Federal Budget 2018: Announcements relating to pensions, Employment Insurance, health and welfare trusts, national pharmacare and pay equity
The 2018 Federal Budget was released on February 27, 2018. It included several announcements relating to pension plans and Employment Insurance, but no notable announcements relating to employee benefits.
Consultation on retirement security
In recent years, a number of companies have entered insolvency proceedings with substantial unfunded pension liabilities. This can result in unexpected financial losses for former employees and retirees that can affect retirement security. The government plans to hold a consultation in the coming months to find a balanced way forward.
Consultation on unclaimed pension balances
The government intends to shortly announce public consultations on a regime to address unclaimed pension balances. Following the consultation, the government may introduce legislative and regulatory amendments.
Employment Insurance Parental Sharing Benefit
The government is introducing an additional five weeks of Employment Insurance (EI) Parental Sharing Benefit. In addition to 15 weeks of maternity leave, 35 weeks of parental benefits can currently be shared between two parents. The change would allow for up to 40 weeks of parental benefits among two parents, provided that each parent takes at least 5 weeks of parental benefits. If one parent takes all of the parental benefits, the current 35 week limit remains unchanged.
If extended parental benefits are taken for a period of up to 61 weeks, at a benefit rate of 33% instead of 55%, then the second parent can take an additional 8 weeks of parental benefits.
Health and Welfare Trusts to be converted to Employee Life and Health Trusts
A Health and Welfare Trust (HWT) is a trust established by an employer to provide health and welfare benefits to employees. HWTs are
not regulated by the Income Tax Act, but are subject to administrative positions published by the Canada Revenue Agency.
Since 2010, the Income Tax Act has included rules relating to Employee Life and Health Trusts (ELHTs). The rules for ELHTs are similar to those for HWTs but deal explicitly with more issues, such as surpluses and pre-funding of benefits.
As of February 28, 2018, no new HWTs can be created. Furthermore, the existing rules relating to HWTs will cease to apply after December 31, 2020. Existing HWTs will have the option to convert to ELHTs or be subject to the usual taxation rules relating to trusts.
Legislative amendments are expected to address the transition from HWTs to ELHTs. The government is holding a consultation on the transitional rules. Public comments are invited by June 29, 2018.
Advisory Council on National Pharmacare
The government is establishing an Advisory Council on the Implementation of National Pharmacare, to be chaired by Dr. Eric Hoskins, former Ontario Minister of Health. The Advisory Council will hold a national dialogue with experts from all relevant fields as well as national, provincial, territorial and aboriginal leaders.
The Advisory Council will report to the Minister of Health and the Minister of Finance, and will conduct an economic and social assessment of domestic and international models, and recommend options on how to move forward.
The Canadian government will introduce proactive pay equity legislation for federally regulated sectors. This legislation will draw on legislative models in Ontario and Quebec, which seek to offer total compensation for women’s job classes that is equal to that of men’s job classes of equivalent value. Under this legislation, the intrinsic values of jobs performed by women and men will be measured using a method that is free of gender bias. Such methods must take into account factors with respect to qualifications, duties, effort and other working conditions for the jobs in question.
The new pay equity regime will apply to employers in federally regulated sectors with 10 or more employees, but a streamlined process will apply to employers with less than 100 employees. The rules will also apply to the Federal Contractors program on contracts equal to or greater than $1 million.
The government will also take measures to more quickly close the gap between women’s and men’s pay in the Canadian job market. The most significant of these measures is the funding of training for women who want to work in traditionally male-dominated skilled trades, as well as pay transparency. With respect to the latter, the pay information filed by federally regulated employers must be communicated via user-friendly online content, with specific attention to making wage gaps more evident. The government has announced that it will spend $3 million over five years to promote the implementation of pay transparency in Canada.
The new process will involve specific timelines for implementation and compulsory maintenance reviews. The government estimates the measures could reduce the gender pay gap by 2.6 cents in the federal private sector (to 90.7 cents on the dollar).
A number of the items in the Budget are potentially significant, but require further consultation until definite action can be taken. The consultation on retirement security could lead to enhanced protection for members and former members with entitlements in defined benefit pension plans, but it remains to be seen what the government’s balanced approach actually means. The possibility of legislative amendments on unclaimed pension benefits is welcome news. The Advisory Council on the Implementation of National Pharmacare could have far-reaching consequences, if it develops recommendations translating to government policy.
As for the concrete measures, enhanced EI benefits may result in somewhat greater usage of parental leave by fathers and second parents. The new pay equity regime will be important to federally regulated employers and federal contractors. Finally, trustees and contributing employers of an HWT will have to take measures to convert HWTs to ELHTs before 2021. As part of the conversion process, the HWT documentation and plan design will need to be reviewed to ensure compliance with the ELHT rules. A broader plan design review could also be useful to consider the implications of the ELHT model.