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Finance Minister Jim Flaherty
introduced new rules for public pensions on Tuesday, aimed at putting plans at
Crown corporations and other firms on more solid ground.
Finance Minister Jim Flaherty.
(CBC)
"We understand the value of
secure and sustainable pension plans," Flaherty said in a release Tuesday.
"We are proposing a balanced package of measures for the benefit of
pension plan sponsors, plan members and retirees."
Among the proposed reforms is a ban
on employer contribution holidays unless the pension plan has a five per cent
cushion between its assets and liabilities.
Also, plans will be allowed to
carry greater surpluses than before. Under existing legislation, federally
regulated employers can only over-fund their pension plans by 10 per cent. That
threshold will be increased to 25 per cent to provide a greater cushion for
pension plans in case of another recession.
And employers will be required to
fully fund pension benefits when a plan is terminated. Currently, employers
must fund only 80 per cent of benefits. Officials say making employers
responsible for full benefits will serve as a disincentive to winding up
pension plans.
The reforms would do nothing to
address shortfalls in public pensions at companies such as Nortel and Canwest,
two firms who have entered creditor protection in recent months. Federally
regulated pension plans account for less than 10 per cent of the country's
retirement savings.
Ottawa has spent several months consulting on the issue with
interested parties across the country, in an exercise led by Ted Menzies,
Flaherty's parliamentary secretary.
As part of that process, Ottawa has consulted with the provinces and corporate Canada to
address problems in the pension system as a whole. But ultimately, Ottawa remains reluctant
to use taxpayer funds to guarantee private pensions.
Ontario is the only province that has a pension benefits guarantee
fund, which provides pensioners with up to $1,000 a month in the event a plan
fails to provide its full benefit or any benefit at all.
It is funded by corporate
contributions, and the government has no legal obligation to top it up. The
province has acknowledged that with only about $100 million, the pension
guarantee fund is dramatically underfunded
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