On March 28, 2018, the Ontario provincial government released its 2018 Budget: A Plan for Care and Opportunity (the “2018 Budget”) and introduced for first reading Bill 31, Plan for Care and Opportunity Act (Budget Measures) (the “2018 Budget Act”). In this post, we highlight the key measures in the 2018 Budget that relate to pensions and benefits.
Pension Funding Reforms
As readers with a defined benefit pension plan will know, in May 2017, the Ontario government introduced a new funding framework for defined benefit pension plans which includes, among other features, the elimination of the requirement to fund a defined benefit pension plan on a solvency basis if the funded status of the plan is 85% or greater. In late 2017 and early 2018, descriptions of the proposed supporting regulations were posted for public comment. In the 2018 Budget, the Ontario government indicated that it is considering the feedback it received on the draft regulations as part of the implementation of the new funding regime.
Security of Pensions
Under the heading of “Protecting Ontario’s Pension Plan Members”, the Ontario government followed the lead of the federal government in the 2018 Federal Budget and announced a number of measures intended to enhance the security of private pensions. As discussed in our post on the 2018 Federal Budget, the recent collapse of Sears and its significantly underfunded pension plan has again brought this issue to the forefront.
In its 2018 Budget, the Ontario government announced the following measures intended to improve benefit security for plan members and retirees, a number of which have already been introduced as part of the 2018 Budget Act:
- The previously announced, but not yet in force, amendments to the Ontario Pension Benefits Guarantee Fund (the “PBGF”) to increase the monthly guarantee from $1,000 to $1,500 and to eliminate the age and service eligibility requirements for coverage will apply retroactively to plans with a wind-up date on or after May 19, 2017. This amendment will allow the increased coverage to apply to members affected by the Sears plan wind-up.
- Amendments that require a periodic review of the provisions governing the PBGF will be introduced.
- The new pension regulator, the Financial Services Regulatory Authority (“FSRA”), will establish an advisory committee dedicated to overseeing issues related to the PBGF and pension plans with distressed sponsors.
- A disclosable events regime will be introduced. Under the new regime, mandatory disclosure of certain corporate or plan events (e.g., significant asset stripping or the issuance of extraordinary dividends) will be required.
- A distressed pension plan workout scheme will be introduced.
New Pension Regulator: FSRA
The government confirmed its commitment to the creation and implementation of FSRA as the new pension regulator in the province of Ontario. FSRA is working towards becoming fully operational by April 2019.
Expansion of OHIP+ and Introduction of Ontario Drug and Dental Program
Effective January 1, 2018, the Ontario government introduced OHIP+, a program which covers the cost of more than 4400 drug products that are currently available under the Ontario Drug Program for children and youth under the age of 25 who have OHIP coverage.
In the 2018 Budget, the Ontario government announced that, starting in August 2019, OHIP+ will be expanded to seniors, which will eliminate the annual deductible and co-payment for seniors under the Ontario Drug Program.
The government also announced that it intends to introduce a new Ontario Drug and Dental Program in summer 2019. Under the new program, prescription drug and dental expenses will be reimbursed up to $700 per year for an eligible family.
With an election in Ontario scheduled for June 7, 2018, it remains to be seen how many of these measures will come into effect if the government changes. However, as a number of the measures could have a significant impact on the administration of pension and benefit plans, it is important that sponsors and administrators be aware of the proposed changes.
For further information on the 2018 Budget and its impact on the administration of your pension and benefit plans, please contact Kim Ozubko at email@example.com or 416-597-4338.