2022 Federal Budget Highlights

Special Notice – April 14, 2022

The 2022 Federal Budget, “A Plan to Grow Our Economy and Make Life More Affordable” (Budget 2022) was tabled by Finance Minister Chrystia Freeland on April 7, 2022. Budget 2022 focuses on relief measures to make life more affordable for Canadians, which include:

  • A proposal for a national dental care program and increasing the length of EI sickness benefits;
  • Further progress toward a national pharmacare strategy and additional investments related to health care and recovery from the continued impact of COVID-19; and
  • Amendments to the Pension Benefits Standards Act, 1985 and the Pooled Registered Pension Plans Act for federally-regulated plans related to frameworks for solvency reserve accounts, variable payment life annuities and improving pension plan governance, as well as moving forward with disclosure requirements that will require reporting on ESG considerations

The government will also fulfill the 2021 Federal Budget commitment to provide a 10% increase to the Old Age Security pension for seniors aged 75 and over.

This Special Notice provides a summary of the key measures with potential impact on pension and benefit plans.

Benefits and healthcare

Budget 2022 focuses on measures to help Canadians further recover from the financial and personal effects of COVID-19. Measures of interest include a proposed national dental care strategy, changes to paid sick leave and the Employment Insurance (EI) sickness benefit, continued progress toward a universal national pharmacare program and investments addressing surgery backlogs and the long-term impacts of COVID-19.

National dental care

Budget 2022 provides funding of $5.3 billion over five years, starting in 2022–23, and $1.7 billion ongoing, to Health Canada to provide dental care for Canadian families with an annual income of less than $90,000. The program will provide dental care for Canadians under age 12 starting this year, and will expand to Canadians under age 18, seniors and persons living with a disability in 2023. The program is expected to be fully implemented by 2025. There will be no co-pays for Canadian families with annual incomes under $70,000.

Impact: The impact on private plans currently offering dental benefits will be clearer when implementation details of the program are announced, and will depend on whether eligibility under the national plan will be limited to those without access to private benefits and the extent of the coverage provided.

Progress toward national pharmacare

Budget 2022 promises further progress toward a national pharmacare program. The government intends to table a Canada-wide pharmacare bill by the end of 2023 and will task the Canadian Drug Agency to develop a national formulary of essential medicines and a bulk purchasing plan to support the implementation of the bill.

Impact: Until further details are known about which drugs will be included in the national formulary and any eligibility requirements, it’s unclear how a national pharmacare program will impact private drug benefit programs.

Paid sick leave and sickness benefits

Budget 2022 confirms two key ongoing actions that will legislate a minimum of 10 days of paid sick leave for federally regulated workers and increase the length of EI sickness benefits from 15 to 26 weeks by the summer of 2022.

Impact: Federally regulated employers will need to review current sick leave policies to ensure compliance when the 10-day minimum is enacted. All benefit plans providing short-term disability benefits, including those that coordinate with EI sickness benefits, or currently participate in the EI Premium Reduction Program by providing short-term benefits that are at least equivalent to those offered under EI, must also review their policies. Changes to short-term disability benefits as a result of the above may not only affect their cost, but will also impact premium rates and provisions under long term disability coverage, given the integration between these benefits.

Other measures of interest related to benefits

  • Budget 2022 proposes to allow medical expenses related to surrogacy or in vitro fertilization under the Medical Expense Tax Credit. This would include fees paid to Canadian fertility clinics and donor banks for donor sperm and ova.
  • The federal government intends to continue to provide provinces and territories with an additional
    $2 billion top-up payment to the Canada Health Transfer to address backlogs in surgeries and other procedures.
  • The government also intends to engage with provinces and territories to inform the development of a new Canada Mental Health Transfer that will support the expansion and delivery of high-quality and accessible mental health services across Canada.
  • Budget 2022 proposes to provide $20 million over five years, starting in 2022–23, for the Canadian Institutes of Health Research to support additional research on the long-term effects of COVID-19 infections on Canadians, as well as the wider impacts of COVID-19 on health and health care systems.


