Last week the federal government unveiled three amendments to regulations covering federally regulated private pension plans aimed at providing increased protection for plan members and cutting volatility in funding corporate obligations.
The amendments to the Pension Benefits Standards Regulations, 1985 include the following points.
• A new standard that uses average—rather than current—solvency ratios to determine minimum funding requirements, intended to soften the impact of short-term market fluctuations on a plan’s solvency funding requirements.
• Limiting contribution holidays unless the solvency ratio exceeds full funding plus a new solvency margin, set at a level of 5% of solvency liabilities.
• Removing the limits on the amounts pension plans can invest in resource and real property investments, providing greater latitude in portfolio diversification.
“These amendments reflect financial market volatility in recent years, which points to the need to enhance protection for plan members,” said Finance Minister Jim Flaherty in a statement. “The changes also modernize the rules for pension fund investments and give plan sponsors greater flexibility in terms of investment allocation to allow them to better manage their funding obligations.”
The regulations are part of the modernized federal pension framework announced in October 2009. The government says additional changes to the regulations can be expected in the coming months.
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