Retirees and Pension Reforms

Karen Shaver for The Lawyers Weekly

August 6, 2010

Historically, employees who retired with an employer-sponsored defined benefit pension could expect to be somewhat insulated from their employers' future economic issues. But that changed with the extraordinary economic conditions that recently threatened even pension plans that the Ontario government had agreed were too big to fail.

Federal and provincial governments throughout Canada accelerated pension reform initiatives and retirees organized in order to participate in pension reform consultations. Reports from expert commissions have been released and governments are rolling out the first phase of pension reform. But are retirees likely to be satisfied with changes?

After four years of consultation and analysis, the Ontario government has passed the Pension Plan Amendment Act, 2010 (Bill 236) which amends the Ontario Pension Benefits Act (PBA) and is the first phase of the most significant pension reform in 20 years. Bill 236 received royal assent on May 18. Many substantive changes become effective on a date to be proclaimed by the Lieutenant Governor, and some amendments are subject to regulations containing prescribed details, yet to be released.

Subject to these prescribed details, what did retirees achieve under Bill 236 and what do they still want? Have pensioners become activists as a result of their participation in pension reform process, and are plan administrators now obliged to consult with and balance pensioners' views in areas of plan governance and administration?

Retiree involvement in consultations

Bill 236 proposes amendments to the PBA based on recommendations of the Ontario Expert Commission on Pensions following extensive consultations with stakeholders, including pensioner groups. Retirees also participated in consultations conducted by the Standing Committee on Finance and Economic Affairs before Bill 236 received royal assent. Retirees made more than 25 submissions about their issues and concerns related to pension reform, some of which are discussed below.

Recognition of retirees

Retirees resent being described in the PBA and their own plan documents as "former members." Bill 236 amends the PBA to define "retired members" separately from "former" members, with separate rights and entitlement to disclosure of certain plan-related information. Some groups perceive this renaming as less than adequate in delivering the real changes that pensioners are seeking in being involved in the administration of their pension plans.

Advance notice of plan amendments

Retirees do not have effective access to plan information. Bill 236 amends the PBA to require that plan administrators provide retirees with increased disclosure about plan operations and funding and with advance notice of all amendments to the pension plan, unless exempted under the regulations. Timing and substance of the required information will be described by the regulations.

Participation in pension advisory committees

Retirees generally have no right to participate in plan governance decisions, even those that might adversely affect their pensions. Former union members, as retirees, have no voice in pension plan affairs, and, in most unions, no role in union decision-making.

Bill 236 amends the PBA to permit active and retired employees to establish a pension advisory committee (PAC) with a mandate to monitor and make recommendations about pension plan administration. Regulations will include details about the mandate, establishment and operation of a PAC.

Once advised of the intent to establish a PAC, the plan administrator is required to support its establishment and operations. Some pensioner groups are concerned that retirees will have little real authority under a PAC. Further, it doesn't appear that retirees will be represented proportionately on a PAC. This could set up priority contests between active and retired employees and adversely impact the effectiveness of the PAC.

Future retiree involvement

While Bill 236 addresses some obvious limitations in the PBA for retirees, subject to the regulation to be released, a number of retiree concerns have not been addressed. And while Bill 236 attempts to balance priorities between broad groups of stakeholders, including retirees, pensioner group submissions clearly indicate that retirees do not speak with one voice. It will be a challenge to develop pension policy that is broad enough to shape future pension reform that incorporates the variety of issues.

As a result, the next step will likely see plan administrators and retirees negotiating and adjusting to settle their new roles and responsibilities under phase one reforms. Depending on the perceived state of the pension plan, some pensioner groups may not wait for the next round of pension reform and will continue to lobby to increase their current level of involvement in plan governance.

The question remains as to whether pension reform can continue to consider "retired employees" as a single interest group, given the diverse existing and future interests of retiree stakeholders within the various pensioner groups.

Karen Shaver is a partner in the Pensions and Employee Compensation Group of McMillan LLP in Toronto. Her clients include employer plan sponsors, boards of trustees, private equity investors, creditors and borrowers and trustees in bankruptcy. will help you find a Pension and Benefits lawyer to assist you with any questions.
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