Ontario’s unique pension-plan safety net that makes payments when companies go bankrupt is on the edge of being wiped out and could fold if a large corporation were to go under soon, experts warn.
The provincial government is currently accepting comments on a report it commissioned in 2006 — which is the first review of pension laws in 20 years — and lead author Harry Arthurs concluded that the Pension Benefits Guarantee Fund, the only such program of its kind in Canada, could soon become history.
“I think one sufficiently large company or several large companies (going bankrupt) would cause the plan to go broke,” Arthurs said, adding the Ontario government is in no way required to save the pension-insurance program.
The report notes it’s increasingly common that companies are reporting high levels of unfunded pension liabilities — shortfalls in funds needed to pay out its pension requirements — and the provincial fund is threatened by a possible “shipwreck scenario.”
That could occur if a bankrupted company with many employees flooded the fund with claims and the government found the shortfall too expensive to make up.
Similar fears have been raised in the past because of troubled companies like Algoma Steel, Massey Combines and Stelco, and special provisions were made by the government to keep the fund afloat.
