Minister of Finance Minisve des Finanoss Ottawe, Canada. K1AOGS 2010FIN3242 JUN 10 2010 ‘The Honourable Dwight Duncan, M.P.P. Minister of Finance Government of Ontario Frost Building South, 7th Floor 7 Queen’s Park Crescent Toronto, ON ,M7A 1Y7 Dear Minis Tam writing to share with you the proposed agenda for our upcoming meeting of Ministers of Finance and Treasurers on June 13" and 14" on Prince Edward Island, Coming out of the meeting, there will be a great deal of attention on our discussions about the retirement income system. It is essential that we continue to work collaboratively on this important matter. I hope we can agree on a course of action to follow and, to that end, Iam writing to provide you with my perspective on the way forward on this issue. My recent consultations across the country, and the work done by our officials since we Jast met, have convinced me that we should seriously consider several specific steps to improve our retirement income system. These improvements would build on the strengths of our system, which includes a healthy balance between government and private-sector involvement, with both mandatory and voluntary savings elements. ‘There is more that can be done to encourage private savings and broaden coverage by removing barriers that currently prevent some Canadians, such as the self-employed, from participating in registered pension plans. 1 believe we should work together toward Canadapension innovations that would allow financial institutions and insurance companies to offer broad-based defined contribution pension arrangements to multiple employers, all employees, and to the self-employed. This approach will help reduce costs of defined contribution plans for individuals and employers by providing opportunities for greater pooling of savings, without imposing the costs of « new administrative apparatus. It will help enhance retirement savings and pension coverage, without compromising out ‘current system and without passing costs on to future generations. These pension innovations would require changes to the federal tax rales as well as federal-provincial-tertitorial collaboration on modifications to pension standards. 1 also think we can do more together to help people saving for retirement to make better- informed decisions, including supporting greater financial literacy and disclosure in relation to retirement savings. Actions towards these objectives will build on the work of the Task Force on Financial Literacy which is to report in December, Even with such improvements, I am concemed that some Canadians may not save enough for their retirement, in my consultations, { heard strong support for the Canada Pension Pian and the central role that it plays in our government-supported retirement income system. I believe that we should consider a modest, phased-in, and fully funded enhancement to defined benefits under the Canada Pension Plan in order to increase savings adequacy in the furure, Changes to the Canada Pension Plan requize significant provincial support, and I will be particularly interested in getting your perspective on the possible expansion of the Canada Pension Plan when we meet in PEL. believe that the types of measures I have set out above represent a targeted, balanced approach to further improving Canada’s retirement income system. | look forward to a fruitful discussion. Sincerely, je James M. Flaherty