Ontario's 2009 budget contains initiatives to combat the global recession in various areas, including pensions, investments, taxes and the provincial workforce.
Consulting firm Hewitt has released a summary of the key announcements employers should be aware of.
In its 2009 Budget, the government reiterated its previously announced intention to introduce amendments to the Pension Benefits Act, retroactive to September 30, 2008, allowing
– consolidate existing solvency payment schedules
– defer for one year the start of new going-concern contributions and solvency special payments
– extend solvency payment schedules to a maximum of 10 years
– the amendments will permit early use of the revised Canadian Institute of Actuaries' standard of practice for pension commuted values for solvency valuations as of December 12, 2008;
– workers and retirees will be entitled to receive clearer information about the financial health of their pension plans
– and the ability of plan sponsors to take contribution holidays between 2010 and 2012 will be limited.
Absent from the budget proposals was any movement to allow the use of letters of credit to assist with solvency funding, as has been adopted in various other jurisdictions.
The government announced the creation of a pension reform advisory council to help secure pension reform. In addition:
– plans will be allowed to offer phased retirement;
– the pension rules regarding marriage breakdown will be simplified;
– the amount of unlocking permitted from Ontario life income funds (LIFs) will be increased from 25 to 50 per cent;
– a two-year waiver of fees for financial-hardship unlocking applications will be introduced;
– the superintendent will also be empowered to review certain pension arrangements in restructuring proceedings, and;
– the Financial Services Commission of Ontario (FSCO) will be directed to hire 25 additional full-time positions to support better regulatory efficiency and oversight.
The government also announced its intention to eliminate the retail sales tax (RST) and move to a single federally administered sales tax, set at the rate of 13 per cent (with the provincial portion at a rate of eight per cent and the federal portion at a rate of five per cent). Despite exempting prescription drugs, Ontario will retain a tax on insurance at eight per cent after the transition to the single sales tax, on the same types of insurance currently subject to RST, such as group insurance.
To harmonize provincial policy with recently announced federal taxation measures, the government will increase the home buyers' plan withdrawal limit from $20,000 to $25,000 and allow deductions for the loss of value in registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) investments after death. As well, the Succession Law Reform Act will be amended to allow for beneficiary designation of tax-free savings accounts (TFSAs).
Labour force initiatives
Labour force initiatives in the budget include:
•increased funding over two years for literacy and basic skills training such as community projects, distance learning and workplace literacy
•new funding over two years to expand support for new Canadians, including bridge training and mentorship opportunities
•new funding over two years to develop a Green Jobs Skills Strategy that responds to labour demand in the emerging green energy sector, including electricity.
In addition, the provincial government called on the federal government to ensure Ontarians have equitable access to the employment insurance (EI) program, especially during these difficult economic times, and to review and change the current EI funding formula for training programs to reflect current labour market conditions.
The Co-operative Education Tax Credit, for eligible expenditures incurred after March 26, will be enhanced to increase the 10 per cent CETC rate to 25 per cent and increase the 15 per cent rate for small businesses to 30 per cent. The maximum available tax credit will also be increased from $1,000 to $3,000 per work placement.
The Apprenticeship Training Tax Credit (ATTC), for expenditures incurred after March 26, 2009, will be enhanced by increasing the 25 per cent ATTC rate to 35 per cent and increasing the 30 per cent rate for small businesses to 45 per cent. The $5,000 annual maximum tax credit will be increased to $10,000 and the ATTC will be extended to salaries and wages paid during the first 48 months of an apprenticeship program. The ATTC will also become a permanent tax incentive.
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