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Gradual Contribution Reduction Hardly An Advantage Public Sector Plans Have No Favoured Position

Having read the recent editorial in the August issue of the Monitor, I believe some clarification is necessary.

The recent changes to the Income Tax Act regarding plan surplus do not give public sector plans any undue advantage or favoured position.

Rather, they provide some equity in the rules for cost shared plans.

For example, in OMERS the pension plan costs, all of them, are shared 50/50 between employers and employees. Contributions (currently just over 6.5 per cent each) are equal. Therefore, under the previous ITArules for excess surplus, when surplus exceeded 10 per cent both employee and employer contributions ceased, according to the 50/50 arrangement.

In a plan that is not cost shared in this way, only the employer contributions were required to cease. The new rules recognize this critical difference and allow a more gradual contribution reduction for both employee and employer contributions. This is hardly an ‘advantage.’

Further, when we first wanted to bring this issue to the fore with Finance and CCRA in Ottawa, we approached industry associations to solicit support for our efforts. We found that there was absolutely no interest among non-cost shared plans.

Plan sponsors seemed quite content with the current rules, as, I believe, it was a relatively non-controversial way of accessing plan surplus.

Michael Beswick OMERS

 

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