2024 Ontario Budget: Update on Target Benefit Plans and the Building Ontario Fund

On March 26, 2024, the Ontario government tabled its 2024 Budget (Budget) and introduced Bill 180, Building a Better Ontario Act (Budget Measures), 2024 (Bill 180). The Budget contains pension-related announcements, and Bill 180 contains amendments to the Pension Benefits Act regarding the framework for target benefit plans as introduced in the Budget.

The Budget

Target Benefit Plans

The Budget provides an update on the implementation of a permanent framework for target benefit plans. Draft regulations on this framework will be available for technical review in the summer of 2024. The Budget indicates that these upcoming regulations will consider feedback received during prior consultations on target benefit plans. In the Budget, the government states that it is proposing legislative amendments to support the implementation of this framework, which would come into effect on January 1, 2025 (see the discussion of Bill 180 below).

Building Ontario Fund

The Budget provides additional detail on the Building Ontario Fund (previously called the Ontario Infrastructure Bank in the 2023 Fall Economic Statement) and highlights the government’s desire for pension funds to invest in Ontario. The Budget indicates that the Building Ontario Fund will support the financing and building of critical infrastructure projects in Ontario.

Bill 180

Bill 180 contains amendments to the Pension Benefits Act (PBA), most of which relate to the framework for target benefit plans introduced in the Budget. The changes include:

• Replacing certain unproclaimed provisions with those that require target benefit plans to have documents setting out the plan’s funding and benefits policy, governance policy and communications policy, and that require these documents to contain prescribed information

• Updating certain unproclaimed provisions to set out the criteria for a benefit to be a target benefit, and to specify that if one or more of the criteria cease to be satisfied and the benefit ceases to be a target benefit, then prescribed rules apply

• Adding a condition that if assets used to provide target benefits are transferred, these assets must be used to provide target benefits in the successor pension plan, in accordance with any prescribed requirements

• Updating certain unproclaimed provisions relating to the conversion of a pension plan that is not a target benefit plan to a target benefit plan. This includes (among other things) adding a five-year time limit on conversions in respect of certain multi-jurisdictional pension plans from the date on which such plan was most recently registered in Ontario, and repealing notice requirements regarding a proposed conversion and an application for consent.

• Adding a provision that requires the administrators of target benefit plans to, upon request, provide the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario with information to determine whether the provision for adverse deviations complies with the PBA and the regulations

While the Budget indicates that legislative provisions relating to the proposed target benefit framework would come into effect on January 1, 2025, the relevant provisions of Bill 180 have various coming-into-effect dates.

Bill 180 also includes the Building Ontario Fund Act, 2024. This legislation sets out the framework for the Building Ontario Fund and provides that the term “qualified institutional investor” in respect of this fund includes a pension fund that is prescribed by regulations. Bill 180 further notes that the objectives of the Ontario Building Fund include attracting investment from qualified institutional investors and receiving and assessing ideas and proposals for infrastructure projects from qualified institutional investors, among other groups.

For further information, please contact any member of our Pensions, Benefits & Executive Compensation group.