My pension law partner, Priscilla Healy reports:
The Ontario budget promises some welcome flexibility for both pension plan members and employers, although at the expense of benefit security on retirement.
Pension plan members who have transferred their pension monies into LIFs or LRIFs will be able to immediately withdraw 50 % of their locked-in monies from these accounts, an increase from 25%., effective January 1, 2010. There will also be a temporary waiver of fees for unlocking those accounts on the grounds of financial hardship, effective for applications made on or after April 1, 2009. However, without amendments to the tax rules, once monies are withdrawn, there will be no ability to replenish those accounts on a tax deferred basis.
Employers will welcome the ability to extend solvency payments over ten years instead of the current five year requirement, starting with valuation reports on or after September 30, 2008. The new ability to consolidate existing solvency payment schedules and to defer new going concern and solvency special payments for one year will also help temporarily cash-strapped employers.
The ten year extension of solvency payments may be illusory for any but jointly governed plans, because it will not be available if more than one-third of the aggregate of plan members object. It is not clear why retirees or deferred vested plan members would not object to a reduction in the security of their pensions. Employers may have to depend upon the inertia of retirees and deferred vested plan members preventing a flood of objections, or upon the concern of retirees or those close to retirement as to the possible insolvency of the employer which could leave them with no retiree medical benefits.
On the flip side, to protect member security the budget proposes restrictions on employer contribution holidays for fiscal years ending in 2010 to 2012.
There are a number of other budget proposals arising from the November, 2008 Report of the Expert Commission on Pensions, and there is reference to the passage of Bill 133 that simplifies pension splitting on marriage breakdown. The intent is also expressed to adopt a new multi-jurisdictional agreement that will simplify the administration of registered pension plans with members in more than one jurisdiction.
This is the first time since the abortive Bill 198 in 2002 that an Ontario government has attempted significant reforms of the Pension Benefits Act.