The Canadian government on Thursday proposed a new voluntary hybrid pension plan for government-owned and federally regulated private companies such as banks and telecommunications firms.
The proposal for the new “target benefit plan” would provide what the Canada Finance Ministry called a “middle ground” between defined benefit pension plans and defined contribution plans, according to the ministry's website. It would be a supplement to the C$201.5 billion (US$182.6 billion) Canada Pension Plan, Ottawa.
Among the elements of the proposal are:
- A joint governance structure including employers, active and retired participants, and independent participants such as pension experts and investment professionals;
- Investment options agreed to by the plans and participants;
- Caps on employer contributions and employer liability, with participants responsible for any funding shortfalls through increased contributions or reduced pension benefits; and
- The opportunity for existing plans to be rolled over into the new plan.
Kevin Sorenson, minister of state for finance, announced the proposal Thursday during a speech at the Economic Club of Canada in Toronto.
The government proposal differs from an earlier proposal by Wes Sheridan, Prince Edward Island finance minister, to create a national supplemental pension plan to CPP. An agreement on that proposal among provincial finance ministers, Mr. Sorenson and then-Finance Minister Jim Flaherty could not be reached in December.
Ontario currently is working on a provincial supplemental plan that could also be used by other provinces.