Federal Fall Economic Statement 2024: Pension & Benefit Related Highlights
December 19, 2024
Following the resignation of Deputy Prime Minister and Finance Minister Chrystia Freeland earlier that day, the 2024 Fall Economic Statement (the “Statement”), titled Reducing Everyday Costs and Raising Wages, was tabled in the House of Commons on December 16, 2024, by Government House Leader Karina Gould. Below is a summary of the key announcements related to pensions, benefits, and executive compensation.
Pension Investment Updates
In Budget 2024, as noted in our earlier article here, the government tasked Stephen Poloz, former Governor of the Bank of Canada, with exploring ways to enhance domestic investment opportunities for Canadian pension funds. Following industry engagement, the government is now advancing measures to encourage greater pension fund investment within Canada, including:
- Amending the Federal Investment Rules set out in Schedule III to the Pension Benefits Standards Regulations, 1985 to eliminate the 30% rule, which currently restricts pension plans from holding more than 30% of the voting securities of a corporation. Removal of the 30% rule will enable Canadian pension funds to make larger, more significant domestic investments. The Statement notes that the government will consult with provinces regarding the treatment of provincially regulated pension plans in this regard. Despite this, it is important to note that many provinces, including Ontario, have adopted the Federal Investment Rules in their own pension legislation. As a result, the proposed changes could automatically affect pension plans registered in those provinces.
- Exploring the removal of the 90% ownership threshold under the Income Tax Act that currently restricts municipal-owned utility corporations from having more than 10% private sector ownership. Reducing this threshold would enable Canadian pension funds to increase their stake in these utilities, such as municipally-owned electricity providers.
- Engaging with airports and pension funds to explore additional measures that would further incentivize investment and development on airport lands.
- Proposing a new round of $1 billion in funding for the Venture Capital Catalyst Initiative in 2025-26. This program is aimed at stimulating venture capital investment in Canada. To attract more private investment, this new round will include more enticing investment matching terms for pension funds and other institutional investors looking to invest in high-growth companies.
- Creating a program offering up to $15 billion in aggregate loan and equity investments for AI data centre projects that receive funding from Canadian pension funds.
Investment Disclosure for Federally Regulated Pension Plans
The government is continuing to consult on proposed regulations to enhance the transparency of pension investments for large federally regulated plans. If implemented, these regulations would require the Office of the Superintendent of Financial Institutions to disclose the distribution of investments—by jurisdiction and asset class—for federally regulated pension plans with assets exceeding $500 million. For more information on the proposed regulations, specifically the proposed jurisdictions and asset classes, see our earlier article here.
Early Retirement Benefits for Frontline Workers in the Public Service
The Statement proposes amending the Public Service Superannuation Act to expand the early retirement program under the federal public service pension plan to additional members. This initiative was announced by the President of the Treasury Board in June 2024, see our earlier article here. Currently available only to employees of Correctional Service Canada working in federal correctional institutions, this change will allow firefighters, border services officers, parliamentary protection officers, and other frontline workers who meet eligibility requirements to retire earlier with an immediate, unreduced pension.
Exempting the Canada Disability Benefit from Tax
Budget 2024 introduced the Canada Disability Benefit, allocating $6.1 billion over six years starting in 2024-25, followed by $1.4 billion annually. Low-income Canadians with disabilities aged 18 to 64 will be eligible. The Statement proposes exempting the benefit from income under the Income Tax Act, ensuring recipients receive the full amount—up to $2,400 annually starting in July 2025—without affecting their eligibility for other federal or provincial programs. The government is also encouraging provinces and territories to prevent clawbacks.
Update on Canada Pension Plan Improvements
The Statement reviews the key Canada Pension Plan improvements introduced by Budget 2024, following the Canadian Pension Plan’s 2022-24 Triennial Review. The key improvements include:
- A larger death benefit for certain contributors.
- A partial children’s benefit for part-time students.
- Extended eligibility for the disabled contributors’ children’s benefit when a parent turns 65.
- End of survivor pension eligibility for legally separated individuals after a pension division.
The improvements will take effect on January 1, 2025.
Update on the Clean Electricity Tax Credit
The Clean Electricity Investment Tax Credit is a refundable credit worth 15% of the capital cost of eligible investments in low-emission electricity generation, storage, and interprovincial transmission. It will be available to pension investment corporations, among others. Over the summer of 2024, the government consulted with provinces and territories on the proposed conditions for the credit and released draft legislation. The government will soon finalize the legislation, confirming retroactive eligibility for investors. The credit will be available retroactively to April 16, 2024, for projects that did not begin construction before March 28, 2023.
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If you have any questions regarding the content of the Statement, please do not hesitate to reach out – we’re here to help.
