FED - Federal Budget 2012
This year's federal Budget contained a few pension-related items, including:
- Starting on July 1, 2013, the government will permit the voluntary deferral of the Old Age Security (OAS) pension, for up to five years, allowing Canadians the option of deferring their OAS pension to a later time and receiving a higher annual pension. Also, the age of eligibility for OAS benefits will be increased from 65 to 67 gradually, starting in 2023.
- The federal government is continuing to move forward with Pooled Registered Pension Plans (PRPPs). They will also continue to work with the provinces "to encourage implementation of the framework in a timely manner". The Budget notes that "harmonization" will be essential to ensure that PRPPs are widely available and to keep costs low.
- The government will be introducing "technical amendments to strengthen"; the federal Pension Benefits Standards Act.
- The funding of the Public Service Pension Plan will be adjusted so that employee contributions equal, over time, those of the employer (i.e., costs are split 50/50). Comparable changes to the contribution rates will be made to the pension plans for the Canadian Forces, the Royal Canadian Mounted Police and Parliamentarians. In addition, beginning in 2013, employees who join the federal public service will have a normal age of retirement of 65 (rather than age 60).
- In response to a number of arrangements taking advantage of various features of the Retirement Compensation Arrangement (RCA) rules in order to obtain "unintended tax benefits", the government will be proposing new prohibited investment and advantage rules to prevent RCAs from engaging in certain non-arm's length transactions. The new rules will impose a special tax on RCAs, and will be closely based on existing rules for Tax-Free Savings Accounts and Registered Retirement Savings Plans. The government is also proposing a new restriction on RCA tax refunds in circumstances where the RCA property has lost value as a result of a prohibited investment or advantage.
FED - Federal Consultation re Proposed PRPP ITA Amendments
Following its introduction of Bill C-25 on November 17, 2011, the federal government released for consultation a package of draft legislative proposals under the Income Tax Act to accommodate the creation of Pooled Registered Pension Plans within the basic system of rules and limits currently applicable to registered pension plans and registered retirement savings plans.
ON - Bill 55 re Budget Amendments
On March 27, 2012, the Ontario government introduced Bill 55, Strong Action for Ontario Act (Budget Measures), 2012, for first reading. The Bill includes amendments to the Ontario Municipal Employees Retirement System Act (OMERS Act) (Schedule 51) and the Ontario Pension Benefits Act (PBA) (Schedule 53).
If the Bill is passed, it would make a number of amendments to the PBA in connection with previous amendments that have not yet come into force, including:
- clarifying entitlement of retired members receiving joint and survivor pensions where their spouses pre-decease them;
- adding a transition provision for the lump sum payment of a small joint and survivor pension;
- specifying that the new letter of credit provisions do not apply to jointly sponsored pension plans;
- repealing provisions that currently enable the Superintendent of Financial Services to consent to the commutation or surrender of certain retirement savings arrangements in circumstances of financial hardship;
- allowing the Superintendent to require plan administrators to provide additional information to persons entitled to notice upon the wind-up of a plan;
- clarifying requirements for asset transfers between defined contribution plans; and
- extending the time period permitting the government to make retroactive regulations in connection with defined benefit plan funding.
ON - Ontario Budget 2012
The Ontario government's 2012 Budget was released on March 27, 2012. Pension-related announcements include:
- extension of the temporary solvency funding relief measures introduced in 2009 (these changes will go into effect when filing the first actuarial valuation report dated on or after September 30, 2011);
- introduction of draft regulations to implement past pension reforms, including: clarification of the surplus rules, implementation of many of the asset transfer provisions, implementation of a "funding concerns" test for plans not required to fund on a solvency basis, and eligibility conditions for "contribution holidays" and accelerated funding of benefit improvements;
- establishment of an "Unclaimed Intangible Property Program" to reunite owners with their "unclaimed property", including insurance policies, returned stocks and bonds, bank deposits, unpaid wages, and pension benefits;
- proclamation of past reform amendments into force on July 1, 2012, including: immediate vesting, elimination of future partial plan wind-ups, and extension of grow-in benefits to all employees (other than those dismissed for wilful misconduct, disobedience or wilful neglect of duty) and the related ability of jointly sponsored and multi-employer pension plans to opt out;
- with respect to jointly sponsored plans, the government would develop a legislative framework, subject to consultation, to implement the following objectives:
- where employee contributions are currently less than employer contributions, consider increasing employee contributions as a means of reducing pension deficits (the goal being to split plan funding 50/50 between employers and employees)
- where there is a deficit, plans would be required to reduce future benefits or ancillary benefits (subject to limits in exceptional circumstances) before further increasing employer contributions
- any benefit reductions would affect future benefits only (i.e., it would not impact benefits that have already been accrued or the benefits of current retirees)
- if plan sponsors cannot reach an agreement on benefit reductions, a new third-party dispute resolution process would be triggered
- with respect to single-employer public sector plans, the government will:
- adjust previously announced temporary solvency funding relief measures to encourage plans to split the cost of ongoing contributions evenly between employers and employees within five years
- encourage efforts to convert current single-employer defined benefit public-sector pension plans to jointly sponsored pension plans with equal cost-sharing
- introduction of legislation this fall to facilitate the pooling of pension fund assets and investment management functions of smaller public sector plans
- continued commitment to "modest" enhancements to the Canada Pension Plan and concerns regarding the federal government's proposed pooled registered pension plans.
ON - Drummond Report re Public Sector Reform
On February 15, 2012, the Commission on the Reform of Ontario's Public Services, which was chaired by Don Drummond, released its report (the Drummond Report) to the Ontario government. The Drummond Report calls for wide-ranging reform of the Ontario public sector - recommending changes not only to how services such as health care and education are delivered, but also to the compensation and benefits provided to the employees who perform such services. In particular, the Drummond Report considered a number of pension-related changes, including:
- rejecting further contribution increases to public sector plans and instead reducing benefits;
- clarifying who is ultimately responsible for funding deficits in public sector plans;
- consolidating administrative functions and pooling the investments of pension plans across the broader public sector;
- promoting transparency of costs in public sector plans;
- consolidating university pension plans; and
- terminating the Pension Benefits Guarantee Fund or transferring it to a private insurer.
ON - Regulation re PBGF
Ontario regulation 466/11 was filed on December 16, 2011. The regulation makes various changes to the Pension Benefits Guarantee Fund provisions of Regulation 909.
QUE - Quebec Budget re VRSPs
On March 20, 2012, the Quebec government introduced its 2012-2013 Budget. The Budget included a section on "Retirement", which notes the "insufficient savings" of some Quebec workers and, in response, proposes the implementation of Voluntary Retirement Savings Plans (VRSPs). In addition, the Budget reiterates an earlier announcement regarding the establishment of expert committees to review target benefit pension plans, municipal retirement plans, and Quebec's retirement system generally. The recommendations of these committees, which are expected during 2012, will provide "a basis for proposing sustainable and realistic solutions to the challenges pension plans face."