1. Radar
July 9, 2012
The Aon Hewitt Radar is a weekly summary of regulatory developments and trends related to retirement
and financial management, employee health benefits, and other HR issues in Canada. It highlights issues
that may require employers to take action to comply with new rules or review existing plans.
Health & Benefits
Generic Price Reductions in Alberta
Bill C-38: Budget Implementation Act and Nova Scotia
Receives Royal Assent Effective July 1, 2012, the government of Alberta reduced
what it pays for generic drugs, from 45 per cent of the cost
Bill C-38, the Jobs, Growth and Long-term Prosperity Act,
of name brand drugs to 35 per cent. The Transition
has received Royal Assent and amends the:
Allowance (introduced in 2010 to provide an additional
Canada Labour Code to require employers that
payment on dispensing fees for prescriptions under $75) is
provide benefits under a long-term disability plan to
$2 in 2011/12, and will decrease to $1 in 2012/13.
insure their plans, subject to certain exceptions;
Excise Tax Act to expand the lists of GST/HST zero-
Also effective July 1, 2012, the price cap on generic
rated medical and assistive devices and non-
medications, based on the price of equivalent brand drugs
prescription drugs used to treat life-threatening
under the Nova Scotia Pharmacare programs, was
diseases, and to exempt certain pharmacists'
reduced from 40 to 35 per cent.
professional services from the GST/HST;
Food and Drugs Act to give the Minister of Health the
power to establish a list that sets out prescription Increased Co-payment Rates in
drugs or classes of prescription drugs that can be sold Ontario
to a consumer only under a prescription;
Income Tax Act to expand the list of eligible expenses Regulations under the Health Insurance Act and the Long-
under the Medical Expense Tax Credit to include Term Care Homes Act have been amended to increase
blood coagulation monitors and their disposable the co-payment rates that chronic care patients and long-
peripherals; term care home residents contribute toward the cost of
Federal-Provincial Fiscal Arrangement Act to adjust meals and accommodation, from $53.23 to $55.04 per
Canada's equalization framework, including day. In addition, long-term care home residents admitted
implementation of the total transfer protection for the to a newer facility who are moving into preferred
current fiscal year; and accommodations will pay an updated premium rate - an
Canada Health Act to include members of the Royal increase from $8 to $9 per day for semi-private, and from
Canadian Mounted Police within the definition of $18 to $19.75 per day for a private room.
"insured person".
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2. The True Cost of Health Care As introduced on first reading, the Bill had contained
provisions to amend the Income Tax Act to introduce a
According to new research from the School for Public temporary measure allowing certain family members until
Policy, health care is financed by a wide variety of taxes, the end of 2016 to open an RDSP for an adult who might
by inter-governmental transfers, by borrowing against not be able to enter into a contract. However, this
future tax revenues, and by drawing down savings. temporary measure does not appear in the final version of
However, when provincial health spending is financed in Bill C-38 that received Royal Assent.
ways other than taxation, it grows two to three times more
quickly than it would have otherwise. Between 2001 and
Accounting Developments
2008, these distortions amounted to $6.75 billion at the
national level. Therefore, when Canadians are clear about The IASB has issued Consolidated Financial Statements,
the true cost of health care, they more effectively play the Joint Arrangements and Disclosure of Interests in Other
traditional role of consumers by guarding against waste Entities: Transition Guidance (Amendments to IFRS 10,
and inefficiency and so contribute to a more efficient and 11 and 12). Their effective date is annual periods
effective publicly funded health care system. beginning on or after January 1, 2013, which is aligned
with the effective date of IFRS 10, 11 and 12, and clarify
the transition guidance in IFRS 10. Additional transition
relief is provided in IFRS 10, 11 and12, limiting the
Pensions & Investments requirement to provide adjusted comparative information
to only the preceding comparative period. For disclosures
Bill C-38: Budget Implementation Act related to unconsolidated structured entities, the
amendments will remove the requirement to present
Receives Royal Assent comparative information for periods before IFRS 12 is first
Bill C-38, the Jobs, Growth and Long-term Prosperity Act, applied.
has received Royal Assent, and amends the:
Old Age Security Act to provide the Minister of Human The CICA has advised that Paragraph 4600.32(a)(ii) and
Resources and Skills Development authority to waive an Appendix have been added to Section 4600 Pension
the requirement for an application for OAS benefits for Plans, to clarify that the fair value disclosures in
many eligible seniors, to gradually increase the age of paragraphs 27-27B of IFRS 7 Financial Instruments:
eligibility for the OAS Pension, the GIS, the Allowance Disclosures that were deleted as a consequence of
and the Allowance for the Survivor, and to allow incorporating IFRS 13 Fair Value Measurement into Part I
individuals to voluntarily defer their OAS Pension up of the CICA Handbook will continue to be required for
to five years past the age of eligibility in exchange for pension plans that have adopted the measurement
a higher, actuarially adjusted pension; requirements of IFRS 13.
