Ontario budget 2015
On April 23, 2015, the Ontario Government introduced its 2015 budget (the “Budget”). The Budget announcement sets out the Government’s intention to introduce legislation to establish an Ontario Retirement Pension Plan (ORPP) Administration Corporation, conduct a consultation on target benefit multi-employer pension plans (MEPPs) and introduce certain pension reform matters.
Results of consultation on key design issues
The Budget summarizes some of the responses received from stakeholders in its initial ORPP consultation and states that the Government will announce its conclusions on the key design questions shortly. There are no new details or signs that the Government has changed any of its positions on the key design questions.
ORPP Administration Corporation and implementation
As part of the budget bill (Bill 91), Ontario is introducing legislation that would establish the Ontario Retirement Pension Plan Administration Corporation (ORPP AC), a professional, independent pension organization that would be responsible for administering the ORPP. The government envisions the ORPP AC as evolving into one of the world’s leading pension organizations.
Key attributes of the ORPP AC would include the following:
- Responsibility for operationalizing the ORPP, administering the plan and investing contributions
- An independent, professional board of directors composed of between nine and 15 members appointed by the Lieutenant Governor in Council
- A board nomination process aimed at securing highly qualified, expert board members, including an independent nominating committee
- A transparency and accountability framework based on best practices in pension governance, including annual reporting, an annual meeting and strong financial controls, and
- Directors and officers subject to duties that are consistent with prudent and responsible pension management
Amendments to several other statutes would be introduced to support the establishment of the ORPP AC. ORPP contributions and investment funds would be held in trust for ORPP beneficiaries and would not form part of general government revenues.
The government is considering options for additional elements of the ORPP’s accountability framework. These may include:
- An Office of the Chief Actuary to provide actuarial advice related to the ORPP that could be modelled on the federal Office of the Chief Actuary, and
- An appeals process for reviewing administrative decisions by the ORPP AC
The legislation would also mandate a legislative review within 10 years, which would provide an opportunity to ensure that the mandate, governance and operational framework of the ORPP AC continue to be appropriate for the long term.
To support the ORPP’s strong governance framework, the government would put in place a focused interim board to oversee the implementation process. If the legislation passes, the Province expects to name an interim chair for the ORPP AC in the coming months. Furthermore, to facilitate the implementation of the ORPP, including design parameters of the pension plan and the establishment of the ORPP administrative entity, the government has established an implementation team of professionals with a wide range of relevant experience and expertise.
One of the government’s initial implementation priorities is to identify potential providers that could help deliver a simple, reliable and cost-effective pension service-delivery system for the ORPP. At this time, the government is assessing a range of service-delivery options for pension administration. As part of this process, the Province is proceeding with a procurement to identify potential third-party service-delivery providers for the ORPP. Costs of administering the ORPP would be borne by the plan.
The Government acknowledges that designing the administration of the ORPP is a significant undertaking. It promises to provide employers and employees with regular updates on implementation and will ensure a simplified process to minimize administrative costs.
Target benefit plans
The government will soon be releasing a consultation paper on a proposed regulatory framework for target benefit MEPPs. Once implemented, it is anticipated that this framework would replace the time-limited funding regulations that are currently in place for certain MEPPs, known as specified Ontario multiemployer pension plans (“SOMEPPs”).
Feedback from the consultation on a target benefit framework for MEPPs will help inform the subsequent development of a framework for single-employer target benefit pension plans.
Updating reporting standards for registered pension plans
The Province is considering regulatory amendments to reduce the administrative burden of regulatory compliance while maintaining transparent financial reporting.
Possible amendments could include:
- Increasing the threshold at which an auditor’s report must be filed respecting the financial statements of a plan, from the current $3 million in assets to $10 million
- Identifying an alternative to the requirement for the filing of audited financial statements for a pension fund
- Extending the requirement to file an Investment Information Statement to DC plans, and
- Easing the requirement for detailed information about individual investments exceeding one per cent of the fair value of the pension fund
Pension advisory committees
Additional steps will be undertaken in 2015 to further enhance transparency for pension beneficiaries through the development of regulations to facilitate the creation of pension advisory committees (PACs). The role of PACs will be to monitor plan administration, make recommendations to the administrator regarding the pension plan, and promote awareness and understanding of the pension plan.
Role of the regulator
As previously announced, the government will conduct a mandate review of the Financial Services Commission of Ontario (FSCO) that will consider, among other issues, the role of the FSCO in regulating pensions.
The government has also signalled its intention to proceed with the development of regulations to modernize the powers of the Superintendent of Financial Services. This would include giving the Superintendent the power to require the preparation of a new valuation report and specifying assumptions or methods to be used in the preparation of the new report. These regulations will be informed by the views of stakeholders and the results of the mandate review.
Asset pooling in the broader public sector
In 2013, the government established a technical working group to advise on the design, governance and transition issues associated with the implementation of a new pooled asset management entity for Ontario’s broader public-sector funds.
The co-chairs of the technical working group recently provided the government with their final report. Legislation establishing the new Investment Management Corporation of Ontario was included in Bill 91.
Variable benefits from defined contribution plans
As previously announced, the Government will proceed with legislation to enable the payment of variable benefits directly from defined contribution pension plans. Amendment to the Pension Benefits Act to introduce variable benefits was included in Bill 91.
Consolidating split pensions in the public sector
The Government will extend the deadline for consolidating “split pensions” in the public sector from July 1, 2016 to July 1, 2017. This relates to movement of employees between public sector pension plans a number of years ago.
Criteria for solvency exemption for jointly sponsored pension plans
The Budget also reiterated the Government’s recently released consultation on proposed criteria for exempting from solvency funding requirements a newly established multi-employer jointly sponsored pension plan (JSPP) or a JSPP created out of the amalgamation of existing single employer pension plans. The proposed criteria are:
- a minimum of five participating employers;
- not more than 50% of the combined membership being related to a single employer;
- at least $5 billion in assets;
- an examination of a plan’s overall governance practices, with particular attention paid to Board composition and risk management tools, such as asset-liability management studies, provisions for adverse deviations and funding policies.
Comments on the proposed criteria are due June 1, 2015.
Reviewing the regulation of financial planning
The government is moving forward with its review of a potential regulatory gap in the general oversight of financial advisory and planning services. More tailored regulation of these services would foster the growth of the profession by promoting appropriate educational requirements and qualifications and would help consumers make informed choices and investments.
As announced in the 2014 Ontario Economic Outlook And Fiscal Review, the Government has appointed an expert committee to thoroughly consider more tailored regulation of financial advisers, including financial planners. The committee will be mandated to provide key recommendations and submit its final report to the government for review by early 2016.
Travel vaccines in pharmacies
Aiming to give Ontarians more options for care closer to home, while also working to ensure that health care professionals can fully use their skills and knowledge, the government is considering allowing Ontarians to receive travel vaccines in their local pharmacies.
Increasing access to fertility treatments
In 2015, Ontario plans to contribute to the costs of one in vitro fertilization (IVF) cycle per patient for all eligible forms of infertility. Families or their health plans will continue to pay for associated drugs and ancillary services.