If it ain’t broke, why fix it?
That’s the message at the heart of OPSEU’s pitch to a special consultation group that is studying changes to the rules around defined-benefit pension plan solvency in Ontario.
In its written submission to the Ministry of Finance, OPSEU said that jointly sponsored pension plans (JSPPs) – like OPTrust, OMERS, and other large public sector defined-benefit pension plans – should be exempt from any changes recommended by the review.
That’s because, unlike single-employer pension plans found predominantly in the private sector, public sector plans share funding risks and have different governance characteristics.
“OPSEU questions the problem that the solvency funding review is intended to resolve,” the union’s submission states.
“It appears to be primarily focused on the contribution requirements at large, private sector single large employer plans (SEPPs), although the consultation paper makes clear that any SEPP, private or public, may be affected through the consultation process.”
JSPPs – some of which are SEPPs – have very different risk characteristics. They are jointly sponsored by employers and unions (representing employees). Working together, the two groups adjust contributions to ensure their plans remain solvent.
Changing solvency rules for JSPPs would result in requiring more funding for plans that are already well funded.
On the other hand, private sector pension plans are at greater risk for a host of reasons, starting with their dependence on success in the marketplace for their products and their governance structures.
The Ontario government established the Solvency Funding Framework review process in its 2015 autumn Economic Statement. Chaired by David Marshall, former chief executive officer of the Workplace Safety and Insurance Board, the review group includes representation from employers, labour, retirees, and a panel of three outside pension plan advisers.
The Ministry of Finance has not yet announced when it will release its final report, but it is expected early in the new year.