: Province Embarks on Consultations with Jointly Sponsored Pension Plans

The 2012 Ontario Budget includes strong action to balance the budget and to maintain gains made in education and health care.  If passed, the plan would include $17.7 billion in savings and actions to contain cost increases and $4.4 billion in revenue-raising measures.

The Budget also presents a strong plan to move forward and transform public services – to change the way they are delivered to give Ontario families better value for money and better results.

As announced in the Budget, the government is proposing reforms to the framework governing public-sector defined benefit pension plans.  These changes are designed to make public sector plans more sustainable and affordable for plan members as well as all Ontarians.

The government is moving forward with its commitment to consult with stakeholders on a new legislative framework for jointly sponsored pension plans (JSPPs) in the public sector.

Most of Ontario’s largest pension plans are jointly-sponsored.  This model has worked well and has been recognized internationally as a sound model for pension plan governance.  However, as noted in the Budget, the cost of providing these benefits has increased significantly and is projected to continue to rise.  While the government recognizes that many of these plans are facing demographic and financial market challenges, it is committed to reducing the growth in the cost of providing these benefits.

To meet this goal, the government proposes to focus on ensuring that measures used to improve plan funding do not add to employer and taxpayer expense, beyond what has already been agreed to. The government also wishes to ensure that all jointly-sponsored plans move to 50-50 funding between employers and employees.

The government wishes to seek the views of affected stakeholders on its proposed legislative framework, which involves the following parameters:

  • in case of a new deficit, plans would be required to reduce future benefits or ancillary benefits before further increasing employer contributions;
  • in exceptional circumstances, a limit would be set on the amount or value of benefit reductions before additional contribution increases could be considered;
  • any benefit reductions would involve future benefits only, not those that have already been accrued. Current retirees would not be affected;
  • where employee contributions are currently less than employer contributions, increased employee contributions would also be available as a tool to reduce pension deficits;
  • where plan sponsors cannot agree on benefit reductions through negotiation, a new, third-party dispute resolution process would be invoked; and
  • the framework would be reviewed after the budget is balanced.

The government also welcomes feedback from other individuals and groups not directly affected by these measures.  If you have a view on these proposals, send your comments (in both WORD and PDF format) to pension.feedback@ontario.ca.  All submissions will be posted on this website at a future date unless you request otherwise.

Following consultations, the government will introduce legislation to help achieve these objectives.  Affected stakeholders will be contacted shortly to schedule a time to meet on this important issue.

In addition to these measures as announced in the Budget, the government will consider a variety of tools to enhance the sustainability of single-employer, defined benefit pension plans in the public sector, and intends to introduce a legislative framework in Fall 2012 that would facilitate the pooling of pension fund assets.