Highlights of the 2026 Ontario Budget

On March 26, 2026, the Ontario government tabled its 2026 budget, “A Plan to Protect Ontario” (budget) and introduced Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026 (Bill 97), for first reading.

In this FTR Now, we highlight information contained in the budget and Bill 97 that is of broad interest to employers, human resources professionals and pension plan administrators.

Proposed Changes to Ontario Pension Legislation Framework

The budget proposes several significant changes to Ontario’s pension framework, including creating a discharge of administrative obligations related to certain unlocated pension plan members, increasing the guarantee limit under the Pension Benefits Guarantee Fund (PBGF), introducing a framework for Variable Life Benefits (VLB), and creating new unlocking options for locked-in accounts.

Other announcements include a proposal to help facilitate conversions of single employer defined benefit pension plans (DB SEPP) into Jointly Sponsored Pension Plans (JSPP) and the creation of a dedicated fund designed to promote certain strategic priorities, including by attracting pension investments.

Unlocated Pension Plan Members

Bill 97 proposes to amend the Pension Benefits Act (PBA) to introduce a discharge of administrative obligations with respect to former members, retired members and other beneficiaries of a pension plan who cannot be located and are more than 100 years old according to plan records.

The new provisions would allow pension plan administrators to apply to the Chief Executive Officer (CEO) of the Financial Services Regulatory Authority of Ontario (FSRA) to consent to the extinguishment of the person’s rights and benefits under the pension plan and the PBA. Once regulatory consent is received, the administrator would be discharged of the obligation to pay any benefits or other amounts owing to the person in respect of whom an application was made.

The application for the CEO’s consent will be required to meet requirements that are to be prescribed. According to the budget, before applying for the discharge, the administrator would be required to conduct additional searches for the individual, following which a prescribed waiting period would apply.

Under Bill 97, if the extinguished benefits are defined benefits or target benefits, the amounts related to the benefits “shall remain in the pension fund to be used for the purposes of the pension plan or the pension fund.” If the amount relates to defined contribution benefits, the amendments suggest the options for reallocating the amounts will be prescribed.

Pension Benefits Guarantee Fund

The PBGF protects beneficiaries of DB SEPPs in the event of employer insolvency where plan assets are not sufficient to make payments.

Following a recent review of the PBGF, the government reports that the PBGF is in a strong financial position.

Bill 97 amends the PBA to double the PBGF guarantee limit from $1,500 per month to $3,000 per month, which would be the largest increase since the fund was created in 1980. The government says this increase would come at no increased cost to employers or the government. This change is proposed to apply where the wind-up date falls on or after March 26, 2026.

Variable Life Benefits

Bill 97 amends the PBA to authorize payments of VLBs.

The amendments would enable defined contribution pension plans and plans that offer additional voluntary contributions to offer VLBs. The introduction of VLBs would align with recent changes to tax rules that allow for the adoption of variable payment life annuities, which were introduced to address decumulation issues.

A VLB would provide a monthly benefit for life, as an alternative to a locked-in account or a traditional annuity. The benefit would serve as a decumulation option that pools risk, including longevity risk, among participants. VLB assets would be professionally invested and payments would be adjusted based on investment performance and the mortality experience of the fund’s retirees.

New PBA provisions would set out the process for transferring amounts into and between VLB funds, establish a death benefit payable to designated beneficiaries in respect of VLBs, and permit partial wind-ups to terminate the VLB provision of a pension plan.

The proposed VLB framework would require comprehensive disclosures to members to support informed decision-making. Enabling regulations would be required before any pension plan could offer a VLB in Ontario. According to the budget, the government intends to consult stakeholders on proposed regulations later this year.

The government is targeting January 1, 2027 as the date when eligible plans could begin offering VLBs.

Unlocking Retirement Funds

The budget proposes to offer a new unlocking option for funds that have been transferred from a pension plan to a locked-in account. Two new unlocking options are proposed:

account holders who have reached early retirement age under the terms of their pension plan
account holders under age 55 whose total locked-in balances are below a prescribed amount. The prescribed amount would be $29,840 in 2026, and would be indexed annually.

These proposals are not reflected in Bill 97.

DB SEPP to JSPP Conversions

According to the budget, the government will be consulting on regulations to assist public and private-sector employers seeking to merge their DB SEPPs into JSPPs. Currently, PBGF assessments and coverage end once a DB SEPP merges into a JSPP. The government proposes to eliminate PBGF premiums for DB SEPPs once plan beneficiaries have consented to the merger, while the merger is awaiting regulatory approval.

Protect Ontario Account Investment Fund

In response to the economic impacts of U.S. tariffs, Bill 97 would create an account called the Protect Ontario Account Investment Fund for the purpose of making investments that promote innovation, infrastructure development, long-term economic growth and other strategic priorities. According to the budget, the province will invest up to $4 billion to identify and execute on investment opportunities in certain industries identified as high-growth. The fund will aim to attract investment from pension funds and other private capital.

