Ontario's own pension plan is dead — but long lives its pooled retirement savings plan and the investment board that will manage it for the public sector.
On Wednesday, the finance ministry announced the creation of Investment Management Corp. of Ontario (IMCO) to oversee pooling of funds in the broader public sector, including pensions. The Ontario Pension Board (OPB) — which administers a defined benefit pension for government employees and those at provincial boards and agencies — and the Workplace Safety and Insurance Board (WSIB) are the first two organizations to relinquish their assets (worth nearly $50 billion combined) to the IMCO board, which was appointed July 1 and will take over management by next spring. Combining assets would ease costly administrative burdens and boost investment returns, according to the government.
“This will increase efficiency when providing pension support and income for injured workers. OPB and WSIB — and public sector pension plans that may join in the future — will benefit from IMCO’s ability to deliver enhanced services,” Finance Minister Charles Sousa said in a statement.
According to the ministry, the IMCO will not require any financial support from the government or taxpayer and will operate as an arm’s length, non-profit corporation — start-up costs for which will be funded by the OPB and WSIB. The IMCO Act was introduced in 2015 as part of the budget, and followed a 2012 report commissioned by then-finance minister Dwight Duncan, who appointed now-federal finance minister Bill Morneau as pension investment adviser. In it, Morneau estimated that a pooling framework could potentially equal savings of anywhere between $75 million and $100 million annually.
“The sheer number of pension plans is greater than expected, with the degree of fragmentation suggesting obvious cost-saving opportunities and, in some cases, a need for greater day-to-day oversight,” Morneau wrote. “Implementation of such a framework would reduce duplication and costs, broaden access to additional asset classes and enhance risk management practices.”
The news was lauded by both the OPB (which covers 42,000 current government employees and more than 42,000 retirees) and the WSIB (which had 8,475 current and retired members at the end of last year).
"These benefits together support the long-term sustainability of the plan. We believe the pooling strategy will benefit the financial status of the plan, and is in the best interests of the plan's beneficiaries and stakeholders," Mark Fuller, OPB's president and CEO, said in a news release.
Pooling assets would enhance risk management and provide for more predictable returns with less volatility, while at the same time enabling access to a broader spectrum of international investment opportunities, such as infrastructure and real estate, Tom Teahen, president and CEO of the WSIB, added in a statement. "Enhanced risk-adjusted performance can also be expected over time."
Also, as of Tuesday, the government is officially accepting feedback for its pooled registered pension plan legislation. Passed last year, Bill 57, the Pooled Registered Pension Plans Act, designed a framework for businesses, their employees, and the self-employed to come together to combine their retirement savings plans. Ontario's pooled registered pension plans (PRPPs) would function as a voluntary plan that would ease administrative costs for members through economies of scale, according to the finance ministry.
Under its current form, the bill takes many elements from the federal government’s PRPP regulations, with some Ontario-specific aspects where necessary. Ontario’s bill mimics Ottawa’s in regard to licensing conditions, investment options, timelines, filing requirements, unlocking funds and the circumstances under which members can set their contribution rate to zero. Factors specific to the province include, among others, creditor protection of funds, transfer to other plans, and multilateral agreements.
Bill 57 received royal assent after passing third reading last May, with only the NDP voting against the legislation. British Columbia, Alberta, Saskatchewan and Nova Scotia have enacted similar PRPP laws.
As for the IMCO, sitting on its board is chair David Leith, a director at the Ontario Infrastructure and Lands Corporation, chair of the board of directors of Manitoba Telecom Services and lead director of the Hudson’s Bay Co.; Eric Tripp, a former president of BMO Capital Markets; and Colleen McMorrow, now retired from her post as senior assurance partner at Ernst & Young, where she was the Canadian leader of the firm’s strategic growth markets. The OPB chose its former chair and investment banker Vincenza Sera and former board member and Canadian Centre for Policy Alternatives researcher Hugh Mackenzie as its representatives. The WSIB picked Robert Bertram, former executive at the Ontario Teachers’ Pension Plan board, and Jacqueline Moss, a lawyer who specializes in human resources and corporate governance.
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