Ministry of Finance
November 17, 2014
The government is committed to a strong and secure retirement income system that helps ensure working Ontarians will be better able to enjoy their retirement years.
Several studies have shown that many people are not saving enough for retirement, a problem that will likely worsen over time. Unless action is taken now, a significant portion of today’s workers will face a decline in their living standard in retirement.
Increasing retirement savings remains a government priority that requires a multi-faceted approach and close collaboration with:
The Canada Pension Plan (CPP) is fundamental to the retirement income security of all Canadians. However, its benefits are too low to meet the needs of many workers.
While Ontario’s preferred solution remains an enhancement to the CPP, the cost of inaction is simply too high. That is why the government plans to introduce a new mandatory provincial pension plan – the Ontario Retirement Pension Plan (ORPP) – that will offer a secure benefit for life. The ORPP will be designed to facilitate the possibility of its integration with the CPP if an agreement is reached on CPP enhancement.
The implementation of the ORPP is intended to coincide with the expected reductions in Employment Insurance premiums in 2017.
The ORPP is part of the government’s plan to invest in people and to help working families build a more secure retirement future. The ORPP would help address the retirement undersaving challenge, particularly for middle-income earners without workplace pension coverage.
Building on the success of the CPP, the ORPP would:
Exemptions would include:
Pooled registered pension plans (PRPPs) will offer employees and the self-employed a voluntary, low-cost, tax-assisted option to increase retirement savings. Ontario is committed to introducing a legislative framework for PRPPs that is broadly consistent with the model introduced by the federal government and adopted by various provinces. The government will introduce this legislation shortly.
Ontario’s strategy to enhance retirement income security includes pension reforms to allow for more flexible models such as target benefit pension plans. These plans offer employers a new option by combining features of defined benefit pension plans and defined contribution pension plans.
Target benefit pension plans “target” a specific pension, funded by fixed contributions. Unlike defined benefit pensions, target benefit pensions may be reduced to address funding shortfalls.
The government will be consulting on a regulatory framework for target benefit pension plans in Ontario. Initial consultations, including the release of a consultation paper, will focus on a framework for target benefit multi-employer pension plans.
Strong pension regulation and oversight are key factors in ensuring retirement income security is effective and responsive. The regulator, the Financial Services Commission of Ontario and its Superintendent, require sufficiently effective power to ensure compliance with pension minimum standards legislation. The government will move forward with the necessary regulations to proclaim amendments to the Pensions Benefits Act, which will expand the Superintendent’s powers.
In November 2014, the government passed a regulation to extend the exemption that certain pension plans have from the “solvency concerns” test, from December 31, 2014, to December 31, 2017.
Earlier this fall, regulatory proposals relating to information statements for retired and former pension plan members; disclosure of environmental, social and governance factors in pension investment decisions; and transfer of pension benefits from Ontario plans to plans in other jurisdictions were posted for public consultation. After incorporating feedback, regulations will be considered for approval later this year.
The government remains committed to and continues to work on other areas of reform, including updating filing requirements to reflect changes to accounting standards, allowing payment of variable benefits from defined contribution pension plans and providing an exemption from the “30 per cent rule” for pension investments in Ontario infrastructure.
The government will be moving forward with a framework to enable the pooling of pension plan assets in the broader public sector as well as endowment and other funds of public entities. Larger pools of capital enable access to a broader range of investments, which is key to improving risk-adjusted returns.
The government will facilitate conversions or mergers of employer-sponsored, single-employer pension plans into new or existing jointly sponsored pension plans. Consultations on the regulations required for these conversions will begin in the coming months and regulations are anticipated to take effect July 1, 2015.
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