Law Times

Page 12 August 18, 2014 • Law Times www.lawtimesnews.com Rule changes in the works Ontario plan among pension items in Liberal budget By Julius Melnitzer For Law Times hen Ontario's Lib- eral government, newly re-elected but now with a majority, tabled what was essen- tially the same budget offered up in May by the previous minority government, it had the effect of reintroducing several important amendments related to pensions. By all accounts, pension law- yers will be quite busy keeping track of the new developments stemming from Finance Minister Charles Sousa's budget. Arguably, the most important development was the reintroduc- tion of the Ontario pension plan to supplement and perhaps ulti- mately integrate into the Canada Pension Plan. e Ontario plan, publicly ad- ministered but invested at arm's length to the Ontario govern- ment, would provide retirement benefits akin to those of the CPP. It would require both employers and employees to make equal contributions of 1.9 per cent with a maximum annual earnings threshold of $90,000 that would increase in tandem with annual changes to the CPP maximum earnings threshold. e plan is to phase in contribution rates over two years. Otherwise, indi- viduals earning less than a minimum threshold would be exempt from c o n t r i b u t i o n s , the application of the plan to self- employed people will be the subject of a further study, and those already participating in a comparable work- place pension plan wouldn't have to enrol. is fall, the Liberals also in- tend to proceed with legislation for pooled registered pension plans that will be "broadly consis- tent" with the model already in- troduced by the federal govern- ment and other provinces. Ontario's pooled plan would allow employers to choose whether to offer and contribute to them. Where employers opt in favour of pooled plans, employee enrolment would be automatic with the right to opt out within a limited period. e plan ex- pressly requires administrators to provide pooled plans at a low cost to members. e government also an- nounced its intention to con- duct public consultations on a regulatory framework encom- passing eligibility conditions, funding rules, and governance requirements for multi-employer target-benefit plans. ese con- sultations will form the basis for a later framework aimed at single- employer target-benefit plans. As far as defined-benefit plans go, the government announced it intends to reform funding rules, enable asset pooling in the public sector, and mandate a structure for conversion to jointly spon- sored pension plans. Included in reforms to funding rules are regulations that would amend the level at which an em- ployer could take a contribution holiday and the duration of that relief. e government also in- tends to deal with accelerated funding of benefit improvements in underfunded pen- sion plans. Under legisla- tion planned for the spring of 2015, the government will es- tablish a new asset- pooling entity in the public sector. Par- ticipation in asset pooling would be voluntary and op- erate at arm's length from the govern- ment. e Workplace Safety and Insurance Board and the Ontario Pension Board will be the initial participants in the pooling entity. In addition, the government has introduced budget imple- mentation legislation under bill 194 that sets out the require- ments for conversions from single-employer pension plans to jointly sponsored ones. e amendments in bill 194 require that retirees receive the same pension and current employees get an equivalent value on con- version. Both plan beneficiaries and the superintendent of finan- cial services must consent to any conversions. e government is consid- ering exempting new jointly sponsored plans from solvency funding requirements. Employ- ers and plan members who join an existing jointly sponsored plan that receives such an exemp- tion will get similar treatment. Several public sector plans have agreed to freeze employer contributions until 2017. ese include the colleges of applied arts and technology pension plan, the health care of Ontario pension plan, the Ontario Public Service Employees Union pen- sion plan, and Ontario teachers' pension plan. e government also provided solvency-funding relief for single employers in the public sector that agreed to cer- tain changes in contribution or benefit structures. e electricity sector got spe- cial attention. e government announced recently that Jim Leech, former chief executive officer of the Ontario teachers' pension plan, had submitted his report on improving the sustain- ability and affordability of pen- sion plans in the electricity sector. e government promised fur- ther details in the near future. Finally, given that consulta- tions on the regulation of finan- cial advisers had failed to reach a consensus, the Liberals have said they intend to appoint an ex- pert committee to consider the matter. LT FOCUS 12-month, part-time, executive LL.M. for lawyers and business professionals Advance your career to the next level! Learn important legal and business concepts that can be immediately applied to better serve your clients. Explore the implications of real-life cases in an increasingly complex global business environment. Acquire in-depth knowledge of how the law interacts with both the private and public sectors. For more information please contact Jane Kidner, Assistant Dean Professional Legal Education at j.kidner@utoronto.ca http://www.law.utoronto.ca/programs/GPLLM.html or visit our website: Untitled-2 1 14-07-14 9:29 AM W Finance Minister Charles Sousa's July budget included lots of changes to pension rules. Photo: Mark Blinch/Reuters

• Cover