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Maximum coverage of $1,000 a month when company pensions fail falls far short of recommended $2,500 level of support.
Toronto (26 Aug. 2010) - The Ontario government has unveiled a pension system overhaul that will affect an estimated 1.7 million workers and pensions and will be debated in the legislature this fall.
Finance Minister Dwight Duncan says the proposals are intended to stabilize and strengthen about 8,000 defined benefit pension plans and Ontario's pension benefits guarantee fund - the only one of its kind among the provinces.
The fund, which provides pensioners with up to $1,000 a month if their company plan fails to pay full benefits or any at all, has long posed a problem for Ontario governments for many years because it lacked adequate funding to meets its obligations.
That threat came to a head during the global recession in 2008 when the fund lacked the resources needed to help thousands of workers at bankruptcy-bound corporate giants like General Motors (GM) and Nortel.
The fund was given a $500-million boost in this year's Ontario budget to cover claims stemming from Nortel's demise and Duncan says the new changes he is proposing should keep it stable enough to meet current claims.
However, the big disappointment for workers is that the province is bowing to corporate pressure and will not take the recommended step of increasing the fund's top-up to $2,500 a month.
While it will raise corporate contribution rates enough to bring in an extra $30 million a year, it won't be nearly enough to do the job thoroughly.
The fund took in $43 million last year, about $13 million of which came from GM, which is no longer contributing.
"I will never forget the look on pensioners faces that I saw, whether the folks I met with from Nortel or General Motors, who thought they had a secure pension," Duncan said this week.
"These rules will help reduce — hopefully eliminate — the kind of moral hazard that I would associate with companies and employee groups agreeing to benefits without properly funding them."
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More information:
• Overview - Improving Ontario's Pension System
• Ontario's Proposed Pension Reforms
• Ontario's Proposed Pension Reforms - Technical Backgrounder