Ontario is implementing changes it first announced in 2010, and reaffirmed in the 2011 budget, by strengthening the Pension Benefits Guarantee Fund (PBGF) to help protect pensioners.
Beginning Jan. 1, the government will:
•establish a minimum assessment level of $250 for each covered plan;
•raise the base fee per plan member from $1 to $5;
•increase the maximum fee per plan member in underfunded plans from $100 to $300;
•eliminate the overall assessment cap, currently $4 million, for underfunded plans; and
•extend the initial waiting period for PBGF coverage of new plans and benefit improvements from three to five years.
These changes will help to make the PBGF more sustainable by reducing the size of claims and ensuring it has sufficient funds to cover them.
PBGF assessments are paid by the company or organization that sponsors the pension plan, not employees.
The McGuinty government is committed to improving Ontario’s pension system to protect plan members and pensioners.
These changes build on the government’s strategy to reduce risk to the PBGF and make it more sustainable.
“We will implement this strategy as we move forward with a plan to modernize Ontario’s pension system,” noted Finance minister Dwight Duncan.
Since 1980, the PBGF has provided pensioners and plan members with benefit protection if plans are wound up with insufficient funds to cover promised benefits.
The fund is the only one of its kind in Canada.
The PBGF “tops up” the first $1,000 per month of certain defined benefits for members in Ontario if a plan is wound up with insufficient assets and the employer sponsor is unable to fund the pension shortfalls.
The government intends to introduce additional reforms to modernize pensions, as well as reduce the risk to the PBGF, such as strengthening funding rules for pension plans.