Pension Benefits Standards Act, 1985 to give
retroactive effect to subsections 39(2) and (3) which New Pension Portability Provisions
deal with the applicability of regulations to pension
plans or to one or more classes of pension plans;
for Members of the RCMP
various statutes to prohibit the issuance of life The Royal Canadian Mounted Police Superannuation
annuity-like products by entities other than insurance Regulations have been amended, effective September 1,
companies; 2012, to expand existing election for prior service
Department of Human Resources and Skills opportunities for members of the Royal Canadian Mounted
Development Act to add provisions relating to the Police Pension Plan, and support the introduction of
protection of personal information obtained in the pension transfer agreements. The changes modernize the
course of administering or enforcing the Canada RCMP Plan and introduce pension choices currently
Pension Plan and the Old Age Security Act, and so available under the federal Public Service Pension Plan
that appeals will be heard by the Social Security and many other Canadian plans. For example, a member
Tribunal; and may improve the value of prior service by having his or her
Excise Tax Act to facilitate the Government of British future pension benefit calculated based on higher
Columbia's decision to exit the HST framework. earnings, obtain or improve ancillary benefits such as
survivor benefits, or qualify for retirement at an earlier age.
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3. To support full implementation of these new pension expectancy would increase private DB pension liabilities
portability provisions, the Retirement Compensation by as much as $84 billion.
Arrangements Regulations, No. 1 (which provide
additional retirement benefits for certain members of the
RCMP Plan) must also be amended to provide appropriate
accommodations with respect to transfer value pension
benefits, prescribe rules for elections to count prior TRC / Other
service, and implement pension transfer agreements with
outside eligible employers.
Bill C-38: Budget Implementation Act
Finally, amendments to the Pension Benefits Division Receives Royal Assent
Regulations ensure that any amount paid out of the RCMP
Bill C-38, the Jobs, Growth and Long-term Prosperity Act,
Plan to another employer pursuant to a pension transfer
has received Royal Assent, and amends the Immigration
agreement, or any amount paid to the plan member as a
and Refugee Protection Act and other statutes to
consequence of such a transfer, is reduced by the
authorize regulatory requirements to be imposed on
actuarial value of the reduction that would otherwise have
employers respecting authorizations to work in Canada. It
been made to the member's pension benefit at the time of
also repeals the Fair Wages and Hours of Labour Act,
retirement because of a payment under the Pension
which governs construction contracts involving the
Benefits Division Act in respect of a spouse or common-
Government of Canada, and amends the Employment
law partner.
Equity Act to remove requirements that are specific to the
Federal Contractors Program for Employment Equity.
Public Sector Amendments in
Quebec, Public Hearings on Bill 80 As well, Bill C-38 amends the Employment Insurance Act
and the Department of Human Resources and Skills
Effective July 1, 2012, the Regulation under the Act Development Act to:
respecting the Pension Plan of Management Personnel - permit the determination of benefits by reference to a
has been amended to revise the tariffs applicable to pay person's highest earnings in a given number of weeks;
the cost of redemption of service for periods of absence - authorize regulations respecting what constitutes suitable
without pay under sections 38 and 118 of the Act employment;
respecting the Pension Plan of Management Personnel, - remove the requirement that a consent to deduction be in
and for service accumulated by an employee hired as a writing;
casual employee under section 146 of the Act. - provide a limitation period within which certain
repayments of overpayments need to be deducted and
Beginning September 11, 2012, the government of paid, and to clarify the provisions respecting the refund of
Quebec will hold public hearings as part of its general premiums to self-employed persons;
consultation on Bill 80, An Act respecting voluntary - require the EI premium rate to be set on a seven-year
retirement savings plans. Organizations wishing to break-even basis once the EI Operating Account returns
participate must submit a brief to the clerk of the to balance; and
Committee on Labour and the Economy no later than - have EI appeals heard by the Social Security Tribunal.
August 30, 2012.
EI Pilot Projects
Impact of Longevity Improvements on
In its 2012 Budget, the federal government also
US Corporate Plans announced plans to implement, effective April 7, 2013, a
The IMF has released a working paper which provides the new permanent approach to calculating EI benefit rates
first empirical assessment of the impact of life expectancy based on the regional availability of work (Variable Best
assumptions on the liabilities of private US defined benefit Weeks). In the interim, current EI rules in effect across the
pension plan, according to which each additional year of country will continue to apply. As such, amendments to
life expectancy increases pension liabilities by 3 to 4 per the Employment Insurance Regulations will extend Pilot
cent. This effect is not only statistically highly significant Project No. 16 (Best 14 Weeks) until April 6, 2013. The
but also economically: each year of additional life extension is designed to test claimants' behavioral
changes in anticipation of Variable Best Weeks and bridge
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4. the gap until it comes into force. Minimal impact on
employers is expected.
In addition, the amendments introduce a new Working
While on Claim (WWC) national pilot project for three
years, from August 5, 2012 to August 1, 2015. Pilot
Project No. 18 will reduce claimants' benefits by 50 per
cent of their earnings while on claim starting with the first
dollar earned, with the goal of ensuring they benefit from
working more. The government expects claimants to
accept more available work, resulting in increased
earnings and greater attachment to the labour market.
Take Action | If you would like further information on any of these
topics, please contact Aon Hewitt at Infocan@hewitt.com.
The Aon Hewitt Radar is provided for information purposes only and should not be relied on as legal advice or
opinion.
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