Welcome to the first A.M. Pension blog post of 2019. In this post, we highlight some of the key legislative and regulatory developments in the area of pensions and benefits law in January 2019.
Federal: Canada Pension Plan
Effective January 1, 2019, the long-awaited changes to the Canada Pension Plan ("CPP") came into force. With the changes, income replacement under CPP will gradually increase from 1/4 to 1/3 of pensionable earnings, to a defined maximum. Employee and employer contributions under CPP will also increase; the increase began on January 1, 2019 and will be phased in over seven years in two phases. In phase 1, which will extend over five years, a higher contribution rate on earnings below the Year's Maximum Pensionable Earnings ("YMPE") (currently $57,400) will be applied. It is estimated that under phase 1, the contribution rate in 2023 for both employers and employees will be 1% higher on earnings below the YMPE. In phase 2, beginning in 2024, a separate contribution rate, expected to be 4% for employers and employees, will be implemented and phased in over two years.
Similar changes are also now in force under the Quebec Pension Plan.
Ontario: OHIP+
Effective January 1, 2018, the Ontario liberal government introduced OHIP+. OHIP+ is a program that covers the cost of more than 4400 drug products under the Ontario Drug Program for children and youth under the age of 25 who have OHIP coverage. Shortly after its election in June 2018, the Ontario conservative government announced that it "was fixing OHIP+ by focusing benefits on those who need it most" but proposed no specific changes.
That changed in January 2019 when the Ontario government published draft regulations to the Ontario Drug Benefit Act. Under the draft regulations, only children and youth without a private insurance plan that covers prescription drug benefits will continue to be eligible for coverage under OHIP+. Subject to certain narrow exceptions, children and youth with a private insurance plan that covers prescription drug benefits will no longer be eligible for coverage under OHIP+ and will, instead, be required to seek reimbursement through their private insurer. The proposed changes are expected to come into force in March 2019.
There are a number of unanswered questions in the draft regulations, including how confirmation of private insurance will be determined. What is clear, however, is that sponsors of benefit plans that provide prescription drug coverage to children and youth will likely see increased benefit plan costs if the changes come into force.
Ontario: Financial Services Regulatory Authority
As discussed in our A.M. Pension webinar series, the Financial Services Regulatory Authority ("FSRA") will soon replace the Financial Services Commission of Ontario ("FSCO") as the regulator of pension plans subject to the Pension Benefits Act (Ontario). It had been expected that FSRA would become operational as of April 1, 2019. However, FSRA recently announced that there will be a phased transition from FSCO to FSRA starting in April with a June launch.
CAPSA Update
The Canadian Association of Pension Supervisory Authorities ("CAPSA") recently published a status update on a number of guidelines. In the update, CAPSA indicates that Guideline No. 8 – Defined Contribution Pension Plans and Guideline No 9 – Searching for Un-locatable Members of a Pension Plan will be published in early 2019. See previous post for more information on draft Guideline No. 9.
CAPSA Guidelines do not have the force of law but are generally considered best practices for administrators of registered pension plans. Pension plan administrators should ensure that they review the final versions of both guidelines.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