Changes related to pension governance and administration

The government proposes to amend the Pension Benefits Standards Act, 1985 (PBSA) and the Pooled Registered Pension Plans Act to improve the sustainability and long-term security of federally-regulated pensions through improved governance and administration. This includes new frameworks for solvency reserve accounts (SRAs) and variable payment life annuities (VPLAs) as well as new requirements for the disclosure of environmental, social, and governance (ESG) considerations, including climate-related risks.

Impact: The impact on the governance and administration of affected plans is unknown pending further details regarding the proposed amendments.

An implemented framework for SRAs would provide greater flexibility to employers sponsoring federally registered defined benefits plans, by potentially providing employers with access to a portion of a plan’s surplus held within the SRA.

The Income Tax Act was previously amended to allow for VPLAs , but changes to pension standards legislation, such as the PBSA for federally regulated plans, are also needed before they can be implemented. Permitting the option to provide retirement benefits from a money purchase plan through a VPLA would provide plan members with additional flexibility for decumulating their retirement savings as well as benefitting from investment and mortality risk pooling. Additional details on ESG disclosures, including climate-related risks, and whether the new disclosures will be required for all federally regulated pension plans or only those above a certain size, are needed to assess the impact of these new requirements for pension plan sponsors.

Borrowing by defined benefit pension plans

The budget proposes amendments to borrowing restrictions in the Income Tax Regulations, applicable to defined benefit registered pension plans (DB plans) that are not individual pension plans. The changes would amend current borrowing limits on DB plans and implement new restrictions on borrowings for the purpose of acquiring real property. Specifically, the real property purchased by the DB plan must be for the purpose of earning income from that property (subject to certain exceptions).

Impact: The intent of these amendments is to provide administrators of DB plans (other than individual pension plans) with greater flexibility to borrow funds. However, compliance with pension standards legislation with respect of such borrowing is still required.

Increase to Old Age Security pension

Acting on promises made in the 2021 Budget, beginning this July, the government is increasing the OAS pension for seniors aged 75 and over by 10%. As noted in the 2021 Federal Budget, these measures would increase OAS benefits for approximately 3.3 million seniors and provide additional benefits of up to $766 to eligible seniors.


Budget 2022 proposes to establish the Canada Growth Fund to attract substantial private sector investment to:

  • Reduce emissions and contribute to achieving Canada’s climate goals;
  • Diversify the economy and bolster exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada’s industrial base; and
  • Support the restructuring of critical supply chains in areas important to Canada’s future prosperity, including the natural resources sector.

The Canada Growth Fund will be a new public investment vehicle that will operate at arm’s length from the federal government. It will invest using a broad suite of financial instruments, including all forms of debt, equity, guarantees, and specialized contracts. The fund will be initially capitalized at $15 billion over the next five years with the goal of attracting three times that amount in private investments.

Other measures of interest

The Budget addressed several issues designed to remedy the housing affordability crisis in Canada, including:
  • Introducing the Tax-Free First Home Savings Account, which would give prospective first-time home buyers the ability to save up to $40,000 toward the purchase of a first home starting in 2023. Similar to an RRSP, contributions would be tax-deductible, and withdrawals to purchase a first home, including investment income, would be non-taxable, like a TFSA.
  • Proposing to double the First-Time Home Buyers’ Tax Credit amount to $10,000. The enhanced credit would provide up to $1,500 in direct support to home buyers. This measure would apply to homes purchased on or after January 1, 2022.
  • Doubling the Home Accessibility Tax Credit to allow seniors and persons with disabilities the opportunity to renovate and upgrade their homes for improved accessibility. Budget 2022 proposes to double the qualifying expense limit of the Home Accessibility Tax Credit to $20,000 for the 2022 and subsequent tax years. This will mean a tax credit of up to $3,000—an increase from the previous tax credit of up to $1,500.
  • Creating the Employee Ownership Trust, a new, dedicated trust under the Income Tax Act to support employee ownership.

This issue of Special Notice has been prepared for general information purposes only and does not constitute professional advice. Should you require professional advice based on the contents of this publication, please contact an Eckler consultant.