Ontario’s government has announced a set of planned changes to the funding rules for workplace pensions in an effort to shore up defined-benefit (DB) pensions.
The government will introduce legislation this autumn to implement a new framework for DB pensions that include changes to the going concern funding rules; requiring the funding of a reserve within plans; increasing the guarantee provided under the Pension Benefits Guarantee Fund (PBGF) by 50%; and requiring plans that fall below the 85% funding level to be funded on a solvency basis.
In addition, Ontario’s government is making a variety of other complementary changes designed to improve transparency to plan beneficiaries, enhance income security, set funding rules for benefit improvements and restrict contribution holidays.
The government also announced that it will be reviewing the rules governing the wind-up of DB pensions and studying a proposal to establish an agency to administer the pension benefits of wound-up plans.
The reforms are intended to help shore up DB pensions by ensuring that they are funded appropriately and establish a reserve to protect benefits while also giving employers greater flexibility in managing their pension contributions, the province states.
“Everyone deserves a secure retirement. By providing more flexibility, defined benefit pension plans will remain a vital part of our retirement income system in Ontario,” says Ontario Finance Minister Charles Sousa in a statement. “With these changes, we are also ensuring that pension plans are affordable for businesses and benefit security for workers and retirees is protected.”
Wanda Morris, vice president of advocacy and chief operating officer with seniors advocacy group CARP, lauds the government’s announcement:
“CARP commends the Ontario government for its continued focus on improving financial security for retirees,” she says in a statement on behalf of the organization. “With unprecedented gains in longevity and historically low interest rates, DB pension plans have experienced significant challenges in recent years. We are pleased to see that the government has taken a balanced approach to funding reform by providing welcome relief to plan sponsors while also improving plan security for pension recipients.”
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