The Voice of Multi-Employer Plan Interests in Canada

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January 29, 2015

 
Hon. Mitzie Hunter
Associate Minister of Finance
Province of Ontario
4117 Lawrence Avenue East
Unit 109
Toronto ON M1E 2S2

 

Re: Ontario Retirement Pension Plan (ORPP) Key Design Questions Consultation

Dear Minister Hunter:

As you are aware, the proposed ORPP will be mandatory for all employers who do not maintain a “comparable pension plan.” A critical question is the definition of a comparable pension plan. MEBCO represents multi‐employer pension plans (MEPPs), many of which include employers and workers in Ontario. The plan sponsor for each of these plans is a board of trustees, often composed of equal numbers appointed by the participating unions and contributing employers. MEBCO strongly supports the Consultation’s inclusion of employers who contribute to target benefit (TB) MEPPs as maintaining a comparable pension plan.

The benefit structures of MEPPs often differ from those of typical single employer plans. Therefore, MEBCO urges you to include MEBCO representatives in the Ministry’s internal and external deliberations so that all employers who contribute to TB MEPPs can qualify as providing a comparable pension plan on equivalent terms to employers maintaining single employer plans. TB MEPPs represent a very large number of workers and a very large number of employers with interests that can be significantly different from those of sponsors of single employer plans. A group like MEBCO can speak on behalf of the MEPPs and allow a complete and fulsome consideration of the comparable pension plan issue.

MEBCO notes that a cornerstone of the ORPP Consultation is that benefits should be locked in and only available to provide retirement income. The Ontario Pension Benefits Act (PBA), and comparable acts throughout Canada, require defined benefit (DB) plans and TB MEPPs to include so‐called portability – the right of an employee whose plan participation terminates to transfer the commuted value of the deferred pension to a locked‐in RRSP. By its very nature, that entitlement turns the DB or TB MEPP pension into a defined contribution (DC) benefit. MEBCO has supported the elimination of this portability option (except for small amounts) for many years. In the context of the proposed ORPP, continuing to require (or even permit) portability represents a significant loophole that should be eliminated. If the ORPP exemption does not apply to DC plans, it should not be permissible to be exempt from ORPP contributions based on participation in a DB or TB MEPP, and then take one’s benefit in the form of a DC, given that a DC is not exempt.

MEBCO notes that the ORPP will apparently only accrue benefits for years when contributions were paid. That means that someone retiring in 2017 will receive little or nothing. When most TB MEPPs were first created, a significant benefit was payable right from the outset. This assured the support of those who were most immediately concerned with pension adequacy – older workers. While MEBCO understands the “intergenerational equity” objectives mentioned in the consultation, the ORPP is fundamentally a social insurance scheme, and modest modifications to the matching of contributions with benefit accruals should be considered so that the objective of adequate retirement income for Ontario workers is met in the reasonably near term, not solely many years in the future.

MEBCO also requests that the exemption from ORPP participation apply to DC MEPPs that provide for a substantial contribution and locking in of the balances. For DC MEPPs, a mandatory ORPP contribution would almost certainly lead to an equal reduction in the DC contribution, with no net benefit to the workers in terms of retirement adequacy. And the participants in DC MEPPs have made an affirmative choice at the bargaining table to have a DC; the province shouldn’t try to overturn that choice legislatively.

 

Sincerely yours,

Robert R. Blakely, QC

President

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  1. The threat to multi-employer plans is real.
    The legislative framework is constantly changing, and cost-management and cost reduction are at the top of every agenda.
  2. Legislative changes can be significant.
    Recent proposed changes have threatened to offload costs onto plans, restrict plan coverage, and have compromised the viability of some plans
  3. Multi-employer plans are worth protecting.
    Multi-employer plans play a vital role in providing health services and retirement plans to over 1 million workers and their families in industries typified by small companies and a mobile work force.
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    Multi-employer plans carry a low profile due to the fact that the coverage is thinly spread over many employer groups and mobile workers.
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