In an effort to plug a solvency gap without cutting benefits, the Anglican Church of Canada is urging its pension plan members to approve a three-year funding extension.
The Ontario government can allow the extension only if two-thirds of the plan members approve it. Members have until September 6 to vote on the issue.
“I appeal to you to support funding relief by voting yes,” said Bishop Philip Poole, chairman of the Anglican Church of Canada’s pension committee, speaking in a recent video address on the website of the church’s Pension Office Corp.
“I’m confident our plan members will support this much-needed funding relief. But I have a nagging worry that many members will not complete and return the voting cards that we recently distributed to you by mail,” Poole explained in the video.
The extension the church is asking for is not about the long-term funding of the pension plan. On a going-concern basis, the plan had a funding rate of 95% due to a $28.7-million shortfall at the end of the last fiscal year. The pension plan’s assets at that time amounted to $602.8 million.
However, on a solvency basis, the fund had a gap of more than $169 million at the end of fiscal year 2012, leading to a funding rate of only 70.5%. This is the hole the pension plan is hoping to plug with an extension of three years.
If the shortfall persists in three years, the plan, which recorded a return of 13.2% last year, would likely cut benefits, according to the newsletter of the Pension Office Corp.
The plan would not be able to increase contributions because it has already reached the contribution maximum. That’s because it is registered as a specified multi-employer pension plan where contributions are limited to 18%—the plan’s current contribution rate.
At the end of fiscal year 2012, the church’s pension plan had more than 1,600 active members and more than 2,600 retirees claiming benefits.
The average age of the active members at the time was 52.5. “Since the cost of benefits increases as average age increases, the aging of active members continues to be a concern,” says the newsletter of the church’s Pension Office Corp.