2019 Ontario Budget includes pension and benefits related matters
The 2019 Ontario Budget, which was presented on April 11, 2019, includes a number of items relating to pensions, benefits, executive compensation in the public sector and the funding of mental health initiatives. A number of these Budget announcements were reflected in Bill 100, Protecting What Matters Most Act (Budget Measures), 2019, which implements certain measures proposed in the 2019 Ontario budget.
Target benefit pension Plans
The government intends to move forward with a target benefit framework which would allow more multi-employer pension plans, including those in the non-unionized not-for-profit sector to participate in the framework. As a first step, legislative changes are being proposed in Bill 100 which, if passed, would expand the eligibility criteria for the target benefit framework to include non-unionized multi-employer pension plans, in addition to collectively bargained multi-employer pension plans. Bill 100 states that a target benefit plan can be based on documents where employer contribution obligations are limited to a fixed amount set out in documents other than a collective agreement. Further details will be set out in the regulations.
Treatment of excess contributions
Bill 100 adds a provision to the Pension Benefits Act (PBA) clarifying that restrictions on contribution holidays do not restrict a prior year credit balance (PYCB) from being used to pay for normal cost contributions and the associated provision for adverse deviations (PfAD).
This will effectively overturn a recent interpretation of the Financial Services Commission of Ontario (FSCO) stating that the normal cost and its PfAD can only be reduced if the contribution holiday restrictions in section 55.1 are met.
The amendment will come into force immediately.
Electronic communications for pension plans
The Ontario government is considering future legislative changes to the PBA to permit pension plans to use electronic communication as the default method, with appropriate safeguards, to provide pension plan information to their members. Members would be given the option to continue to receive paper documents if desired.
Financial Services Regulatory Authority
The government will be moving forward with launching the new Financial Services Regulatory Authority (FSRA), targeted for June 2019. The government is considering legislative and regulatory changes that would provide the FSRA with additional rule-making authority in the pension sector.
FSRA will tackle key priorities in its first year of operation that will reduce regulatory burden for regulated sectors, such as reviewing inherited guidance, in addition to data collection and filling requirements, and establishing meaningful service standards.
Bill 100 makes a number of legislative amendments to the legislation that created FSRA. Among the changes, FSRA will be required to prepare an annual business plan to be provided to the finance minister and released publicly.
In order to make a rule, Bill 100 will require FSRA to post a notice that contains a qualitative and quantitative analysis of the anticipated costs and benefits of the proposed rule.
Bill 100 will require FSRA to provide the Minister of Finance with records and information related to a pension plan or pension fund, as well as the Pension Benefits Guarantee Fund, upon request. Notice is not required to be given to an individual in respect of personal information that may be collected by the Minister.
Executive compensation in the public sector
The Ontario government will end automatic pay increases for public sector leaders. Under the new framework, compensation adjustments would be controlled, and only executives who deliver on priority-driven outcomes would be eligible.
To move ahead with this approach, the government is proposing amendments in Bill 100 to the Broader Public Sector Executive Compensation Act, 2014, and is consulting with employers to set sector-specific priorities that all leaders must work towards.
Retirement age in universities
The government of Ontario reports that the average retirement age of university faculty has been increasing, suggesting that employees are remaining in their positions longer and limiting turnover. Such employees tend to receive the high salaries and large benefits packages and, in some cases, draw a salary and a pension simultaneously. The government proposes to address this issue through amendments to the Ministry of Training, Colleges and Universities Act. The Ministry of Training, Colleges and Universities will consult with the university sector on how best to address this issue.
Bill 100 authorizes regulations governing the reduction, limitation and alteration of compensation due to an individual who is working and in receipt of a pension or who has transferred the commuted value of their pension to a locked-in retirement vehicle that was earned while working in postsecondary institutions.
Ontario drug benefit
Effective April 1, 2019, the Ontario government removed drug coverage for children and youth who are under the age of 25 and who have access to private drug plans. The government will consider ways to redesign the Ontario Drug Benefit Program to make its programs more efficient, including:
- Providing timely access to new clinically proven medicines while continuing efforts to lower drug costs;
- Modernizing and strengthening oversight of payments to pharmacies; and
- Reducing the administrative burden on clinicians and red tape for the industry wherever possible.
Dental benefits for low income seniors
The government will introduce a new dental program for low-income Ontario seniors with an annual investment of approximately $90 million once fully implemented. By late summer 2019, single seniors age 65 and older with incomes of $19,300 or less (or senior couples with combined incomes of less than $32,300) and without existing dental benefits will be able to receive dental services at public health units, community health centres and Aboriginal Health Access Centres located throughout the province. The program will later be expanded by investing in new dental services in underserviced areas, including through mobile dental buses and an increased number of dental suites in public health units.
Scope of practice for health care professionals
The Ontario government will expand the scope of practice for certain regulated health professionals, such as pharmacists, nurse practitioners, dental specialists and optometrists.
According to the government, these changes will improve convenience for patients by reducing the time spent travelling between providers for multiple visits for diagnostic tests and alleviate the need to make referrals to other providers.
Mental health funding
The 2019 Ontario budget pledges $3.8 billion in support for mental health and addictions services and housing support over 10 years, beginning with building a mental health and addictions system focused on core services embedded in a stepped-care model, and a robust data and measurement framework.
$174 million of the new funding is to be distributed in 2019-2020 to support community mental health and addictions services, mental health and justice services, supportive housing, and acute mental health inpatient beds. Services will also target priority populations, such as Indigenous peoples and Francophones.
The most noteworthy pension-related change in the budget would be the introduction of electronic communications with pension plan members as a default option, potentially resulting in cost savings for pension plans. The amendment in Bill 100 that permits the use of PYCB to cover normal cost and PfAD without dealing with the restrictions on contribution holidays will be of relief to DB plan sponsors in Ontario who have accumulated PYCB in their pension plans.
The changes to executive compensation for public sector executives and potential changes to encourage earlier retirement for university faculty will be of interest to employers and employees in those sectors. The expansion of the scope of practice for health care professionals could potentially result in more efficient patient care. The increased funding for mental health services is also noteworthy.