Regulation - LGIC
A Permanent Framework for Target Benefits
Regulation Number(s):
R.R.O. 1990, Regulation 909 (General)
New target benefit regulation to be named
New target benefit regulation to be named
Instrument Type:
Regulation - LGIC
Bill or Act:
Act
Summary of Proposal:
The Ministry of Finance has launched its consultations on proposed regulations necessary for implementing a permanent target benefit framework in Ontario. This permanent framework would replace the temporary funding regulations currently in place for Specified Ontario Multi-Employer Pension Plans (SOMEPPs), which expire beginning in 2024.
The objective of the proposed permanent framework for target benefit pension plans is to strengthen governance, improve transparency and support long-term plan sustainability for plan members and employers through written policies, disclosures and funding requirements.
A comprehensive framework would reflect best practices from the pension sector and include regulations for critical elements such as plan governance, member communication and funding requirements. The proposed permanent framework is designed to enable plans to build funding and governance practices around regulatory requirements, to increase transparency by requiring plain language disclosure so that members understand the reducible nature of their target benefit, and to improve equity through prudent investment so that lower than expected returns are not borne exclusively by future members.
A set of transitional measures would also be implemented to assist plans in converting to target benefits.
Regulations for consultation will be posted to this website in stages.
Additional Information:
In 2007, temporary regulations, including an exemption from solvency funding, were introduced for Multi-Employer Pension Plans (MEPPs) that could already reduce benefits and were interested in offering target benefits. Known as Specified Ontario Multi-Employer Pension Plans (SOMEPPs), these plans have operated under the temporary regulations while the remaining elements of a permanent TB framework were being developed. Over 50 MEPPs elected to become SOMEPPs.
The solvency funding exemption and temporary regulations for SOMEPPs were intended to be in place only until a permanent and comprehensive legislative and regulatory framework was developed for these MEPPs to ensure that they were well-funded and well-governed.
Legislative provisions were introduced in the Pension Benefits Act (PBA) in 2010, 2017 and 2019 to establish the legislative framework for target benefit plans, and consultations were held in 2015 and 2018. Legislative provisions remain unproclaimed as they require regulations to be implemented.
In the 2022 Budget, the government committed to consult with affected stakeholders on proposed regulations before implementing a permanent target benefit framework in 2023.
The objective of the proposed permanent framework for target benefit pension plans is to strengthen governance, improve transparency and support long-term plan sustainability for plan members and employers through written policies, disclosures and funding requirements.
A comprehensive framework would reflect best practices from the pension sector and include regulations for critical elements such as plan governance, member communication and funding requirements. The proposed permanent framework is designed to enable plans to build funding and governance practices around regulatory requirements, to increase transparency by requiring plain language disclosure so that members understand the reducible nature of their target benefit, and to improve equity through prudent investment so that lower than expected returns are not borne exclusively by future members.
A set of transitional measures would also be implemented to assist plans in converting to target benefits.
Regulations for consultation will be posted to this website in stages.
Additional Information:
In 2007, temporary regulations, including an exemption from solvency funding, were introduced for Multi-Employer Pension Plans (MEPPs) that could already reduce benefits and were interested in offering target benefits. Known as Specified Ontario Multi-Employer Pension Plans (SOMEPPs), these plans have operated under the temporary regulations while the remaining elements of a permanent TB framework were being developed. Over 50 MEPPs elected to become SOMEPPs.
The solvency funding exemption and temporary regulations for SOMEPPs were intended to be in place only until a permanent and comprehensive legislative and regulatory framework was developed for these MEPPs to ensure that they were well-funded and well-governed.
Legislative provisions were introduced in the Pension Benefits Act (PBA) in 2010, 2017 and 2019 to establish the legislative framework for target benefit plans, and consultations were held in 2015 and 2018. Legislative provisions remain unproclaimed as they require regulations to be implemented.
In the 2022 Budget, the government committed to consult with affected stakeholders on proposed regulations before implementing a permanent target benefit framework in 2023.
Analysis of Regulatory Impact:
The proposed framework would establish the target benefit pension plan model as a permanent part of Ontario's pension landscape by implementing a comprehensive legislative and regulatory framework. Target benefit pension plans would offer members a monthly income stream in retirement at a predictable cost for employers.
For plans that wish to undergo the conversion process, there would be initial costs associated with developing written governance and funding policies and filing with the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (FSRA).
For plans that wish to undergo the conversion process, there would be initial costs associated with developing written governance and funding policies and filing with the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (FSRA).
Further Information:
Target Benefits Consultation Document 2023
Proposal Number:
23-MOF003
Posting Date:
March 15, 2023
Comments Due Date:
June 30, 2023
Contact Address:
A Permanent Framework for Target Benefits
Pension Policy Branch
Ministry of Finance
5th Floor, Frost Building South
7 Queen's Park Crescent East
Toronto, ON
M7A 1Y7
or
Contact Email: pension.feedback@ontario.ca
Pension Policy Branch
Ministry of Finance
5th Floor, Frost Building South
7 Queen's Park Crescent East
Toronto, ON
M7A 1Y7
or
Contact Email: pension.feedback@ontario.ca