Head of plan benefits, design and policy explains the decision to add on this population and what that means for HOOPP's funding, liabilities
Healthcare of Ontario Pension Plan (HOOPP) announced earlier this week that it will open up access to its plan for incorporated physicians. The move, which offers pension access to a population that had previously been limited to self-managed retirement savings, could bring as many as 24,000 incorporated physicians into the plan.
Beyond the significance of that improved access, the move required some technical details to be dealt with, given the somewhat different nature of an incorporated physician’s earnings model and relationship with their employer. Rachel Arbour, head of plan benefits, design, and policy at HOOPP, explained how her organization overcame those technical issues as well as what the addition of these physicians might mean for the plan’s funded status and liability. She says that the decision to expand access was, fundamentally, a product of HOOPP’s mission.
“We are continuously looking for opportunities to add more healthcare workers to our organization. We’re very mission driven in that regard,” Arbour says. “So this is a population of people who were not easily able to join and who are important components of the healthcare system on Ontario. Now was the time to solve for allowing that group of healthcare workers to join our plan.”
While there wasn’t a particular tipping point that made this the moment to add incorporated physicians, Arbour says that HOOPP’s growth in recent years up to almost 700 employers made this group of incorporated physicians the next natural step. HOOPP, she says, was able to spend the time and energy required to bring these doctors onboard.
Despite the differences between incorporated physicians’ employment arrangements and many of the other workers eligible for HOOPP, Arbour says they will participate in the plan as equal members. Achieving that took some technical work on HOOPP’s part because incorporated physicians are technically both employees and owners of their medical professional corporation (MPC), meaning they have less of a distinction between themselves as an employee and their employer.
The primary concern, Arbour says, was in how salaries are calculated for these employees. Ordinary employees earnings decisions are somewhat different from a physician who can make their own decisions about how much of the MPC’s earnings will be paid out to them. To that end, HOOPP will impose a restriction on changes in pensionable earnings under the plan for physicians. Plan benefits for all members will be calculated based on a member’s best 60 consecutive months of earnings, but physicians will be somewhat limited in how much they can change those pensionable earnings between periods.
The decision to limit this expanded access to incorporated physicians, Arbour says, was a product of the Income Tax Act, which requires T4 income to support participation in a registered pension plan. MPCs will be admitted as employers and their employees — including physicians, administrative staff, and any other employees of the MPC — will be enrolled as members. She notes, too, that physicians working as salaried employees of existing HOOPP enrolled employers are already in the plan and that will not change. Unincorporated physicians who are not salaried employees, however, remain unqualified for a pension plan.
While physicians represent a significant number of high earners in Ontario, Arbour says that their presence within the plan should not make a significant difference in HOOPP’s funded status, simply because even if all of the roughly 24,000 incorporated physicians in Ontario joined the plan, they’d be joining a population of over 460,000 members. It’s for a similar reason that Arbour says the addition of these physicians will likely not result in a significant impact on HOOPP’s liabilities.
Opening access in 2025 may bring in a number of incorporated physicians who are later in their career than a typical new pension member. Arbour says, however, that many members join HOOPP and other DB pensions at later stages in life and even a few years contributing to a pension plan can result in greater security in retirement. Given the amount of education that underpins most work in healthcare, Arbour says that HOOPP is set up for older new members already.
As HOOPP adds new members in a period of declining defined benefit plan access in Canada, Arbour calls back to the mission driving her organization. She believes that pension access can do myriad forms of good, and this expansion is simply in service of that good.
“We want to serve the healthcare community in Ontario and find opportunities to add more healthcare workers to our plan,” Arbour says. “We've done a number of pieces of research over the last number of years that speaks to the value of a good pension, how it supports good workplaces, how it supports the financial and mental health of our members and of people who are able to participate in pension plans. And this is consistent with our mission as an organization to deliver on a pension promise, which we do for healthcare workers.”
