Bill Provides New Options for Employers and Older Workers

New legislation introduced today, April 30, would provide new pension opportunities for retired workers and those approaching retirement. The proposed amendments to the Pension Benefits Act would also help employers retain key staff who want to continue working.

In January, the Pension Review Panel recommended that phased retirements be allowed. Under a phased retirement, an employee who is retired or is eligible to retire could continue working for the employer and paying into the pension plan while receiving pension payments.

"At a time when worldwide economies are taking a toll on retirement investments, older workers would have an option that allows them to enjoy a more leisurely work life while continuing to build their retirement nest egg," said Minister of Labour and Workforce Development Mark Parent. "This is an innovative way to meet the demands of the labour market and to address some of the demographic challenges ahead of us."

In 2007, the federal government made changes to income tax regulations to allow people to continue working, accumulate pension benefits and receive up to 60 per cent of their pensions. Previously, workers could not contribute to a pension plan while receiving benefits from the same plan.

With an aging workforce and a declining population, there is growing concern that businesses will have difficulty replacing retired workers.

Phased retirements would complement the elimination of mandatory retirement for most workers, which comes into effect July 1.

At retirement age, some workers may want to stay employed. For example, workers whose careers began late in life or were interrupted, may want to continue working longer to maximize their pension plan contributions.

Many employers may want to offer older workers an option to remain because their experience and knowledge is beneficial.

At the same time, many employers would like to offer older workers an option to remain with the company longer because they are knowledgeable about their employer's business, clients, products and services.

"This is an option, not a requirement," said Mr. Parent. "Under the proposed legislation, an employer would not be obligated to offer phased retirement to any or all staff; it would be a decision driven by business needs."

The government is also revising Pension Benefits Act regulations. Currently, pension plan administrators must return under-funded pension plans to full funding within five years. The amended regulation would temporarily extend this time limit to 10 years for plans that report an under-funding between Dec. 30, 2008 and Jan. 2, 2011. Pre-existing under-funding could be added to newly-identified shortfalls and allowed to recover over 10 years.

The Pension Review Panel which was struck in 2007, delivered its final report this year. It made 30 recommendations to improve solvency, transparency and flexibility. The province continues to evaluate the report's recommendations while looking at what other jurisdictions are doing and what is in the best interests of Nova Scotians.