Varying regulations for pensions across Canada are discouraging the creation of national, single-employer pension plans, which is fuelling an existing shortage of pension coverage in this country, a new report by the C.D. Howe Institute finds.

The paper, called the Pension Tangle: Achieving Greater Uniformity of Pension Legislation and Regulation in Canada, argues that cross-jurisdictional differences in pension legislation and regulation make it less likely that firms with employees in more than one province will establish registered pension plans.

The report points out that the provinces, which are responsible for establishing minimum standards for design, funding, communications and administration of pensions, have developed their legislation at different times and with different provisions. In addition, different aspects of pension policy tend to fall under different ministries — principally finance, labour and justice — that have different constituencies, priorities and expertise, according to the paper.

As a result, employers face a confusing myriad of rules, and a higher risk of administrative error and legal challenges, which acts as an obstacle to those considering creating national pension plans.

This obstacle contributes to the existing lack of pension coverage, with more than 60% of Canadian workers not currently covered by employer-sponsored pension plans, according to the report.

“Inadequate private pension coverage leaves a gap to be filled,” says the paper.

Author Gretchen Van Riesen, an advisor on pensions and benefits with GVR Consulting, calls for better harmonization of pension legislation.

“There are a number of ways in which uniformity of legislation and regulation of pensions in Canada can be moved forward,” Van Riesen says.

In particular, she suggests four alternatives to the current regulatory framework. One recommendation is to institute a single piece of pension legislation that brings together the existing jurisdictional legislation, and one national regulatory body to supervise pension plans, possibly with staff in each province.

A second alternative involves establishing a model law that would align the legislation of jurisdictions across Canada, while maintaining the existing regulatory structure.

Third, Van Riesen suggests maintaining the current structure of multiple acts of pension legislation, but assigning supervision responsibilities to a single national regulator, such as the Office of the Superintendent of Financial Institutions.

Lastly, the report suggests maintaining the current structure of multiple laws supervised by multiple regulators, but augmenting it with new guidelines and rule-making authority by the Canadian Association of Pension Supervisory, to increase and maintain uniformity.

Van Riesen notes that a single law and regulator is the most efficient approach to address the uniformity issue, but she warns that it could also be the most complex alternative, since it may require resolving constitutional issues.

Still, she is encouraged by the federal government’s recent establishment of a Research Working Group to explore potential changes to pension legislation.

“While the group’s mandate is unclear at the time of writing, it may be cause for hope that pension coverage for those not in pension plans and harmonization of legislation will be topics of discussion,” Van Riesen says.

IE