Law Times

PAGE 8 FOCUS ON Pensions Law Pooled plans face provincial hurdles Ontario government not buying in to federal pension scheme it can get its provincial counter- parts on board, according to a leading pensions lawyer. Bill C-25 received Royal assent T tered Pension Plans Act could be dead in the water unless he federal govern- ment' s Pooled Regis- at the end of June, but Mitch Frazer, a partner at Torys LLP in Toronto and chairman of the Canadian Bar Association' benefits law section, says Ted Men- zies, the minister of state for finance handed responsibility for the plans, needs to get selling it if it' have any effect. "The concept is great, but it s national pensions and s going to just depends how far it goes and how many people get access to it," says Frazer. "The goal here really is to see the provinces pass their own enabling legislation. The question is can he [Menzies] get people from other jurisdictions to buy in. He' people, and if he does, it'll be a huge success. But if the provinces don't come on board, this exer- cise has all been for naught." The government introduced s got to convince BY MICHAEL McKIERNAN Law Times federal government made it flexible enough so that if a province wanted to make coverage mandatory for ev- eryone, they could do that. Or if they don't want to, they don't have to. "It's a high-level bill. The to making the pooled plans work. "The premise here is that if you have a large enough scale and make it easy enough for people to have access to the plan, then more people will join, which will then bring the cost of the fees down and produce greater long-term re- turns. If it' Frazer notes scale is key " pooled plans as a low-cost alter- native for workers at smaller com- panies without pension plans as well as self-employed people. But the federal bill applies only to employees in federally regulated industries, such as banking, com- munications, and transportation. Workers in those sectors are al- ready among the most likely to have adequate pension coverage, according to Frazer. He says the bill provides a framework from which the prov- inces can develop their own more specific legislation. tario appeared to pour cold water on the idea of pooled pension plans. Hinting that it preferred enhancements to the Canada Pension Plan as a way to boost pension coverage, the province steered clear of its own legislation and instead expressed its con- cerns in a number of areas: • Pooled plans may simply re- place one form of retirement arrangement with another in- stead of expanding retirement income savings and coverage. • It's unclear if the plans' fidu- and it's not broad enough cov- erage, it's not going to work." In its March budget, On- s not cheap enough legislation that mirrors the federal law. McCarthy Tétrault LLP part- ner Lorraine Allard says a form of provincial peer pressure may force a change of mind in Ontario. "We could see a situation where The cost of regulation must be reasonable since plan par- ticipants would ultimately be paying for them. In June, Quebec introduced • It's uncertain whether compul- ciary framework adequately protects plan members. • The extent to which pooled plans could achieve their low- cost objective is unclear. sory employee contributions would be flexible enough to al- low for various life events such as divorce or periods of finan- cial hardship. • Each province would need to establish an effective licens- ing and regulatory regime. The pooled-plan scheme will have limited impact without provincial participation, says Mitch Frazer. says. "A lot of people who provide maybe some of the western prov- inces come through next with legislation and Ontario is going to have to get with it," she says. If Menzies succeeds in his sales job, Thomas Copeland of Fasken Martineau DuMoulin LLP says pooled plans could change the pensions market fundamentally. "It has the potential to drive people out of things like individ- ual RRSPs and into these entities," he says. That prospect has had mutual aspect of pooled plans, some- thing the legislation mandates but doesn't define, will attract employees who currently have retail RRSPs at the heart of their retirement plans. She says small employers that don't have any other pension offering available to employees are also likely to want to participate. In January, a survey com- advice are concerned about the risk of being cut out of the market." Allard agrees that the low-cost fund dealers raising the alarm, ac- cording to Copeland. "There' whether there's still going to be a market for those mutual funds," he s a big question over missioned by the Canadian Life and Health Insurance Associa- tion Inc. showed 68 per cent of small- and medium-sized busi- ness owners who don't currently offer a pension plan were inter- ested in providing a pooled-plan option to their employees. Leger Marketing questioned 800 com- panies for the poll. About 71 per cent of respondents also agreed that employers should have to of- fer some kind of retirement plan to employees. Frazer says he' s hopeful pooled CANADIAN LAW LIST 2012 YOUR INSTANT CONNECTION TO CANADA'S LEGAL NETWORK Inside you will find: • an up-to-date alphabetical listing of more than 58,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; • contact information for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; • legal and government contact information related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. MORE THAN A PHONE BOOK Hardbound • Published February each year • On subscription $149 • L88804-571-26084 One-time purchase $165 • L88804-571 • ISSN 0084-8573 Prices subject to change without notice,to applicable taxes and shipping & handling. Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation www.lawtimesnews.com CLL - 1/4 pg - 5X.indd 1 1/20/12 10:55 AM CANADIAN LAW LIST ple additional coverage for their retirement or encour- ages people to save for their retirement is a good thing, says Frazer. "It's good to help plans will get off the ground because he considers them a useful tool for encouraging the huge number of people without plans at work to get saving. According to Statistics Canada, less than 40 per cent of all Canadian employees are currently members of a regis- tered pension plan. " Anything that gives peo- " sort of thing you can get and now you don't have to worry about re- tirement. It' the CBA also noted some tech- nical concerns with the bill that Frazer hopes the regulations un- der the act will clarify. The submission recommends In its submission on Bill C-25, s not a panacea." the government define the key phrase "low cost" and warns that some potential administrators could be fearful of the sugges- tion that pooled plans run only through a trust structure. While many Canadian pension plans operate that way, others run by way of an insurance contract. Life and health insurers can't act as trustees, a fact that could limit their involvement as administra- tors of pooled plans. "These providers might have to outsource the PRPP to captive trust companies or third-party trust companies with the added expense and complexity that the PRPP seeks to avoid, CBA submission. " reads the LT people because for the aver- age Canadian, if you live in an urban centre, CPP is not enough to give you any sort of reasonable retirement." He adds: "But it' s not the augusT 20, 2012 • Law Times

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