On February 27, 2018, the Canadian federal government released its 2018 Budget: Equality and Growth for a Strong Middle Class (the “2018 Budget”). In this post, we highlight the measures in the 2018 Budget that relate to pensions and benefits.
Protecting Canadians’ Pensions
Under the heading of “Protecting Canadians’ Pensions,” the federal government committed, over the coming months, to “looking to obtain feedback from pensioners, workers and companies” on how to protect Canadians’ pensions. While this is a vague commitment at best, the federal government has faced pressure in recent months from employee groups and other organizations to reform the current rules regarding the treatment of underfunded pension plans in insolvency situations.
Under the Bankruptcy and Insolvency Act (Canada) (“BIA”), employee deductions, employer’s defined contribution and normal costs currently have a “super-priority” charge. As a “super-priority” charge, subject to certain defined exceptions under the BIA, the charge ranks ahead of all claims (including claims of secured creditors) on bankruptcy. What does not have a super-priority under the BIA are special payments; payments required to be made by an employer to a defined benefit pension plan in order to fund the deficit in the plan.
The recent collapse of Sears and its significantly underfunded pension plan has again brought this issue to the forefront. In the 2018 Budget, the government committed “to finding a balanced way forward,” recognizing not just the impact of bankruptcies on workers and pensioners, but on small businesses, lenders and other creditors. No timeline for the consultation process has been announced.
Unclaimed Pension Balances
A significant issue for administrators of registered pension plans is the problem of missing former members and their unclaimed balances in the plan fund; balances that are often held in the plan for many years after a member’s termination of employment. In Budget 2018, the federal government committed to launching public consultations on a regime to address unclaimed pension balances “shortly.” The government further indicated that following the consultations, it “may” introduce legislative and regulatory amendments to address the issue.
Expanded Parental Leave
In Budget 2018, the federal government announced that it intends to introduce a new Parental Sharing Benefit under the Employment Insurance Act (Canada). The new benefit is expected to be available starting June 2019 and will provide additional weeks of “use it or lose it” Employment Insurance (“EI”) benefits. The proposed benefit will be available to eligible two-parent families, including adoptive and same sex couples, and will increase the duration of EI parental leave where both parents agree to share the leave. Employers should be aware of the proposal as it may impact staffing decisions in the workplace.
As discussed in our post, Changes to the Canada Pension Plan, the Canada Pension Plan (“CPP”) has been amended, effective January 1, 2019 to increase contributions and enhance benefits. In the 2018 Budget, the federal government confirmed that in December 2017, the federal and provincial finance ministers had reached a unanimous agreement in principle to take the following additional steps under CPP, beginning in 2019:
- Increase retirement benefits under the CPP Enhancement both for parents who take time off work to care for young children, and for persons with severe and prolonged disabilities.
- Raise survivor’s pensions for individuals under age 45 who lose their spouse, by providing a full survivor’s pension instead of the current reduced pension that is linked to the age of the widow or widower.
- Provide a top-up disability benefit to retirement pension recipients under the age of 65 who are disabled and meet eligibility requirements.
- Increase the death benefit to its maximum value of $2,500 for all eligible contributors.
In Budget 2018, the federal government announced the creation of an “Advisory Council on the Implementation of National Pharmacare.” The Council is to conduct an economic and social assessment of domestic and international models and recommend options on how to move forward.
For further information on Budget 2018 and the impact of Budget 2018 on the administration of your pension and benefit plans, please contact Kim Ozubko at email@example.com or 416-597-4338.