Insurance Premium Tax Flexibility for Benefit Plans

Bill 97 would amend the Corporations Tax Act (CTA) effective April 1, 2026 to enable certain plans considered funded benefit plans under the CTA to elect to be treated as unfunded benefit plans for the purposes of the Insurance Premium Tax, subject to prescribed limitations including with respect to the types of funded benefit plans that may make the election and the time period for which such an election is effective.

Under the current framework, a funded benefit plan is subject to Insurance Premium Tax on taxable contributions at the time they are paid into the plan, creating an upfront tax liability. The proposed change would allow plan holders to elect to trigger liability only when benefits are paid out, as is currently the case for unfunded benefit plans.

Retail Business Holiday Closures

The budget will remove the requirement for retail businesses to close on Family Day and Victoria Day, while maintaining the public holiday protections for employees under the Employment Standards Act, 2000 (ESA). Bill 97 addresses this by amending the Retail Business Holidays Act (RBHA) to remove the reference to Victoria Day in the definition of “holiday.” (Family Day was never listed as a holiday in the RBHA.)

To ensure consistency across the province, Bill 97 will amend the Municipal Act, 2001 and the City of Toronto Act, 2006 to remove the authority of municipalities — including the City of Toronto — to pass or maintain local by-laws requiring retail closures on Family Day or Victoria Day, and Bill 97 expressly overrides any existing municipal bylaws in this respect.

Labour Mobility

The budget highlights recent changes that the government has initiated to improve labour mobility rights. As of January 1, 2026, new “As of Right” labour mobility rules allow in-demand, certified workers to begin working in Ontario within 10 business days following confirmation of credentials by the applicable regulator. These rules apply across occupations regulated by over 50 non-health regulatory bodies and more than 300 certifications. The budget also notes that “As of Right” labour mobility has been extended to 16 additional regulated health professions, and that the government is taking further steps toward automatic recognition of physicians and nurses registered in good standing in other provinces and territories. Employers seeking to hire regulated workers from other Canadian jurisdictions should familiarize themselves with these expanded options. For more details, please see our Human Resources Legislative Update of September 9, 2025, Ontario Government Taking Significant Steps to Break Down Interprovincial Barriers for Certified Professionals.

Freedom of Information

The budget proposes a series of amendments both to the Freedom of Information and Protection of Privacy Act (FIPPA) and to the Municipal Freedom of Information and Protection of Privacy Act (MFIPPA). For both statutes, they will be amended to confirm that they do not apply to certain records prepared or collected under the Enhancing Digital Security and Trust Act, 2024. Some other notable changes are briefly noted below.

For institutions that are subject to MFIPPA, the budget will enact similar changes to those made to FIPPA in 2025. This will include requirements for privacy impact assessments, the reporting of the theft, loss or unauthorized use or disclosure of personal information to the Information and Privacy Commissioner of Ontario (Commissioner), and the possibility of reviews by the Commissioner of an institution’s information practices. Other amendments include allowing heads of institutions to reply to some requests by proposing a plan to allow for access to records in stages, clarifications on how to determine certain time limits in the statute, and the increased ability to extend certain response timelines.

For institutions subject to FIPPA, there will be similar amendments to those made to MFIPPA, including allowing heads of institutions to reply to some requests by proposing a plan to allow for access to records in stages, clarifications on how to determine certain time limits in the statute, and the increased ability to extend certain response timelines. In addition, amendments will be made to Part III.1 of the FIPPA, which establishes data integration rules.

Supporting Workers Affected by Layoffs — POWER Centres

The budget highlights the ongoing operation of Protect Ontario Workers Employment Response Centres, which provide transition assistance for workers affected by layoffs, including targeted training referrals and access to Employment Ontario programs. The centres are typically set up by unions, employee or employer associations or municipalities, and can be launched proactively before a layoff has occurred. They provide services to help workers navigate retraining and transition opportunities. Last year, 10 centres were operational across Ontario, assisting nearly 15,000 workers. The budget confirms continued funding and cooperation through the Canada–Ontario Tariff Response Initiative.

Employers in tariff-impacted sectors — including automotive, steel, forestry, and manufacturing — who are contemplating or managing workforce reductions should be aware of these programs and their interaction with obligations under the ESA regarding notice of termination and severance pay, as well as any applicable collective agreement obligations.

Alcohol Sector — Changes Affecting Licensed Operators

The budget indicates that a number of changes will be made with respect to the wholesaling and retailing of alcohol, and that there will be revisions to the tax regime relating to alcohol products.

Employers in the hospitality, gaming, and food service sectors who hold liquor licences are encouraged to familiarize themselves with these changes ahead of the April 1, 2026, implementation date.

Many of the initiatives described above are subject to the passage of legislation or the enactment of regulations before they coming into force. We will continue to monitor these and other developments arising from the budget that may be of interest to employers, human resources professionals and pension plan administrators.

Should you have any questions about the budget, please contact your regular Hicks Morley lawyer.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©