2009 Budget Updates

The 2009 Federal and Ontario Budgets, which were tabled January 27 and March 26, 2009 respectively, were designed to temporarily stimulate the Canadian Economy. You may be wondering how these budgets may affect your business as a pension plan sponsor/employer in Ontario. The key items of interest are summarized below.

Employment Insurance (EI) Program and other Labour Force Initiatives
• Effective February 1, 2009 until April 3, 2010
• $1 billion funding increase in training programs over the next 2 years through EI
• EI premium freeze on employee contributions for the next 2 years ($1.73/ $100 insurarable earnings)
• EI benefit maximum duration extended from 45 weeks to 50 weeks for 2 years
• More protection of severance and termination pay through the Wage Earner Protection Program for employees whose employers go bankrupt
• Extended work-sharing agreements by 14 weeks (to a maximum 52 weeks) so more Canadians can continue working through the use of reduced hours. EI will pay a benefit to cover lost earnings (maximums determined by EI)
• Consideration is still being given to extending coverage to the self-employed for EI maternity and parental benefits
• Eliminations of regional disparities in benefit coverage were not included in the budget

Federal Healthcare Commitment
• Canadian Health Transfer will grow by 6% annually in 2009 and 2010
• No specific reduction in publicly provided health services was announced, so no significant cost impact on private health plans is expected

Federally Regulated Private Pension plan sponsors may elect to:
• Consolidate existing solvency payment schedules into a five-year payment schedule;
• Defer for one year from the valuation date new going-concern and solvency special payments referenced in the valuation report; and
• Extend the solvency payment schedule to 10 years for a new solvency deficiency subject to member consent (the consent requirement does not apply to multi-employer and jointly sponsored pension plans)

Tax-Free Savings Accounts
Effective January 1, 2009 owners of Tax-Free Savings Accounts are permitted to directly designate beneficiaries for their accounts, meaning the balances can transfer directly on the account holder’s death, bypassing probate and estate taxes

Sales Tax Harmonization (HST)
• The Ontario Retail Sales Tax (RST) will be harmonized with the federal Goods and Services Tax (GST) effective July 1, 2010
• The eight percent tax that currently applies to some insurance premiums, including some group insurance premiums, would continue to apply
• Specific details about which insurance premiums will be subject to the Harmonized Sales Tax will be determined once the legislation has been published

We will be sure to keep you informed of any further updates to the 2009 Budget.