2018 Ontario Economic Outlook and Fiscal Review
On November 15, 2018, the new Ontario government released the 2018 Ontario Economic Outlook and Fiscal Review (the Economic Outlook) and introduced Bill 57, the Restoring Trust, Transparency and Accountability Act, 2018. The Economic Outlook and Bill 57 include a number of items relating to pension and benefit plans.
Variable benefits regulation
The government intends to follow through with plans to permit defined contribution pension plans to pay variable benefits directly to retirees. A description of proposed regulations was released in March 2018 and described in the April 2018 edition of News & Views. In addition, Bill 57 will amend the Pension Benefits Act (the Act) to permit 50% unlocking of pension benefits when a variable benefit account is created within a pension plan. 50% unlocking is already permitted when funds are moved to a Life Income Fund, so this amendment will help make variable benefit accounts a viable alternative to Life Income Funds.
Enabling electronic designation of beneficiaries
Bill 57 includes amendments to the Act which would explicitly allow administrators of pension plans to permit electronic beneficiary designations for pension plan death benefits. Such electronic beneficiary designations will be subject to the requirements of future regulations.
Permitting buy-out annuity purchases in respect of surviving spouses
Bill 57 will provide discharges for purchases of buy-out annuities in respect of surviving spouses in receipt of a pension. Previously, the Act only provided discharges in respect of former and retired members. This will apply to past and future annuity purchases, provided regulatory requirements are met. Refer to our May 2018 edition of News & Views for more details on buy-out annuities in Ontario.
Non-residency unlocking from pension plans
Bill 57 will amend the Act to permit pension plans to offer unlocking of pension benefits for pension plan members who are non-residents of Canada for income tax purposes, subject to spousal waiver if there is a spouse. Non-residency unlocking has already been available to owners of locked-in retirement accounts in Ontario, but has not been available to pension plan members.
OHIP+ and Ontario drug benefit program reform
On January 1, 2018, Ontario introduced OHIP+ Children and Youth Pharmacare, which made eligible prescription drugs (for more than 4,400 drug products) free for anyone under age 25 with OHIP coverage.
The Economic Outlook states that, starting in March 2019, persons under age 25 will be required to receive reimbursement from their private drug plans. OHIP+ will continue to provide coverage to those who are not covered by private drug plans.
The government will also review the Ontario Drug Benefit Program for potential reforms.
Mental health and addictions
Partly in order to obtain matching funds from the federal government, the Ontario government has made a commitment to spend $1.9 billion over 10 years on mental health and addictions services. The aim of these funds would be to facilitate:
- reductions in wait times for patients;
- faster access to mental health and opioid addiction treatment services;
- an enhanced approach to addictions treatment and rehabilitation services through the new Consumption and Treatment services model; and
- the expansion of the scope, coverage and locations of Rapid Access Addiction Medicine (RAAM) clinics, for individuals with substance abuse issues that require specialized addiction medicine support, in communities of high need.
The $1.9 billion dollar commitment replaces prior Ontario government’s promise of $2.1 billion over four years, as discussed in the April 2018 edition of News & Views.
Employer health tax
Under the 2018 Ontario Budget, the previous government had proposed exploring measures to limit the Employer Health Tax (EHT) exemption for small businesses. However, the current government has confirmed that it is not moving forward with these proposals.
Workplace Safety and Insurance Board review
In September 2018, the Workplace Safety and Insurance Board (WSIB) announced a reduction to the average WSIB premium rate effective January 1, 2019. The average rate would decrease from $2.35 to $1.65 on every $100 of insurable payroll, which represents a nearly 30% cut to the premium. This resulted from the elimination of the WSIB’s unfunded liability.
The government intends to launch a review of the sustainability of the workers compensation system, which would include an assessment of its efficiency, governance and rate predictability for employers.
Some of the measures announced in the Economic Outlook and Bill 57, such as the cancellation of planned EHT rule changes and the previously announced WSIB premium rate decreases, will be welcome developments to Ontario employers. The release of the long-awaited variable benefit regulations and the proposal to explicitly permit electronic beneficiary designations for pension plans would be welcome news to pension plan administrators. The extension of buy-out annuity rules to pension plan survivors will also be helpful to defined benefit pension plan administrators in Ontario.
There remains some uncertainty over the Ontario government’s plans with respect to pharmacare and OHIP+. Although the Economic Outlook was clear that OHIP+ would cease to be the first payer for children and young adults with private drug insurance, it did not reiterate the government’s previous statements that it would continue to be the second payer for such individuals where private coverage does not cover some or all their drug costs. The review of the Ontario Drug Benefit could also affect Ontarians who rely on public drug coverage.