Advertise
Resources
Member, Beacon International Group, Ltd.
OTTAWAThe Canadian federal government has proposed revamping pension funding rules to give defined benefit plan sponsors more time and flexibility in funding pension deficits.
Under the proposal, the schedule for solvency funding payments would be extended from five years to 10 years on the condition that plan members are fully informed and that no more than one-third of current plan members or retirees object to the change.
In addition, plan sponsors could extend the funding period to 10 years if the difference between the five-year and 10-year payments is secured by a letter of credit, which would reduce payments for sponsors while protecting pension benefits, according to the government.
The funding relief measures will only be available to plan sponsors whose funding payments are up-to-date and only available for the first valuation report filed with the Office of the Superintendent of Financial InstitutionsCanada's federal pension regulatorbefore 2008. OSFI has jurisdiction over pension plans in major financial sectors, such as banking and transportation, and estimates that about 72% of the roughly 1,200 pension plans it regulates had a solvency deficit last year.
The changes came as a result of a consultation on pension legislation and regulation conducted by the Department of Finance Canada last year. The paper asked for opinions on a number of pension issues, including whether pension funding schedules should be relaxed and whether a federal pension guarantee fund would be viable in Canada.