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Normandin Beaudry

Proposed changes to Ontario’s PBGF contribution formula

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There, in black and white

NB Bulletin Vol. 21 No. 3, January 2018

The Ontario government’s proposed new funding framework includes unproclaimed amendments to the Pension Benefits Act that would increase the guarantee provided by the Pension Benefits Guarantee Fund (PBGF) by 50%—from $1,000 to $1,500 per month—in the event a defined benefit pension plan would wind up with insufficient funds. Age and service eligibility requirements for the coverage of these benefits would also be eliminated.

On January 19, 2018, the Ontario government presented its proposed changes to the PBGF contribution formula to support the above enhancements.

Here is an overview of the proposed amendments:

  • Increase of the risk-based assessment contribution by 50%.
  • Introduction of an additional assessment contribution equal to 0.015% of a pension plan’s solvency liabilities tied to Ontario plan beneficiaries.
  • Increase the plant closure/permanent layoff benefit assessment component by 50% for employers that had previously elected to exclude all benefits related to these situations from their solvency liabilities.
  • Increase of the maximum assessment per member from $300 to $600.
  • Elimination of the $5 basic assessment per Ontario plan member and $250 minimum assessment per pension plan.

For instance, for a pension plan with solvency liabilities of $50M, 500 beneficiaries and a solvency ratio of 80%, the PBGF assessment would increase from $77,500 to $120,000.

The changes would be effective for assessment dates on or after January 1, 2019. Interested stakeholders can submit their comments on the proposals to the Ontario Ministry of Finance by February 20, 2018.

 

Please feel free to contact us for additional information.

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