Federal Minister of Finance Jim Flaherty has published regulations meant to provide optional temporary solvency funding relief for federally regulated defined benefit (DB) pension plans.
The plans affected represent 7% of all private pension plans in Canada and account for approximately 12% of pension assets.
“The measures will offer temporary relief to sponsors while also protecting pension benefits,” said Flaherty.
The malaise in global equity markets has been tough for DB plan sponsors as assets have declined and solvency deficits increased.
Flaherty’s proposed regulations, to be prepublished on April 4, 2009, will extend the solvency funding period by one year for deficiencies reported as of year-end between Nov. 1, 2008 and Oct. 31, 2009. The solvency funding payment may be extended from five years to 10 with the agreement of members and retirees, or with a letter of credit.
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The solvency funding payment period for agent Crown corporations will also be extended from five years to 10 with “terms and conditions to ensure a level playing field.” And asset smoothing above 110% will be allowed, with the difference in payments subject to a deemed trust.
Flaherty explained that once the national consultations on Canada’s legislative and regulatory framework for federally regulated private pension plans report back to Ottawa, he hopes to sign the new regulations into law by the fall.
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