Law Times

PAGE 4 NEWS December 14, 2009 • Law Times New pension law skirts big issues But lawyers expecting more legislation after federal-provincial talks BY GLENN KAUTH Law Times wait at least a few months for more sweeping changes expect- ed to address the big funding issues that plans are facing. "Th ere's nothing here to deal with any of the pressing issues," says Doug LeFaive, a member of the pension law group at Sack Goldblatt Mitchell LLP in Toronto. But in introducing the pen- sion benefi ts amendment act last week, Finance Minister Dwight Duncan said he was building on the recommen- dations from last year's expert commission on pensions set up to address the issue of declining coverage, particularly through defi ned-benefi t plans, for On- tarians. Among the changes, the T new law would extend he province is reform- ing pension laws, but Ontarians will have to grow-in benefi ts in some cas- es to allow laid-off workers, whose age combined with their years of service totals at least 55, to qualify for early retirement. At the same time, the new law would provide for imme- diate vesting of pension con- tributions so that employees who leave a company after a relatively short period of time would still be entitled to them. As well, it aims to increase transparency for plan members by improving access to information about their pension plans. On the employer side, one of the biggest changes is the elimination of partial windups of plans, which happen when an employer closes only part of a pen- sion scheme. Kathryn Bush, a partner in the pension and employee benefi ts group at Blake Cassels & Graydon LLP, "There's still an awful lot to come,' says Kathryn Bush. says that change is particularly signifi cant given that employ- ers that lay off employees and therefore might want to wind up part of their plans will no longer have to distribute the surplus. "If you have surplus in your plans, it's a major is- sue for you," she says. Other employer-friendly changes include proposals to allow plans to restructure more easily during com- mercial transactions such as mergers and divestments. As well, the proposed law will amend plan rules to permit phased retirements, the gov- ernment said. Th e law represents the government's response to last year's report from the expert commission, headed by for- mer York University presi- dent Harry Arthurs. Noting that less than 35 per cent of Ontario workers now have pensions, the report aimed to reverse the slide by allow- ing more innovation beyond the traditional dichotomy be- tween either defi ned-benefi t or defi ned-contribution plans. One solution was to allow so-called for target-benefi t plans that link payouts to their performance rather than re- quiring employers to pay a set amount regardless of invest- ment returns. Multi-employer plans, such as those set up for workers in many trades, can al- ready do that, but the Arthurs report proposed extending that to single-employer schemes as well. Th e move would allow for more fl exibility in an area bat- tered by investment losses, an issue highlighted by the recent struggles of some of Canada's largest companies, including General Motors. Th e Arthurs report also called for beefi ng up Ontario's pension guarantee fund. But so far, Bush expects the gov- ernment to leave those bigger issues to federal-provincial dis- cussions on pension reform, including at the upcoming summit in Whitehorse. "In fairness to them, I think the government would ac- knowledge that coverage is not addressed by this," she says. Overall, the recent changes Starting from $62.50 per month More value for your money! Cases that you can't find anywhere else can be found in BestCase, a new web-based research service from Canada Law Book, containing: • Comprehensive collection of reported and unreported decisions dating back to 1898 and including: • Canadian Criminal Cases – since 1898 • Dominion Law Reports – since 1912 • Labour Arbitration Cases – since 1948 ... plus others! • Renowned case summaries • Case citator eREPORTS included at no extra charge ... continuing legal education delivered to your desktop! BestCase subscribers can now receive our eREPORTS – electronic versions of "paper parts" of our law reports. 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Contact your Account Manager to compare BestCase to your current research services! represent a balancing act be- tween protecting employees at risk due to the economic crisis and providing some relief to businesses facing large pension burdens, according to Bush. On the one hand, the grow-in and immediate-vesting provi- sions represent a cost, while the elimination of partial windups represents possible savings for employers, particularly for those that have surplus funds. As well, changes to rules on full windups that would get rid of a requirement to prove both his- toric entitlement to and agree- ment on distributing surplus funds provide a "welcome" simplifi cation of procedures 1.800.263.2037 Canada Law Book is a Division of The Cartwright Group Ltd. www.lawtimesnews.com Bestcase-reduce costs (LT 1-2x4).indd 1 6/10/09 10:43:32 AM LT0715 that will lessen the chances of litigation, Bush notes. Th e new law comes at a time of lively discussion over pensions. Already, the Ontario government has extended sol- vency funding requirements for pension plans to 10 years. At the same time, it has re- lieved multi-employer pension schemes from having to fund to solvency for the time being, a move LeFaive says should be made permanent. In the mean- time, federal Liberal Leader Michael Ignatieff waded into the debate this week when he called for a supplementary op- tion for the Canada Pension Plan to encourage people to save more. But it's clear that last week's legislation won't do much for people at companies now in trouble over their pensions, such as those at Nortel Net- works. Still, Duncan is prom- ising more legislation in the spring that will address the con- tentious funding issues people have been worried about. "Th ere's still an awful lot to come," says Bush. LT

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