According to the Toronto Star, under the legislation, companies that fold up pension plans would have to pay all the benefits owed to workers, not just benefits that are funded. In addition, companies could no longer take a “contribution holiday” unless their plan had a 5% funding surplus.
The bill would also restrict companies’ ability to increase benefits if its workplace plan is less than 85% funded, or if the improvements would cause funding to drop below that level.
Flaherty also proposed redrafting tax law to encourage both federally and provincially regulated firms to hold bigger pension fund surpluses. He proposed increasing the amount plans can be in surplus from 10% to 25% to provide a cushion so pension plans will not become underfunded as a result of an economic downturn or financial disruption, the Star said.
Critics of the measure note that it will only help a fraction of Canadian workers and will not apply to retirees who have already seen their expected pensions undermined in the recession. The improvements will apply to only about 10% of private-sector employee plans at airlines, banking, communications, and other companies regulated by Ottawa, according to the news report. The other 90% of private-sector plans are governed by provincial legislation.