Federal Government introduces target benefit plans and pushes forward on CPP expansion

TORONTO, Nov. 15, 2016

TORONTO, Nov. 15, 2016 /CNW/ - In the November 2016 issue of its monthly newsletter, News & Views, Morneau Shepell takes a look at moves made by the Federal Government to advance the expansion of the Canada Pension Plan (CPP) and the legislation introduced for the implementation of Target Benefit Plans (TBPs). The newsletter also reviews other issues this month, including changes to provincial drug plans, the approaching VRSP deadline in Quebec and more.

• CPP expansion: Legislative changes and chief actuary's valuation – Following up on the finance ministers' agreement to expand the CPP and the assent of all provinces other than Quebec, the federal government introduced Bill C-26 on October 6, 2016, in order to provide for the agreed-upon CPP expansion to be implemented gradually from 2019 to 2025. Morneau Shepell examines the Chief Actuary's report, which notes the importance of investment returns in ensuring that the additional CPP tier is financially sustainable.
• Federally regulated plans: Legislation introduced for target benefits and buy-out annuities – On October 19, 2016, the federal government introduced Bill C-27, which will permit TBPs by federally regulated employers, for both single and multi-employer pension plans. Morneau Shepell concludes that the introduction of target benefit plans at the Federal level is a positive step that could boost the development of these types of plans across the country, offering a new middle-ground approach between defined benefit (DB) and defined contribution (DC).
• VRSP: The deadline is fast approaching – For any Quebec employer that had 20 or more employees as of June 30, 2016, the deadline for setting up a Voluntary Retirement Savings Plan (VRSP) or other type of retirement plan that involves pay deductions is December 31, 2016. There are only a few weeks left for these employers to comply with VRSP legislation.
• Drug plans can benefit from biosimilars – In the last 10 years, there have been intensive pressures on drug costs coming from the development of new biologic drugs. Claims of such drugs are increasing at a pace of about 15 per cent per year and the average costs are very high. There is good news for sponsors of health benefit plans – biosimilars are entering the market.
• Premiums to provincial medical plans: Changes in BC and Quebec in 2017 – In September and October, respectively, "BC announced that the planned increases to premiums for 2017 have been cancelled, while Quebec announced that the premiums are being cancelled completely."
• OSFI issues instruction guides on disclosure requirements for DB and DC pension plans – In October 2016, the Office of the Superintendent of Financial Institutions (OSFI) released two Instruction Guides on disclosure requirements for DB and DC pension plans. Morneau Shepell looks at what these requirements entail.
• Ontario adopts three regulations proposed earlier – On October 31, 2016; the Ontario government adopted three regulations which were previously discussed in News & Views this year.
• Tracking the funded status of pension plans as at October 31, 2016 – During the month of October, Canadian universe bonds, Canadian long term bonds and Canadian long-term provincial bonds showed negative returns while Canadian and global equity markets (in C$) as well as alternative investments showed positive returns.
• Impact on pension expense under international accounting as at September 30, 2016 – This shows the expense impact for a typical defined benefit pension plan that starts the year at an arbitrary value of 100 (expense index).

About Morneau Shepell Inc.

Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With almost 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

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