The federal government released final regulations to provide temporary funding relief for federally regulated defined benefit(DB)pension plans.
The measures cover DB plans established for employees working in areas that fall under federal jurisdiction—about 10% of all plans in Canada. “The measures will help re-establish full funding of plans in an orderly manner, while also protecting pension benefits,” says Finance Minister Jim Flaherty.
Plan sponsors can choose one of the following options:
-Consolidate previous solvency payment schedules and amortize the entire solvency deficiency over a single, new five-year period.
-Extend the solvency funding payment period to 10 years from five years with buy-in from members and retirees.
-Extend the solvency funding payment period to 10 years when the difference between the five-year and 10-year level of payments is secured by a letter of credit.
-Extend the solvency funding payment period to 10 years for federal agent Crown corporations with terms and conditions to encourage a level playing field.
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