TORONTO (Reuters) — Canada's Conservative government proposed a new voluntary pension plan option on Thursday that would see investment risks shouldered by both employers and employees.
Called Target Benefit Plans, or TBPs, the proposed plans would be available to employees of government-owned corporations and private sector companies that are federally regulated.
Under the TBP framework, pension benefits would be targeted, rather than guaranteed, based on a predetermined formula, and contributions would be fixed or set within a range.
Both benefits and contributions could be adjusted over time based on the financial performance of the plan, doing away with the need for a solvency funding requirement.
The proposal was due to be unveiled in a speech by Secretary of State for Finance Kevin Sorenson to the Economic Club of Canada on Thursday.
Currently, pensions in Canada are typically either defined benefit plans, which provide a guaranteed pension backed by the financial health of the employer, or defined contribution plans, which provide a benefit based on investment returns.
Both types of plans could be converted into TBPs, and the framework would also be available to new plans in the future. All parties would be required to agree to the plan.
The government will enter into a consultation period on the proposal for the next 60 days.