Expert Commission report released
The report of the Ontario government's Expert Commission on Pensions was released on November 20, 2008. The report consists of 142 recommendations for improvements to pension law and practice in the province.
The report includes recommendations for single employer pension plans, and for multi employer plans and jointly sponsored plans. Like a number of the larger plans, the CAAT Plan is both multi employer and jointly sponsored (both employer and employee groups are involved in the setup and running of the plan).
The Commission's recommendations covered a wide range of topics, including the following.
Regulation - the Pension Benefits Act (PBA) should be revised so that it is the exclusive source of legal authority on pension matters in the province. (Currently, pension authority relies variously on a patchwork of provincial law and court decisions.)
The provincial regulatory body, the Financial Services Commission of Ontario, should have its pension division replaced by a new, independent, pension-focused body. Similarly, the tribunal which adjudicates FSCO's activities, the Financial Services Tribunal, should be replaced by a tribunal that focuses exclusively on pension issues.
Governance - There should be means of reducing conflict of interest and clarifying who are the fiduciaries in a governance body, and of ensuring that there are standards of education for participants in the governance process.
Members should be able to access, through the online facilities of the regulatory body, all plan documents, valuations and other reports filed by the plan, without charge to the individual. In addition, plans should investigate electronic transmission of annual member statements.
Plan design - Vesting (the point at which a member becomes entitled to a benefit) should be made immediate (there is currently a two year waiting period). Also, plans should be required to make transfers between plans easier to accomplish for newly hired employees.
Funding - Stricter requirements for the preparation of actuarial valuations should be introduced. Jointly sponsored plans should have to meet funding requirements only on a going concern basis (it is assumed the Plan will continue indefinitely). These plans should continue to conduct solvency valuations (which assume that the plan is ending on the day the valuation is conducted), but these should be made available to the regulator and plan members for information only. This reflects the fact that jointly sponsored plans very rarely face the prospect of winding up in the short to medium term.
Investments - Jointly sponsored plans with the capability to make complex investment decisions should be exempt from the current federal law that limits pension plans to a 30% ownership stake in any one business.
Innovation - Pension law should facilitate more cooperation among existing smaller plans, giving them the ability to join up and create larger benefit plans, or to take advantage of investment services offered by larger plans.
The report doesn't offer any specific advice to address the current economic climate and resulting funding issues for plans. However, the Ontario government has indicated it will be introducing legislation in the Spring to provide solvency funding relief, allowing plans to spread their solvency payments over a longer than normal period of time.
Despite the lengthy list of recommendations, it is not certain that any of them will subsequently become law. Legislation to implement any number of the recommended reforms may follow at a later date. In the meantime, the government has offered interested parties the opportunity to submit feedback on the report, with a deadline of February 27. The CAAT Plan will make a submission by that date.
March 2009
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