The Ontario Chamber of Commerce(OCC), Ontario’s business advocate, presented its case for pension reform at the Ontario Expert Commission on Pensions yesterday. The OCC explained that defined benefit(DB)pension plans are fast becoming unsustainable.
The acting chair of the OCC Finance committee, Winton Woo, described the current funding rules as unnecessarily burdensome on employers. “It’s like having to pay off a mortgage in five years versus the conventional 25-year term,” he said.
Shortcomings in the current legislation and the decline in long-term interest rates have led to funding issues for most DB plans. According to Len Crispino, president and chief executive officer of the OCC, the excessive funding requirements force employers to channel cash flow into pension funding and away from their business operations. He said this puts a “downward pressure on businesses” and could have a negative impact in the province’s economic growth.
The OCC Pensions Task Force – a committee of both financial and actuarial experts – recommends that the government amend the pension legislation to:
• promote voluntary increased pension funding and the re-establishment of full funding for existing plans;
• eliminate partial plan terminations and “grow-in” benefits;
• relax solvency funding requirements;
• reduce administrative burden; and
• allow businesses running DB plans access to funding excesses.
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