2026 Ontario Budget – Key Measures: Pension Sector

The 2026 Ontario Budget: A Plan to Protect Ontario, introduces several important measures to enhance retirement income security, provide new options to pension plan members, increase flexibility and simplify pension plan administration. Below is a summary of the items most relevant to the pension sector, which are also addressed in Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026.

The maximum monthly benefit covered by the Pension Benefits Guarantee Fund (PBGF) will double from $1,500 to $3,000 per month and will:

• Become effective as of March 26, 2026;
• Not increase cost to employers; and
• Apply to all covered members of eligible defined benefit single‑employer pension plans in the event of a plan wind-up and employer insolvency.

This enhancement aims to strengthen benefit security as plans are aging and the proportion of retirees continues to grow. The budget does not mention any eventual impact of Bill C-228 on the PBGF.

Ontario will launch consultations on regulatory changes to ease consolidation of defined benefit single‑employer pension plans (SEPPs) into jointly sponsored pension plans (JSPPs).

Topics will include:

• Eliminating PBGF premiums once members have consented and during the merger‑approval period; and
• Clarifying regulatory requirements throughout the transition.

Organizations exploring a JSPP transfer should monitor this closely.

Ontario confirms a target implementation date of January 1, 2027, for Variable Life Benefits (VLBs).

VLBs would:

• Provide a lifetime income option to retirees of defined contribution pension plans and plans with additional voluntary contribution (AVC) arrangements;
• Pool investment and longevity risk; and
• Adjust payments based on experience.

The government will consult on enabling regulations during 2026.

Ontario will broaden unlocking rules to allow:

• Full unlocking at early retirement age; and
• Unlocking for individuals under age 55 when total locked‑in holdings fall below a prescribed threshold of 40% of the Year’s Maximum Pensionable Earnings ($29,840 in 2026) and indexed thereafter.

This measure is intended to give individuals greater control over their money while maintaining protection for long‑term retirement income.

Plan administrators will gain the ability to apply to the Financial Services Regulatory Authority of Ontario (FSRA) for a discharge for unlocatable members aged 100 and older, after:

• Completing prescribed search steps; and
• Observing a defined waiting period.

This change reduces plan administration costs while maintaining appropriate safeguards.

We expect draft regulations and guidance related to several of these measures over the coming months. Plan sponsors and administrators may need to review plan text, administrative practices and member communication materials once details are finalized.

Normandin Beaudry consultants will continue to monitor Ontario pension sector news and developments involving FSRA activities and keep you informed. Feel free to contact us if you have any questions.