The Canadian Institute of Actuaries believes the Ontario government should permit the use of a pension security trust, require all defined benefit pension plans to establish and maintain a target solvency margin to enhance benefit security, along with 10 other recommendations for reversing the decline in defined benefit plans.
In a presentation to the Ontario Expert Commission on Pensions today, it also recommended that the province:
• Enact flexible, principles-based legislation that encourages innovation in plan design and financing arrangements and promote the growth of Defined Benefit pension plans
• Enact pension legislation that permits the use of letters of credit for solvency amortization payments
• Change the way pension plan wind-ups are processed to address practical difficulties in applying solvency valuation requirements
• Require annual actuarial valuations for plans whose solvency ratio is less than 100%
• Amend the legislation and policies to facilitate adjustments in pension plan designs and workplace policies to deal with increasing longevity and workforce planning
• Explore alternative ways of protecting benefits in wind-ups of underfunded plans by insolvent employers
• Require plan sponsors to establish a formal funding policy for Defined Benefit pension plans
• Take the lead in coordinating the development of pension legislation in Canadian jurisdictions
• Eliminate partial plan terminations
• Enact more flexible legislation and policies to streamline the process for plan mergers, splits and asset transfers
The institute believes moving forward on these measures would greatly improve the environment for defined benefit pension plans to the advantage of plan members, plan sponsors and retirees.
James Murta, president of the CIA says: “Our proposals on pension security trusts, target solvency margins and letters of credit, if implemented by the Ontario government, would largely eliminate the need for the Pension Benefits Guarantee Fund, which is currently in a deficit position of hundreds of millions of dollars.”
To read the CIA’s entire submission, click here.
The public hearings return to Toronto next week. For more information regarding the hearings, click here.
To comment on this story, email craig.sebastiano@rci.rogers.com.