Ontario Chamber of Commerce

Ontario Chamber of Commerce

October 23, 2007 15:00 ET

Ontario Chamber of Commerce Calls for Pension Reform

TORONTO, ONTARIO--(Marketwire - Oct. 23, 2007) - Pension legislation reform is urgently needed in Ontario in order to enable employers to improve their competitiveness, while giving employees a predictable retirement income, says the Ontario Chamber of Commerce, Ontario's premier business advocate.

In an appearance before the Ontario Expert Commission on Pensions, the Ontario Chamber of Commerce (OCC) explained that Defined Benefit Pension Plans (DBPP) are quickly becoming unsustainable.

Winston Woo, Director of Taxation and Pensions with AGS Automotive Systems, and Acting Chairman of the OCC Finance Committee, describes current funding rules as unduly burdensome on employers, "It's like having to pay off a mortgage in 5 years versus the conventional 25 year term."

Under DBPP, employers promise to deliver benefits based on an employee's earnings and years of service, providing a predictable retirement income and a complementary tool in the attraction and retention of talent.

Yet, short-comings in the current legislation and the sharp decline in long-term interest rates to historically low levels, have led to sizeable solvency deficiencies and funding issues for most DB pension plans.

"Today's excessive funding requirements force employers to divert significant cash flow away from capital upgrades, research and development, and basic maintenance in their operations, into pension funding," explains Len Crispino, President & CEO of the Ontario Chamber of Commerce. "This puts downward pressure on businesses, and could negatively impact growth in the Ontario economy."

The OCC Pensions Task Force, composed of financial and actuarial experts, has recommended that the government amend the pension legislation to:

- Promote voluntary increased pension funding and the re-establishment of full funding in an orderly manner for existing pension plans;

- Eliminate partial plan terminations and "grow-in" benefits;

- Relax solvency funding requirements by establishing a "normalized interest rate" of 6.5% and extending the amortization period to 15 years;

- Allow businesses running DBPP access to funding excesses;

- Reduce administrative burden.

The OCC also called on the government to create a framework for "multi-participant" defined benefit pension plans which would give Small and Medium sized companies, with limited capacity of running their own plans, access to a smart tool for attracting and retaining skilled labour.

"Every employee in Ontario should have access to a DBPP in the same fashion as they can currently participate in a defined contribution arrangement (e.g. an RRSP)," says Steve Eadie, Partner with Robertson Eadie and Associates and Chair of the OCC Pension Task Force.

A full copy of the OCC presentation can be found at www.occ.on.ca.

The OCC represents over 57,000 businesses through 160 local Chambers of Commerce and Boards of Trade, and has been Ontario's business advocate since 1911. Its advocacy and policy initiatives focus on six areas key to the economic well-being of the province: health; education; energy; finance & taxation; transportation & infrastructure; and border issues.

Contact Information

  • Ontario Chamber of Commerce
    Amy Terrill
    W: (416) 482-5222, ext. 241 or C: (416) 605-8205