Ottawa proposes new target-benefit pension scheme, no changes to CPP
TORONTO - Ottawa is proposing to create a new pension plan that would be an alternative to defined-benefit plans, generally favoured by workers, and defined-contribution plans, which are favoured by employers.
The federal government is billing target-benefit plan, or shared-risk plan, as a "sustainable and flexible" option for Crown corporations and federally-regulated workers.
Kevin Sorenson, minister of state for finance, says Ottawa will hold consultations on the new framework, which he unveiled during a speech Thursday to the Economic Club of Canada in Toronto.
Ottawa says the voluntary plan is an "innovative approach" that will allow employers and employees to adjust benefits and contributions to their needs in times of economic surplus or deficit, like the recent financial crisis that put many defined-benefit plans in jeopardy.
The proposed framework would also allow companies with defined-benefit and defined-contribution plans to convert to target-benefit plans, if all parties agree.
The government says it will be looking for public comment on the proposal for the next 60 days.
This is the latest in several reforms recently announced regarding public-service pension plans, including a hike in contributions. Despite the changes, the government has kept benefits, which are fully indexed for inflation, largely untouched.
Ottawa opposes expanding the Canada Pension Plan by boosting premiums and benefits, an initiative favoured by Ontario and Prince Edward Island, but one that the government says will cost jobs and stunt business development because it would raise premiums for workers and firms.
Ontario Finance Minister Charles Sousa said in a speech Wednesday that his province is still planning to go it alone with a CPP top-off if necessary, accusing Sorenson of misrepresenting the issue with statements that it could cost up to 70,000 jobs.
The Harper government has preferred tax-free savings accounts and pooled registered pension plans, both voluntary savings vehicles created by the Conservatives, rather than mandated CPP improvements.
The CPP, established in 1965, currently provides retirement benefits to contributing workers up to a maximum of about $12,500 annually.
Maximum yearly premiums of about $4,700 are split half-and-half with employers; the self-employed pay the full amount.
There are currently more than 1,200 federally-regulated pension plans in Canada.
â€” With files from Julian Beltrame
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