Provincial and federal regulators are beginning to roll out relief measures for defined benefit pension plan sponsors, ranging from administrative filing extensions to freezes on commuted-value transfers.
At the federal level, the government announced Thursday it will be halting solvency special payments for federally regulated DB plans until the end of 2020 to ensure plan sponsors have financial resources to continue their operations and pension plans. The Office of the Superintendent of Financial Institutions is also putting a temporary freeze on portability transfers and buy-out annuity purchases.
British Columbia is moving to extend deadlines for filing annual statements, annual information returns and financial statements by 60 days for plans that provide them between March 30 and Dec. 29, 2020. It’s also providing a 30-day extension for delivering termination of active membership statements to plans that have a March 30 deadline, with the exception of collectively bargained, multi-employer plans. Any plans required to file an actuarial valuation report will have 90 additional days to do so.
Read: Canada pausing solvency payments for federally regulated DB pension plans
Similarly, Alberta is offering 180-day extensions for filing annual information returns and associated fees, audited financial statements, annual reports to members, actuarial valuation reports and cost certificates for plans that are required to file them between March 31 and July 1.
It’s also taking a further step by implementing a restriction on asset transfers without consent of the provincial superintendent of pensions if the transfer could impair a plan’s solvency. In addition, the province is offering extensions to the amortization period for unfunded liabilities and solvency deficiencies, as well as the deadline for employer and employee contributions, on a case-by-case basis.
Saskatchewan’s Financial and Consumer Affairs Authority is providing plan sponsors with a 90-day extension for filing annual information returns and annual statement disclosures to members.
The Financial Services Regulatory Authority of Ontario is granting 60-day extensions for regulatory filings if requested by plan sponsors. It also said that, while it can’t extend timelines for member disclosures, it won’t levy monetary penalties until further notice if plan sponsors warn the regulator in advance.
Read: OSFI temporarily freezes portability transfers, annuity purchases due to coronavirus
As well, the FSRA said DB plan administrators that have seen their transfer ratio drop by 10 per cent or more since the most recently determined transfer ratio will be prohibited from transferring any part of a member or former member’s commuted value, deferred pension or ancillary benefit without receiving approval from the regulator.
Both New Brunswick and Nova Scotia are offering 30-day regulatory filing extensions.
This is likely to be just the first wave of relief measures with more substantial changes to follow, says Simon Nelson, a principal in Eckler Ltd.’s pension group. “What you’ve seen so far is focused more on administrative relief [and] . . . making things easier for plan sponsors to administer plans. I think what we haven’t seen yet is that second wave of measures. My understanding is that a number of the jurisdictions are looking at other options [that are] intended to be more in the vein of financial relief.”
In the near term, Nelson says he expects pension plan sponsors will be looking for relief from contributions based on existing valuations, assistance with liquidity constraints and extensions on existing valuations. “I think you’ll have many stakeholders looking for some kind of mechanism to allow for interest-free loans to cover [payments to plan members], . . . repayable over some period of time.”
Read: Pension industry urging feds for relief from coronavirus fallout
Winston Woo, executive director for tax, pensions and government programs at AGS Automotive Systems and the chair of the Canadian Manufacturers and Exporters’ pension committee, says the administrative changes are welcome, but DB plan sponsors need more help.
In a submission to Ontario’s Ministry of Finance, the CME pension committee called for the provincial government to allow all single-employer DB plans to suspend pension contributions until September 1. “That would provide immediate liquidity [to plan sponsors] at no cost to the government,” says Woo. “We see that as a very direct, efficient way of providing much-needed cash to companies being hit by economic challenges.”
He notes plan sponsors are taking hits on all sides: their businesses have been impacted by the economic fallout of the virus; equity markets have taken a dive, impacting pension assets; and ultra-low interest rates have driven their plan liabilities higher.
As well, the committee has asked Ontario to allow pension benefit guarantee fund premiums to be suspended until September 1, as well as the level of required pension contributions at a pre-coronavirus level to be frozen for a period of three years. “It [would give] companies and markets more time to recover and stabilize their contributions so that, as the economy returns and comes out of a recession, . . . companies can continue to put money into their pension plans in an orderly, sustainable fashion.”
Read: Are pension plans considering filing early valuations to lock in pre-coronavirus funded ratios?