An article by Dan Clark (Buck Actuarial consultants) on the Benefits Canada web site highlights the potential significance of Ontario Bill 54, a private member’s bill amending the Pension Benefits Act which has passed second reading and is now before the Standing Committee on Finance and Economic affairs.
Clarke says, “At the heart of the proposed bill is the creation of multi-employer DC plans for unrelated employers, self-employed persons or sole proprietors. The bill appears to contemplate that this new plan type will be sponsored and administered by financial institutions and must be a DC plan type.”
While members would be required to make contributions, employer contributions would be voluntary. Income Tax Act changes would also be required. Bill 54 goes on to propose amendments to the Ontario Employment Standards Act, requiring all employers with 20 or more employees to provide some form of retirement savings plan with one option available to such employers being the proposed insurance industry plans.
Insurance companies aren’t the only ones promoting legislation to facilitate this new form of pension plan. Self-employed doctors, lawyers and other professionals who until now have not had the ability to save in a registered pension plan are salivating.
In a May 17th Osler blog Ian McSweeney comments, “While it seems unlikely in these circumstances that the Ontario government will enact any legislation that would make retirement plans mandatory, by referring Bill 54 to Committee it may be signalling its interest in exploring this aspect of the coverage issue in greater detail. This is consistent with the Ontario Budget announcement, indicating that the government plans to continue studying the various options to expand pension coverage and engaging the public in further consultations.”
With the benefit of hindsight, we now know that both Ontario Finance Minister Dwight Duncan and Federal Finance Minister Jim Flaherty are supporting a two-tier approach to pension reform, including modest CPP increases and legislation much like Bill 54 that will facilitate the creation of private sector multi-employer plans.
Could this be the right solution to the lack of pension coverage across the country?
Scott Sweatman, a partner in the law firm of Spectrum HR law LLP and former Co-Chair of the Alberta-British Columbia Joint Expert Panel on Pension Standards (JEPPs) doesn’t think so.
In a recent interview discussing the JEPPs proposal for an Alberta/BC Penson Plan Sweatman said, “I don’t see ─ with great respect to the insurance industry and financial institutions ─ any evidence that they are able to provide what we are talking about at the cost we are talking about. Certainly they do quote 60-90 basis points for large plans already in existence, but those are large plans. I suppose they could deliver it but I’m not certain I want the future of pension coverage in this country being provided by insurance companies.”
But Clark thinks it’s encouraging that at least some members of the government see the benefits of expanding the concept of multi-employer plans to include more than just unionized employees. “Now if we can just get the government to go a bit further and see the merits of allowing this new plan design to be a defined benefit plan or a target benefit plan,” he concludes.
Retirement Redux
