After a two-year study, Ontario’s Expert Commission on Pensions has released its report with more than 140 recommendations designed to “reinvigorate” the province’s pension system.

Advised by a panel of four pension experts, sole commissioner Harry Arthurs, former dean of Osgoode Hall Law School and former president of York University, has come up with a complex series of far-ranging recommendations — including creating a pension champion or government agency that would collect and disseminate reliable information about the pension system and think creatively about new pension strategies and policies, and replacing theFinancial Services Commission of Ontario with a new pension regulator that would be given greatly enhanced powers to regulate the pension system.

The report’s emphasis is on long-term design of the pension system, not on short-term challenges presented by the current financial crisis.

The provincial government is calling for feedback by the end of February 2009 and will introduce legislation sometime after that.

Other recommendations would see individual workers who are laid off or fired qualify for or “grow-in” to early retirement benefits if their age and years of service add up to 55 points — a provision that currently applies only to workers affected by a full or partial wind-up of their company.

As well, the report says, pension plan sponsors should be allowed to withdraw surpluses from an ongoing plan if it is funded at more than 125% of benefits owing, and contribution holidays should be allowed if the plan is funded at 105% — with the proviso that contributions must be resumed immediately if funding falls below 95% of benefits owing.

The commission was asked to focus on defined-benefit plans and “to examine the legislation that governs the funding of defined-benefit plans in Ontario, the rules relating to pension deficits and surpluses, and other issues relating to the security, viability and sustainability of the pension system in Ontario.”

The report notes the percentage of the Ontario workforce covered by occupational pension plans has been declining slowly, to slightly less than 35% of the workforce today from about 40% in 1985. An increasing number of workers with pension coverage — but still less than one in five — are now enrolled in defined-contribution plans rather than DB plans, even though DB plans are often seen as more attractive by workers, the commission says.

Workers who are unionized and work for medium-sized and large companies or in the public sector, broadly defined, are far more likely to be enrolled in pension plans than those who work for smaller companies, says the commission’s report. The two main causes of the decline in pension coverage, it adds, have been the decrease in the percentage of Ontario’s workforce represented by unions and the significant loss of jobs in the manufacturing sector, in which pension coverage was relatively high.

“The best hope for maintaining and ultimately expanding pension coverage,” the report concludes, “is to facilitate the development of large plans, to encourage co-operation among small and medium-sized plans, and to promote target benefit plans that might be affordable for Ontarians who do not now have pension coverage.”

The report acknowledges the restructuring of Ontario’s economy poses many challenges for workers, employers and pension plans: “Present procedures for dealing with the impact of corporate change on pension plans are too slow and cumbersome for sponsors, and offer inadequate protection for members who must leave their present plan and move to another or to none at all.”

The report proposes a series of measures to address these concerns, including immediate vesting of the pension rights of all active plan members when they join a plan, as well as the development of standard procedures to facilitate transfers of plan members between plans. As well, the report says, Ontario’s pension laws should provide for phased retirement.

The commission heard considerable evidence from active and retired plan members about the impact of pension plan failures. The report recommends that the province’s Pension Benefits Guarantee Fund, which protects benefits of plan members in the event of plan failure, should be continued for at least five years or until the completion of a study of possible alternatives, whichever is later.

Meanwhile, the commission’s report says, the level of monthly benefits eligible for protection by the PBGF should be raised to $2,500 from $1,000, and a report should be completed within one year on how levies should be assessed and benefits adjusted in future.

@page_break@Although reviewing the public pension system was beyond the commission’s mandate, the report recommends that Ontario investigate the advantages and disadvantages of expanding the Canada Pension Plan or creating a comparable provincial plan “so as to enhance pension coverage, control costs and improve benefit portability.”

“The idea of expanding the CPP, among others,” says Arthurs, “has attracted considerable interest outside Ontario as well, and proposals are afoot to discuss it at a ‘national pensions summit.’ I believe that if such a summit does occur, it ought also to explore a broad spectrum of proposals for large-scale, long-term changes in the architecture of the pension system.”

Initial reaction to the report has been favourable. Says Scott Perkin, president of the Association of Canadian Pension Management, representing pension plan sponsors and administrators: “We encourage the finance minister to initiate further discussions with stakeholders in order to advance pension reform in the province.”

And Wayne Samuelson, president of the Ontario Federation of Labour, notes: “The report’s recommendations are complex and interdependent and deserve serious consideration by government. The current crisis in financial markets should not drive long-term reform efforts.”

Samuelson adds that the labour movement will be keeping two priorities in mind while it considers the report: “Strong regulation to enhance security for those with DB pension plans and the need to expand pension plan coverage for those without.” IE