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OTTAWA--Canada's federal government has instituted new rules to provide temporary funding relief for defined benefit plans with pension deficits.
The new regulations will set out a range of options to help plan sponsors fund pension deficits caused by declining interest rates and changes to actuarial standards for the 10% of Canadian pension plans that fall under federal jurisdiction--namely in industries such as transportation, telecommunications and banking.
Under the new regulations, plan sponsors will be allowed to extend the schedule for funding deficits from five years to 10 years on the condition 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. They also will be able to consolidate previous funding schedules and repay the entire deficit over a single, new five-year period.
"The measures will help re-establish full funding of plans in an orderly manner, while also protecting pension benefits," Jim Flaherty, the federal Minister of Finance, said in a statement.