Segal Group Finds New Ontario Proposal Potentially Harmful to Multi-Employer Pension Plans

(4/11/18) — 

The recently released document from the Ministry of Finance raises questions, concerns.

On April 5, the Ontario Ministry of Finance released a framework describing the funding of Target Benefit Multi-Employer Pension Plans (TB MEPPs). The Segal Group, which consults to many multi-employer pension plan clients, reviewed the proposal and looks forward to providing feedback during the public consultation period.

“We have some concerns with the proposal, specifically relating to the contribution sufficiency test and Provision for Adverse Deviations (PfAD),” noted Cameron McNeill, Business Leader for Segal Group Canada in Toronto. 

Under the proposal, TB MEPPs would be required to satisfy a new contribution sufficiency test. If the negotiated contributions of a TB MEPP are less than the minimum required contributions, the plan would not satisfy the conditions of the test. “This is not appropriate for these types of plans,” said McNeill. “Deficits can arise in many different ways, so it is essential that trustees ultimately decide what reductions are appropriate for their plan.”

Mr. McNeill also expressed concerns for the requirement to fund a PfAD. “The proposal does not provide sufficient information as to how the asset mix component was determined, or why it is significantly harsher than the corresponding component in the DB framework,” he said. “This may lead to benefit reductions and create inter-generational equity issues with actives funding the PfAD for all members,” he added.

The public consultation period ends on May 4. “We encourage all stakeholders to respond to the proposal document and express its potential harm to the members of these plans,” said McNeill.

Read the full Briefing from The Segal Group on the proposal. For more information or to speak with Mr. McNeill, please contact Todd Kohlhepp.

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