On May 15, 2025, Ontario’s Finance Minister presented the 2025 Budget entitled A Plan to Protect Ontario. This memo highlights items that may be of interest to pension and group benefit plan Trustees, sponsors, and administrators.

Pensions

Target Benefit Pension Plans

The government implemented a legislative and regulatory framework for target benefits on January 1, 2025. The government promises in the Budget to monitor the new regime to ensure that it works as intended and meets all plan members’ needs.

Variable Life Benefit Pension Plans

The Budget also announces that the government will consult with the pension sector on a possible new pension option called a Variable Life Benefit (VLB). It will evaluate the feedback from stakeholders, which will help inform a future VLB legislative framework.

The VLB option would be allowed in pooled registered pension plans, defined contribution pension plans, and plans that provide for additional voluntary contributions. A VLB would give retirees a new alternative by providing a monthly benefit for life, with payments that are adjusted based on the investment performance of the fund and the mortality experience of the fund’s members.

Health and Insurance

Proposing an Ontario Fertility Treatment Tax Credit

The Budget announces a new refundable Personal Income Tax credit to help Ontarians with their eligible medical expenses related to fertility treatment, starting with the 2025 taxation year. The Ontario Fertility Treatment Tax Credit would provide support of 25 per cent on eligible expenses up to $20,000, for a maximum tax credit of $5,000 per year.

Eligible Ontario residents could apply for this credit when they file their Income Tax and Benefit Returns, even if they do not owe any Personal Income Tax.

The proposed credit would be built on the existing Medical Expense Tax Credit (METC) related to fertility treatment and preservation, as well as surrogacy. It could be claimed in addition to the non-refundable federal and Ontario METCs for the same eligible expenses.

Eligible fertility expenses would be those paid by the individual or the individual’s spouse or common-law partner to conceive a child, starting in 2025. To be eligible for the credit, expenses must not have been reimbursed or will not be reimbursed (e.g., through insurance). If a part of the expenses has been or will be reimbursed, the unreimbursed portion may be eligible. Eligible expenses would also include certain medical expenses paid to or on behalf of a surrogate mother for the purposes of the tax filer becoming a parent.

The types of eligible fertility-related expenses would generally be the same as those claimed for the Ontario METC, if they are for goods or services provided entirely in Canada.

Tax filers can consult relevant Canada Revenue Agency publications and federal and provincial legislation for detailed rules, including which medical expenses are eligible.

Employer-Sponsored Drug Program Policies

Last year, the government held a consultation on the role of Preferred Provider Networks (PPNs) in employer-sponsored drug programs. Building on this, the government is launching a second consultation to explore new policy options inspired by the initial findings, including considering the introduction of Any-Able-and-Willing-Provider legislation, which would enable any eligible pharmacy to join PPNs. The government will collaborate with stakeholders to evaluate all potential policies before determining next steps.

Life and Accident and Sickness Managing General Agent Licensing

As committed to in the 2024 Ontario Economic Outlook and Fiscal Review, the government has created a licensing framework under the Insurance Act for life and accident and sickness managing general agents.

The Financial Services Regulatory Authority of Ontario (FSRA) is consulting on the associated rule to support the framework’s launch date of June 1, 2026.

Auto Insurance and Extended Health Benefits

The government has completed regulatory changes to make statutory accident benefits other than medical, rehabilitation, and attendant care optional for consumers to purchase, and to make auto insurance pay for motor vehicle accident injuries before extended health care plans. The government is now collaborating with FSRA and stakeholders to support a smooth transition on July 1, 2026.

Institutional Investing

Building Ontario Fund

The government proposes to provide up to $5 billion in additional funding to the Building Ontario Fund (BOF).  The BOF was established to partner with trusted Canadian institutional investors to help fund infrastructure projects in priority areas of energy, affordable housing, long-term care, municipal and Indigenous community infrastructure, and transportation.

The BOF recently announced its first investments in partnership with the Arch Corporation and Rekai Centres, which will help build long-term care homes across the province.

Employer Taxes

Employer Health Tax

Increasing the Employer Health Tax (EHT) exemption from $490,000 to $1 million.

WSIB Rebate

The WSIB will distribute rebates of $4 billion in surplus funds to employers in 2025.