It looks like Ontario has put a roadblock up against Ottawa’s proposed pension reforms, pushing instead for changes to the CPP.
In the provincial budget tabled yesterday, Ontario’s government said that it has several concerns with the federal model of pooled registered pension plans (PRPPs) as currently proposed, including the worry that PRPPs may simply replace one form of retirement coverage rather than expanding retirement savings.
“[I]t is unclear if PRPP’s fiduciary framework adequately protects plan members” and “whether compulsory employee contributions would be flexible enough to allow for various life events, such as divorce or periods of financial hardship,” the budget states.
Ontario also expressed concern over the costs for regulating PRPPs, pointing to the fact that each province would need to establish an effective licensing and regulatory regime—and this cost will be passed on to PRPP participants.
In its budget released last week, Quebec indicated support for the PRPP framework by introducing its voluntary retirement savings plan (VRSP) model. VRSPs are similar to PRPPs but, in contrast to their federal counterpart, are mandatory for employers to offer to their employees.
While Ontario has said it will work collaboratively with the feds and other provinces to develop the PRPP model, it also said that any pension reform efforts should be tied to enhancements to the CPP.
Provincial pension reform
Ontario also announced that draft regulations regarding provincial pension reform will be posted later this spring. These regulatory changes are intended to clarify pension surplus rules, implement some of the pension asset transfer provisions for organizations that undergo restructuring and implement provisions that specify the “rights and responsibilities of retired members.”
Other proposed changes, which are scheduled for later 2012, include amendments that will provide a “funding concerns” test for insolvent plans and eligibility conditions for contribution holidays for DB plans.
Effective July 1, 2012, the following provisions of the Pension Benefits Amendment Act, 2010, will be proclaimed in force:
- future partial plan wind-ups will no longer be permitted
- pension benefits will be immediately vested;
- multi-employer pension plans and jointly sponsored plans will be able to elect not to provide grow-in benefits; and
- grow-in benefits will be available to all eligible members terminated other than for cause.
The province has also announced plans to restructure the financial-hardship unlocking program in order to “create a simpler, more streamlined process to access locked-in funds.”
Under the revisions, locked-in account owners would no longer require consent of the regulator in order to withdraw money for reasons of financial hardship, and could instead request withdrawals directly from their financial institution.
A draft of these regulatory amendments will be posted for public review and the Ontario government ahs indicated it will monitor and evaluate the effectiveness of the program over the next two years.
The full 332-page Ontario budget is available here.
This article originally appeared on BenefitsCanada.com.