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Ontario Budget 2019: Pensions

The Government proposes to expand the target benefit framework to better enable non-union workplaces to participate. This will bring Ontario in line with other jurisdictions like Alberta and British Columbia that do not discriminate against non-union workplaces. The budget papers also indicate that amendments will be made to the Pension Benefits Act to clarify rules relating to contribution holidays.

Better Pensions for Non-Union Workplaces

Over the past few years we have worked hard to encourage the Ontario government to end funding rules that discriminate against non-union workplaces that wish to participate in multi-employer target benefit plans. Today’s Ontario budget announcement confirms that the necessary changes will be made.

Today’s announcement provides considerable relief for some clients, like Christian Schools International, who were quoted in the budget papers.

It also provides a green light to several associations that have been investigating the merits of an industry wide target benefit plan. For example, we have been working with the Canadian Bar Insurance Association which feels a target benefit plan for law firms can provide predictable lifetime retirement income at half the cost of the average DC arrangement, but with the same cost certainty as a DC arrangement. Like plans which are fairly common in unionized workplaces, an industry wide plan for law firms would not only deliver predictable, cost certain and cost efficient retirement income for employees, but it could do it on a basis that virtually eliminates fiduciary risk and administrative burdens for employers.

A survey released earlier this week in the UK indicated that by 2025, approximately 13% of the organizations participating in the survey would be “likely” or “very likely” to provide these kinds of plans, if proposed UK legislation is passed. The survey also indicated that although the majority of survey participants provide DC plans for their employees, two-thirds would prefer to offer a plan providing a regular income through retirement, rather than a “pensions pot” that can be accessed flexibly. We will now have greater ability to do that in Ontario.

Today’s budget announcement is great news. It is a game changer for small and medium sized non-union workplaces that typically cannot afford to even think about a proper pension program. It is a great opportunity for industry-wide associations to add a valuable product or service for their members.

We would like to acknowledge that this is an opportunity that was made possible by a small number of our association clients who had the vision, determination and perseverance to convince Government to make these changes. Changes that will no doubt result in expanded access to better pensions for their members and others.

We would be happy to explain the details of this change and the potential benefits for your organization.