The subject of pension reform rarely makes its way to the top story on the national evening news. But it did happen this week, as the federal and provincial finance ministers met in a picturesque Rockies resort to figure out how to make sure Canadians save enough for retirement.
This is a big story for all Canadians because there is general agreement that something needs to be done, or many of today’s workers will have to give up a comfortable lifestyle once they retire. But it is also a big story for lawyers who will need to have a hands-on approach to the reform.
Yesterday, the ministers hammered out an agreement that will allow small companies and individuals to contribute to privately-run pools of money, in essence opening the defined-benefit pension options to a whole new group of people who were either self-employed or worked for companies that couldn’t afford to run a plan on their own. It’s important to note this is a voluntary option — which is favoured by the federal conservatives, Alberta, Quebec, and businesses that are small or medium in size.
The ministers postponed action on the mandatory option — championed by Ontario, British Columbia, and the labour unions. It would involve large increases to contributions in the Canada Pension Plan, up to doubling its size. In essence, it means workers would end up with less take-home pay without having a say about it, which the federal government says is risky in this still shaky economy.
So what does this mean for lawyers? The newly established funds, the Pooled Registered Pension Plan, will be run by financial institutions like large insurance companies, so there is a lot of legal work ahead to hammer down the plans and contracts with businesses and individuals.
Companies might also implement new plans or change their current ones as a result of the ongoing reform.
“This is a set of reforms that is going to require in-house counsel to consider whether their pension plans require amendment. It should be a pretty busy time for lawyers getting everything in place for all these reforms, so it is something general counsel and in-house counsel should know about,” says Kathryn Bush, a partner at Blake Cassels and Graydon LLP.