Law Times

PAGE 10 An online resource 1.800.263.3269 Focus On LABOUR & EMPLOYMENT LAW Pension reform 'most change we've seen in a generation' BY ROBERT TODD Law Times whirlwind of changes to On- tario's Pension Benefi ts Act in 2010. With four bills making their E way through Queen's Park last year, along with separate re- forms at the federal level, the head of Hicks Morley Hamil- ton Stewart Storie LLP's pen- sion and benefi ts practice group suggests that lawyers in this area of law are busier than ever. "Th is is the most change we've seen in a generation," says Elizabeth Brown. "It is huge, and I think a lot of lawyers are still trying to wrap their heads around the stuff ." Th e primary Ontario chan- ges came through Bill 236, the Pension Benefi ts Amendment Act, and Bill 120, the Secur- ing Pension Benefi ts Now and for the Future Act. However, the Pension Benefi ts Act was also altered through Bill 135, the Helping Ontario Families and Managing Responsibly Act, and Bill 16, the Creating the Foundation for Jobs and Growth Act. While there's a seemingly endless list of reforms that lawyers and their clients are getting up to speed on, some deserve to be singled out. For Andrew Harrison, national leader of Borden Ladner Ger- vais LLP's pension and benefi ts group, one of the key changes from Queen's Park is the move to immediate vesting. mployment lawyers are working overtime trying to get up to speed on a Th e change is likely to mean more workers will have resources to draw upon at re- tirement, but some employ- ers are concerned about the shift. Harrison notes that an employer that goes through a high number of short-term employees could face greater complications than when it could simply pay out pen- sion contributions upon dis- missal. Employers can wait up to two years before invit- ing a worker to join a plan but most appear reluctant to take that approach, says Harrison. Another key change from a cost standpoint is the in- clusion of grow-in provisions for all terminations. Grow-in is relevant in a defi ned-bene- fi t plan with an enhanced early retirement feature. When membership in a plan is termin- ated and the requirement for early retirement isn't satisfi ed, members typically receive only the value of the pension they've accrued to that date. But grow- in specifi es that if a member has reached 55 when age and years of service are combined, they'll be entitled to additions to their pension value. "On a pension plan windup, you always got this benefi t," Harrison notes. "Now it's ex- tended to all terminations. So it does mean for more senior employees there is a potential increase in the benefi t that they will get." Th e changes also include the elimination of the concept of partial windup. Th e topic had fuelled much debate on how a MARCH WEB SPECIALS SAVE 20% for solvency funding. Th ey involve assurances that suf- fi cient resources are available should a plan wind up on any given day. Th e require- ment has in the past caused signifi cant complications for employers. "It often means that com- panies have to pump in extra cash knowing that in the long term it won't be required," Harrison notes. "It can be a bit of a surplus trap." Th e change allowing letters Immediate vesting is among the more significant changes, says Andrew Harrison. plan should be treated under such circumstances, especially if there was surplus involved. Th e Supreme Court of Canada handled the issue in its 2004 ruling in Monsanto Canada Inc. v. Ontario (Superintend- ent of Financial Services) that said that surplus on a partial windup must be paid out even though the plan continues. "Essentially, the result of this change is that there will be no more partial windups, so that makes things a little bit simpler," says Harrison. Th e province has also intro- duced the concept of a targeted benefi t plan. Th ese plans al- low an adjustment of bene- fi ts rather than requiring full funding by the employer. So in eff ect, the employer pays a defi ned-contribution amount, and if the plan doesn't play out as expected and asset values go down, benefi ts can be ad- justed. "It allows the pooling of a defi ned-benefi t plan but it also allows that escape valve of a re- duction in benefi ts," says Har- rison. New restrictions on contri- bution holidays — which al- low employers to stop making contributions if the plan is in a surplus position — have also garnered attention. Employ- ers will now be unable to take a contribution holiday until a cushion has been established beyond 100-per-cent funding of the plan. Harrison says it's expected that amount will be in the range of 105 per cent. In addition, the province has proposed to allow the use of letters of credit to satisfy a portion of the requirements of credit means that if it turns out the extra money isn't re- quired in the long term, the letter is simply not called on. Th at is an attempt to mitigate to a certain degree what Har- rison calls the "trapped cap- ital problem" that previously existed. Meanwhile, in terms of a signifi cant federal change that may go under the radar, Brown points to Bill C-47's so-called defi ned-contribution plan safe harbour provisions. Th ey of- fer employers some comfort in knowing they can't be sued if they comply with certain regulated provisions around the types of investment op- tions they provide and the kind of education they off er to employees. "One of the biggest fears that employers in Canada have about off ering a defi ned-con- tribution plan is there's a fear they're going to get sued," says Brown. "Because employees are investing their own funds usually, they're making invest- ment decisions on their own. See Lawyers, page 15 February 28, 2011 • Law Times EMPLOYMENT STANDARDS HANDBOOK, THIRD EDITION Kimberly A. Parry and David A. Ryan EMPLOYMENT CONTRACTS HANDBOOK, THIRD EDITION Cheryl J. Elliott and Stewart D. Saxe LABOUR RELATIONS BOARD REMEDIES IN CANADA, SECOND EDITION Jeffrey M. Andrew Visit canadalawbook.ca or call 1.800.565.6967 for a 30-day no-risk evaluation CANADA LAW BOOK® www.lawtimesnews.com PREGNANCY, THE WORKPLACE AND THE LAW Melanie Manning

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