Canada: Proposals from the 2022 federal budget

Employer Action Code: Monitor

The 2022 federal budget includes several important items and changes that could affect employers as well as sponsors of pension and benefit plans, notably about public dental benefits, national pharmacare and solvency reserve accounts for federally regulated pension plans.

Key details

• Includes funding for a new national public dental care program
• States that the government will continue to work toward a universal national pharmacare program
• Reaffirms that the government intends to increase the length of Employment Insurance sickness benefits from 15 to 26 weeks
• Proposes additional amendments to support the implementation of the 10 days of paid medical leave for workers in the federally regulated private sector
• Proposes amendments to the Pension Benefits Standards Act (PBSA) to allow solvency reserve accounts (SRAs) (an SRA is an account within a defined benefit [DB] pension plan into which an employer sponsoring such a plan could remit solvency special payments to eliminate a pension deficit; once the deficit is eliminated, the employer would be permitted to recover portions of its special payments from the SRA, in the form of plan surplus, that are no longer required to secure pension benefits)
• Proposes amendments to the PBSA to accommodate variable payment life annuities
• Proposes amendments to the Income Tax Regulations that will give administrators of DB plans (except individual pension plans) more flexibility to borrow
• States that federally regulated pension plans will be required to disclose environmental, social and governance considerations, including climate-related risks

Please see our Client Advisory: Highlights of the 2022 federal budget for further details.

Employer implications

This is the first budget since the Liberals were reelected in September 2021. Although the Liberals are a minority in Parliament, the recent Supply and Confidence Agreement with the New Democratic Party means that it is expected that the 2022 budget will pass and the proposals will become law. Affected employers and plan sponsors should monitor the legislative progress and consider the impacts on their plans.