The federal government’s 2008 budget has a little something for everyone this year, including increased flexibility for locked-in pensions, an initiative to help keep older workers in the workforce, a change to the Employment Insurance program, and more investment in infrastructure.
There will be increased choices available to holders of life income funds (LIFs) by increasing the flexibility to withdraw funds and these three provisions are in the budget: individuals 55 or older with small holdings of up to $22,450 will be able to wind up their accounts with the option to convert to a tax-deferred savings vehicle, individuals 55 or older will be entitled to a one-time conversion of up to 50% of LIF holdings into a tax-deferred savings vehicle with no maximum withdrawal limits, and all individuals facing financial hardship will be entitled to unlock up to $22,450.
The budget also proposes to provide additional support for older workers who have been laid off by extending the Targeted Initiative for Older Workers through to 2012.
“This is a new $90-million investment in capable, experienced workers aged 55 to 64,” says Minister of Finance Jim Flaherty. “It will allow them to remain productive participants in the workforce and help alleviate labour shortages where they exist.”
The government plans to create a new, independent Crown corporation—the Canada Employment Insurance Financing Board in 2009—to ensure that Employment Insurance (EI) premiums are used exclusively for the EI program.
This is good news for employers, according to the Canadian Restaurant and Foodservices Association (CRFA). “CRFA has vehemently opposed over-contributions by employers and employees to this insurance program for more than 15 years. Over that time, over-contributions have resulted in a notional EI surplus of more than $50 billion,” says Joyce Reynolds, CRFA executive vice-president of government affairs. “It is significant that this inappropriate practice is coming to an end, and with a sound governance structure for the new crown corporation, this announcement should result in EI premium savings for both employers and employees.”
The CFRA also applauds the government’s $22 million investment to speed up the processing of permanent resident applications, which it believes should help Canada’s labour shortage because it includes measures to address immigration backlogs and disincentives to work.
The government announced the establishment of another Crown corporation, called PPP Canada Inc., to work with the public and private sectors to support public-private partnerships (P3s).
“It will be the first public-private partnership office of its kind at the federal level in Canada,” Flaherty explains. “By increasing our use of P3s and taking into account contributions by other levels of government, we should be able to leverage a $100-billion investment in infrastructure.”
Other highlights include:
• Advancing the Capital Markets Plan for Canada, including the recent launch of an Expert Panel on Securities Regulation.
• Modernizing the authorities of the Bank of Canada to support the stability of the financial system.
• Updating treasury risk guidelines to ensure that federal entities continue to adhere to leading practices in financial risk management.
• Providing $110 million to the Mental Health Commission of Canada to support innovative demonstration projects to develop best practices to help Canadians facing mental health and homelessness challenges.
For more about the proposed introduction of tax-free savings accounts, click here to read Budget 2008: Shelter for Your Capital Gains.
For more federal budget coverage, click here to read our special online section, Budget 2008: Special Report.
To read the budget on the federal government’s website, click here.
To comment on this story, email craig.sebastiano@rci.rogers.com.