Ontario could allow defined contribution plan participants to take withdrawals of variable amounts directly from their plans after they retire, according to the province's proposed 2017 budget introduced Thursday.
Currently DC participants at retirement must convert their DC assets to annuities or move them to registered retirement funds that require steady but inflexible withdrawal amounts based on a retiree's age, with the amounts increasing as they get older. Critics have argued that the present withdrawal limits keep some retirees from accessing more of their plan assets for emergencies and other needs. Other provinces allow for more flexible withdrawals.
The Ontario government plans to develop regulations later this spring to allow for variable withdrawals to be made directly from DC plans, the finance ministry said in a budget summary on its website.
The Association of Canadian Pension Management, a national organization of pension and retirement plan sponsors and service providers, recommended more flexible withdrawal options be incorporated into DC plans. The recommendation was among those in an ACPM report, “Decumulation, the Next Critical Frontier: Improvements for Defined Contribution and Capital Accumulation Plans,” released March 27.
Also in the budget was a pledge by the Ontario finance ministry to issue a framework to change solvency funding requirements for pension plans later this spring, with draft regulations to be released in the fall.
Currently, Ontario public and corporate defined benefit plans must calculate funding based on both solvency rules, which assume the plan would be wound down within a year, and on a going-concern basis, which assumes the plan will continue to operate indefinitely. The ministry in August requested comment from DB plan sponsors on whether to tweak or eliminate solvency rules and to make adjustments to going-concern funding rules. Those comments were due Sept. 30.
Among other provinces, Quebec in 2016 eliminated solvency valuation entirely for corporate DB plans and enhanced its going-concern valuation rules to increase pension fund contributions; public plans in Quebec were exempt from solvency valuation. Saskatchewan is considering legislation that would eliminate solvency valuation for the six multiemployer plans based in the province, and Alberta and British Columbia changed their solvency valuation rules to allow plan sponsors to hold surplus solvency assets in a reserve fund that they can access.
Pension regulations in Canada vary by provinces except for plans of employers who are regulated by the Canadian government, such as banks and telecommunications firms; those plans are regulated by the federal government.
The Ontario budget goes to the provincial parliament for approval.