Ontario targets pension reform

Ontario is jumping on a growing pension-reform bandwagon, pledging to introduce measures next month to enhance protection for employee plans on the heels of federal moves to modernize pension rules.

Finance Minister Dwight Duncan said yesterday that Ontario plans to reform its laws in two stages, beginning with legislation next month and again next year that will focus on provincially regulated pension funds. He is also pressing Ottawa to work with all provinces on measures to help the majority of workers who have no pension plan.

"We are trying to bring greater consistency to pension regulation across the country," he told reporters. "I think when the process is complete, you will see a much more harmonized system of pension regulation across the country."

Reforms to expand pension coverage in the private sector are being studied separately by the provinces and Ottawa, and are expected to be developed in coming months. One of the ideas is a new program that would parallel the existing Canada Pension Plan and provide enhanced pension coverage to more workers.

Mr. Duncan would not provide details on the proposed Ontario reforms, the first in more than two decades. But just a day after Ottawa unveiled its own enhancements focused on federally regulated plans, he said Ontario has a responsibility to act as well. Most private-sector pension plans are provincially regulated.

But any idea of harmonizing Ontario's standards with those announced by Ottawa this week for federally regulated companies could meet with a cool reception in the corporate community, which is already giving a thumbs down to the federal proposals.

Paul Forestell, leader of the retirement professional group at consulting firm Mercer, said Ontario already has better rules for calculating pension plan deficiencies than the federal proposals, so it would not necessarily be better for Ontario to harmonize the standards. "From a sponsor's perspective, Ontario has things that allow them to manage their funding more than they can under the new federal proposals," he said.

Pension experts say the new federal reforms broadly do little to address concerns about huge new funding obligations following last year's market meltdown. And they argue new costs imposed in the changes may even accelerate the loss of pension plans in the private sector.

"Pension plan sponsors now looking at this are going, 'Great, more rules that we have to jump through,' " pension lawyer Mitch Frazer said.

The reforms unveiled by federal Finance Minister Jim Flaherty will prevent companies from taking "contribution holidays" and skipping payments unless their plans have a surplus, and will prohibit companies from improving pension benefits if their plans have a significant deficit.

But critics said the federal proposals will also add a slew of new costs. For example, companies will now have to bear the cost of doing pension valuations annually rather than every three years, and they will have to prepare more extensive materials to communicate with plan members.

"It improves some areas, but it does add a number of new obligations," Toronto pension lawyer Natasha vandenHoven said. "I don't see that this is going to create a situation where we're going to see enhanced [pension] coverage, not by any stretch."

Plans of federally regulated companies represent about 12 per cent of pension assets in Canada, but cover some of the country's largest private-sector plans at such companies as Bell Canada and Air Canada.