Ontario budget targets JSPPs, variable life benefits and the missing member problem
Earlier this year, Ontario's 2025 budget landed with a handful of pension measures that, taken together, signal a meaningful shift in how the province thinks about retirement security.
As for plan sponsors, the question is what it all means in practice and how fast they need to move.
‘An important step forward’
Dimitri Poliak, principal at Normandin Beaudry, outlined the five key measures worth watching. The first is the doubling of the Pension Benefits Guarantee Fund (PBGF) coverage from $1,500 to $3,000 a month for single employer defined benefit plans facing windup or insolvency.
While it's not the kind of change that will generate headlines in a period when most DB plans are well funded, Poliak sees the current environment as precisely the right moment to shore up protections, not a reason to delay them. After all, he noted that markets don't stay elevated forever, and he puts the onus squarely on plan sponsors “to ensure that they secure the surpluses they have in one way or another,” he said.
“This is an important step forward,” he said. “It's happening in an environment where most defined benefit plans are in surplus and doing quite well thanks to strong investment returns in part as long as, in addition to good governance and management.”
However, he emphasized how the PBGF only kicks in during insolvency - a scenario that remains rare - and the fund was never designed to make members whole.
“The funding of the PPGF is one aspect here to keep in mind as we're increasing the benefit. Ultimately, it's the taxpayer that funds this insurance blanket as it were. And the PPGF was never intended to cover the full benefits that are promised so should a plan go into insolvency, members are still not going to get 100 cents on the dollar,” he explained.
Additionally, most plan members have little awareness the PBGF even exists, he noted, adding taking the lump sum removes the member from the plan entirely and shifts them into what is effectively a DC problem - self-managing their own retirement income.
“Should a pension plan become insolvent for one reason or another, the PPGF is there to step in,” added Poliak. “I think it becomes more meaningful as a greater portion of our population is aging.”
Transition support for JSPP
The second measure, which Poliak notes will carry the most weight for DB plans, targets jointly sponsored pension plans (JSPPs), where Ontario is cutting the regulatory friction for single employer DB plans looking to convert to a shared risk model, explained Poliak. He suggests the appeal for plan participants is greater sustainability; for sponsors, it's a path away from bearing the full financial weight alone. But Poliak acknowledges the trade-off as governance becomes more complex under a jointly sponsored structure, even as security improves.
"The number of single employer plans is shrinking," Poliak said. "The number of participants in multi employer plans is indeed increasing, and this is through studies done by the Ontario pension regulator FSRA."
Asked which types of plans are most likely to explore the JSPP path, Poliak acknowledged the calculus depends on plan-level factors, like cost burden, legacy governance strain, plan size and each conversion needs to be weighed on its own merits. He emphasized that sponsors who haven't yet examined whether a shared risk model is feasible should probably start.
"These conversions are now becoming actionable," he said.
Variable life benefits
But it’s variable life benefits (VLBs) that represent what Poliak considers a significant long-term shift. Once the framework is finalized, he suggests VLBs would enable lifetime income risk sharing among DC participants, with adjustable payments over time - a mechanism that brings DC plans closer to the retirement income function that DB plans have always served.
Poliak sees VLBs as one more tool in an expanding toolkit alongside annuities, financial advisors, and self-directed management. But he also draws a firm line on implementation, noting how the governance and administrative burden make plan-by-plan adoption unrealistic for most sponsors.
To that end, he sees institutional-level implementation as the only viable path, with plan sponsors potentially steering members toward record keeper solutions or incorporating VLBs as one option among several in a retirement transition guide.
“The due diligence and review process will still grow as we understand the risks and implications of making such a choice. But I think it provides another opportunity to really think of DC pensions in a more traditional form of providing not just savings opportunities, but income opportunities as well.”
Unlocking locked-in funding
The fourth measure — full unlocking of locked-in retirement funds — follows Quebec's move last year and continues a national trend. Poliak flags a tension that other pension professionals share, noting flexibility for members is a good principle, but the outcomes are unpredictable. He points to the UK experience, where unlocking provisions led to significant asset withdrawals and, in some cases, eroded retirement security over the long term.
"The need for stronger member communication frameworks is going to be much greater as a result of this," he said, adding administrators face an immediate operational task, particularly when it comes to revisiting communication documents, updating retirement guides, aligning with record keepers, and monitoring outflows.
Missing members
The fifth measure tackles the missing member problem - a persistent administrative headache that Poliak calls "a thorn in the industry side for some time." As a result of the measure, Ontario is now allowing plans to remove aged, unlocatable individuals from their records after demonstrating reasonable search efforts.
While the threshold is set at age 100 and above, Poliak suggests the scale of the problem is larger than it might seem, as he noted how approximately 175,000 missing members “were reported by plans to FSRA with entitlements summing to over $3 billion," Poliak said.
Whether the age-100 threshold is too conservative, Poliak noted how planners now project longevity into the early 90s for Canadians who reach 65, making a lower cutoff hard to justify.
"I think it's a good starting point,” he said. “When it comes to policy, taking baby steps rather than significant corrective action is the right approach and then taking a moment to reflect and see what the response is and the implications of the change," he said.
