The Pension Investment Association of Canada (PIAC) appeared before the Ontario Expert Commission on Pensions on earlier this week to respond to the Ontario government’s review of its pension system.
PIAC believes that its recommendations will create a more conducive environment for the creation and maintenance of defined benefit pension plans.
“The Pension Benefits Act (PBA) is outdated and clearly in need of an overhaul. The management of pension plans has changed radically in the two
decades since the last major review of this legislation”, says Terri Troy, PIAC chairwoman.
“The current investment restrictions make no sense and result in lower returns and higher costs. Canada is the only developed country that imposes these types of limits on pension investments.”
PIAC made eight key recommendations to the Commission:
- Address risk asymmetry in the rules regarding surplus entitlement;
- Take steps to ease solvency funding by exempting public sector plans, allowing other plans to use Letters of Credit, and researching an approach based on creditworthiness;
- Enable plan sponsors to enhance the funded position of plans by encouraging an increase in Income Tax Act surplus rules beyond 110%, and allowing plan sponsors to earmark contingency reserves with clear entitlement to reclaim funds;
- Hold pension investments to the standard of a prudent person and eliminate all quantitative limits on investing;
- Establish as a minimum standard that only assets representing the value of liabilities transfer in the case of mergers, splits, or restructurings;
- Disband the Pension Benefits Guarantee Fund;
- Harmonize pension law across Canada; and,
- Establish one pension regulatory system with one set of rules.
PIAC has been the national voice for Canadian pension funds since 1977. PIAC’s member funds are responsible for the oversight and management of over $910 billion in assets on behalf of millions of Canadians.
To view PIAC’s full submission, please visit www.piacweb.org, under Submissions to Government.