PPO looks deeper at benefit plans
Prompt Payment Ontario (PPO) is undertaking a survey of multi-employer benefit plans to quantify the cost of damages stemming from delinquent payments, which will form part of the organization’s submission to the Construction Lien Act review.
"Prompt payment isn't just about some contractor wanting his money, it's about the flow of funds through an economy," said PPO Spokesperson Sandra Skivsky.
"It effects many things from investment to employment, to the number of people who bid a job, and it affects all payments downstream. This particular survey will ask the various funds or benefits plans out there, whether its pension or health and welfare, about their delinquencies, the cost of collecting on these delinquencies and the impact on the worker."
Skivsky recently asked PPO members to participate in an online survey.
The PPO is a single issue organization dedicated to promoting and achieving Prompt Payment Legislation for Ontario's construction industry. It represents trade contractors in the non-residential and residential construction sectors, as well as labour unions and benefit plan administrators.
"As trade contractors, we employ the majority of workers in construction, with this comes the obligation to meet payroll, pay taxes, and for many trade contractors to make remittances to pension and health and welfare plans," said Skivsky.
"When trade contractors don't get paid and can't meet their downstream obligations, it not only affects other businesses, but it affects employees and their families."
Skivsky said unionized contractors under a collective agreement are required to pay remittance industry funds to the union, or to the employer association.
Contractors contribute to pension plans, as well as health and benefit plans, on behalf of their employees, which is part of the wage package that is negotiated.
"If the contributions to those plans are not made on time, there are a number of costs that get borne by the plan and a number of costs or consequences that get borne directly and indirectly by the plan members," said Michael Mazzuca, partner at Koskie Minsky LLP.
"For example, if an employer is delinquent, there is an obligation on the trustees of the plans to pursue those delinquencies and the legal costs are often borne by the plan. So, that is a depletion of the plan assets."
For pension plan members, if the money doesn't come in on time or not at all, the danger is that a member's benefits are based on contributions that come in.
"On a pension plan, they won't approve these credits in a defined contribution plan or a group RRSP. This is money that will never make it into the plan," said Mazzuca. "Or if it makes it into the plan it is too late, so therefore it doesn't accrue any interest on it. It is a direct loss to the member everyday those monies don't come in, because the money doesn't accrue any income or interest."
As a member of PPO's legal team for the Construction Lien Act review, Mazzuca said there are two main impacts of delinquent payments on health and welfare plans.
"One, the contributions don't come in, but the plan continues to cover those members and therefore it's a cost to the plan and a depletion of the plan asset," he said. "Or, the plan doesn't cover the member whose contributions don't come in, and the member has the possibility of falling out of benefit in the health and welfare plan. For real people, for real workers, it will have a direct and unfortunate consequence."
Mazzuca and other members of PPO drafted the questions of the survey to try and capture this information.
Prism Economics and Analysis has been hired by PPO to collect data on multi-employer benefit plans, which will be tabulated and analyzed by Sept. 8, 2015.
The employer information from the survey will remain confidential, while the aggregated results will be released to the public.
The survey is being undertaken in anticipation of the release of a stakeholder information package, which marks the start of the second phase of consultation of the lien act review.
The package will define the issue as it relates to the existing legislation in other provinces and countries, in order to recommend potential solutions. The PPO's survey results will form part of the organization's submission to the review.
The first phase of the review began in February 2014 with the Ontario government's selection of Bruce Reynolds to conduct an expert review of the lien act. This initial phase involved the identification of stakeholders and a first round of informal discussions.
Article appeared in the Daily Commercial News Online.