One year since the federal government unveiled its target-benefit bill, the issue is still attracting divisive opinions from the industry. On one hand, there’s continued opposition from Canada’s labour unions, while many others in the industry believe the bill is heading in the right direction.
Unifor, which has taken credit for forcing the government “to take a step back, halting the bill’s progression,” said in April that it remains committed to seeking “full withdrawal” of the legislation. Some 2,600 union members and retirees signed Unifor’s online petition opposing the law.
Read: Can the feds overcome opposition to pass target-benefit pension bill?
In a letter sent to Finance Minister Bill Morneau earlier in October, Ottawa-based pension consultant Bob Baldwin expressed his strong support for the general direction of Bill C-27, noting it’s consistent with what expert panels on pensions concluded some years ago. But he also suggested the addition of some supplemental information that could provide appropriate enhancements to the protection of plan members.
Any single-employer defined benefit plan requesting to convert to a target-benefit arrangement on a past-service basis should only be allowed to do so for reasons that are substantial, suggests Baldwin. “Thus Bill C-27 should be amended to incorporate language to the effect that conversions involving past service will only be accepted by the Office of the Superintendent of Financial Institutions in cases that are ‘a last resort’ or some equivalent wording.”
“With respect to past-service conversions, the federal government should also go as far as it can in articulating how it will make the concept of ‘last resort’ operational. The concept that should be central in this context is that conversions of accrued benefits should only be allowed where the benefit reductions focused exclusively on future accruals would have a devastating effect on young cohorts of plan members.”
Read: Federal target-benefit conversions face an uphill battle
Another matter of concern, according to Baldwin, is the governance process for target-benefit plans. “In cases where single-employer [target-benefit] plans have adopted a joint governance model, it is not clear that plan governors need a great deal of regulatory guidance in addition to what is provided in Bill C-27,” he wrote. “Where joint governance is in place, plan members will protect their rights through the governance process. This will not be the case in [target-benefit] plans in which the governance structure is dominated by employer nominees.”
Given this significant difference, Baldwin suggests the government create a much more prescriptive regulatory regime for plans that aren’t jointly governed. He also suggests that the government issues draft regulations and invites open debate and discussion of them.
In light of the differing opinions around target-benefit plans, is it time for the government to pass the bill?
Have your say in our weekly online poll here.
Read: Confusion remains despite federal retreat on guidance about taxing employee discounts
As for last week’s poll, which looked at whether employee discounts should be a taxable benefit, the vast majority (86 per cent) of respondents said no, it would be petty to tax one of the small ways employers can give their staff an extra boost. Just 14 per cent said yes, people should have to pay tax on employee discounts just as they do with a number of other benefits.
