Government introduces temporary measures but withstands pressure for short term fixes to deal with the financial crisis, according to OPSEU.
Toronto (30 March 2009) – Ontario’s provincial budget released last Thursday provides temporary solvency funding relief. The government announced that it will amend the Pension Benefits Act (PBA) to allow pension plans to ‘amortize’ payments over ten rather than five years.
According to an analysis of the pension reform measures announced in the budget, the Ontario Public Service Employees Union (OPSEU/NUPGE), states the option will be open to all jointly-sponsored plans and appears to cover all multi-employer pension plans. Single employer plans will have to get a two third majority vote of plan members or union consent. The union considers this a victory for private sector unions and the major Ontario pension plans. OPSEU’s analysis notes, however, that smaller jointly sponsored pension plans may be more vulnerable.
There is no mention of letters of credit or asset pledges as a substitute for pension payments.
The budget also states that future benefit enhancements must be funded over a maximum of five years on both a solvency and a going-concern basis if solvency amortization schedules are consolidated or extended. However, the extended 10-year amortization schedule will not apply to benefit enhancements.
The government also will limit contribution holidays. OPSEU considers this as welcome relief for those plan members – union and non-union – who have discovered, sometimes years afterwards, that the employer has made excessive use of contribution holidays. Contribution holidays will only be permitted in fiscal years ending in 2010 to 2012 if an actuarial cost certificate is filed annually with the province’s pensions regulator, the Financial Services Commission of Ontario (FSCO) confirming that the plan is in a surplus at the start of the fiscal year.
The government also used the budget to announce its intention to move forward on implementation of the recommendations of the Ontario Experts Commission on Pensions (OECP), which has been widely viewed as a balance between the interests of employers, unions and plan members. The government plans to carry through with the OECP recommendation to establish a Pension Reform Advisory Council to “provide practical feedback on specific pension reform proposals”. The budget states that pension reform will be guided by the “principles of transparency, clarity, flexibility and competitiveness, with a goal of balancing benefit security and plan affordability and expanding pension coverage for Ontarians.”
The budget also gave the giant Teachers Pension Plan, on the edge of layoffs of high-powered investment staff, the right to extend its mandate to take in plans from the broader public sector. It will be able to extend its mandate to provide pension administration and investment services to other pension plans and institutional investors in the public sector.
The government is planning to move forward with Bill 133, the Family Law Statute Amendment Act. Upon passage of the bill, the government will consult with stakeholders on regulatory details, including the calculation of the pension division. Bill 133 provides substantial clarity to the treatment of pensions on marriage breakdown.
The government also plans to introduce legislative amendments to the PBA that would permit pension plans to offer phased retirement programs. Plans would be permitted to allow members to receive a pension while continuing to accrue benefits
OPSEU is cautious about immediately moving ahead with this PBA amendment. The union is anxious to consider phased retirement as an advantage for members, particularly those in physically demanding work, who would like to reduce working hours with no penalty to their pension. However, the union notes that this benefit can be indiscriminately applied so that a few favored workers get it at the expense of others and those who do get this benefit suffer longer term penalties to their pension. Collective agreements would need to ensure that this rule is applied fairly.