Federal budget 2021 — Several measures affecting total rewards

The federal budget unveiled on April 19, 2021, affects several components of total rewards. Our specialists have identified the most relevant elements.

The budget provides two changes to Old Age Security (OAS):

• A single payment of $500 in August 2021 to OAS recipients who will be 75 or older in June 2022; and
• The introduction of a bill to increase monthly OAS payments by 10% for recipients aged 75 or older starting in July 2022.

Funding for the Canada Revenue Agency has also been suggested so that it can administer some of the tax measures announced in the 2019 budget. These include, among other things, two measures expected by pension plan sponsors, namely the possibility to offer life deferred annuities at 85 years of age in certain registered plans and variable payment life annuities in, for example, defined contribution plans.

These measures, combined with the enhancement of Old Age Security, are likely to have a significant impact on savings and retirement planning strategies in the coming years.

Besides these measures, few changes to pension rules were proposed. The conclusions of the consultation carried out in fall 2020 by the Minister of Finance to strengthen the governance and security of federally regulated pension plans are still expected and we will closely monitor any developments.

The 2021 federal budget proposes extending the employment insurance sickness benefit period from 15 to 26 weeks. This extension will take effect in summer 2022.

The Government of Canada will also launch consultations with employers, unions and private insurers to improve the EI Premium Reduction Program. This program allows employers who provide their employees with a disability insurance plan that meets certain requirements to receive a reduction in EI premiums. Some employers may have to review their disability insurance plan depending on the results of the consultations.

The Government of Canada reiterated its desire to work together with provinces, territories and various stakeholders to move forward on the issue of establishing a national pharmacare plan.

As announced in 2019, $500 million will be invested continuously in the National Strategy for High-Cost Drugs for Rare Diseases.

The 2021 budget is consistent with the already planned measures; more information is needed to determine the impact on private plans.

The Government of Canada announced its intention to submit a bill to implement a minimum wage of $15 an hour for federally regulated businesses, such as air, rail and interprovincial road carriers, the maritime sector, banks and telecommunications companies, whose provincial minimum wage currently falls under this level. For the moment, no timeframe has been given to introduce the bill, and the details of this measure remain unknown. The introduction of a federal minimum wage could have an impact on various government policies in provinces dealing with an increase the minimum wage in certain industries.

We will be following up on the implementation of these various initiatives and keep you informed. Contact your Normandin Beaudry consultant or email us if you have any questions.