Buck Offers Guidance on Impact of Canadian Budget Changes on Employee Benefits

Buck, an integrated HR and benefits consulting, administration, and technology services firm, offered guidance on the impact of the 2019 Federal Budget in Canada on employee benefits. In addition to the widely-expected announcement of more details on the proposed national pharmacare program, Budget 2019 contained a number of other measures impacting pension and benefit plan sponsors, and employers.

Buck published a detailed analysis of the impact of the Canadian Budget on employers, plan sponsors, and individuals: 2019 Federal Budget: Highlights and Discussion. Notable measures addressed in this analysis include:

  • Enhanced protection for pension members and retirees, particularly in employer insolvencies
  • Changes to the tax rules applicable to individual pension plans (IPPs)
  • Two new annuity vehicles for certain retirement savings plans
  • Changes to the contribution rules for specified multi-employer plans (SMEPs)
  • Improving access to government retirement benefits

“While Budget 2019 provides many details regarding a range of measures, we are particularly encouraged by progress toward a national pharmacare program, covering high cost drugs and rare diseases, as there are many cases where such coverage is needed,” said Karen DeBortoli, Director – Knowledge Resource Centre, Buck. “Although the success of the program will ultimately hinge on how it balances coverage with cost, we saw good progress in the new budget this week.”

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“We’re also pleased with the direction of discussions around pensions, as the government is making some moves that will benefit plan members in the case of employer bankruptcies with legislation aimed at improving creditor protection for plan members in the event of insolvency,” added DeBortoli. “It is only when the full details supporting the various announcements are introduced that we can truly assess impact, positive or negative, of Budget 2019.”

National Pharmacare on the Horizon
Guided by the consultations and interim report of the Advisory Council on the Implementation of National Pharmacare (Advisory Council), Budget 2019 sets out how the federal government plans to move forward with the development of a national pharmacare program.

Three interrelated projects were announced:

  1. Creation of the Canada Drug Agency (CDA) to assess the effectiveness of new drugs and serve as a single negotiator for drug prices and identify
  2. Development of a National Drug Formulary to create a comprehensive, evidence-based list of prescribed drugs
  3. Creation of a National Strategy for High-Cost Drugs and Rare Diseases to gather and evaluate evidence on high-cost drugs for rare diseases.

Canada is currently home to a patchwork of federal and provincial pharmacare programs,” added DeBortoli. “The replacement of the current patchwork of prescription drug benefit programs, which provide what Budget 2019 acknowledges as ‘inadequate and inconsistent coverage,’ will be welcome by most Canadians. In order for the CDA to operate effectively, all provinces and territories must participate. A single negotiating entity will have greater bargaining power, and a single formulary will be of greatest benefit to all Canadians.”

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Protecting Pensions in Employer Insolvency
In the aftermath of a number of high-profile insolvencies, including Sears Canada and Wabush Mines, Budget 2019 contains some significant announcements designed to protect employees and pensioners in the event of their employer’s insolvency. Some of these measures apply to all employees, while others only apply to employees of federally incorporated businesses.

“While provincial pension legislation contains deemed trust provisions that apply in the event of plan termination, these provisions are subject to the CCAA and/or BIA in the event of the insolvency of the sponsoring employer,” noted DeBortoli. “The vagueness of the announcements on pensioner protection raise a number of questions such as how CCAA and BIA changes will protect member and retiree pensions, what is meant by acting ‘in good faith,’ and the details on forthcoming PBSA requirements on the continuity of pension payments, among others.”

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