The Office of the Superintendent of Financial Institutions has updated its frequently asked questions (FAQs) regarding letters of credit.
Over the past two years, the federal government’s Jobs and Economic Growth Act has made several reforms to the funding of DB pension plans. Among those reforms was the granting of permission for plan sponsors to use letters of credit for solvency funding, to cover up to 15% of solvency liabilities.
The updated FAQs address issues such as the treatment of letters of credit obtained under the Solvency Funding Relief Regulations and the treatment of letters of credit that are included in solvency assets when calculating a plan’s average solvency ratio.
The updated FAQs are available at osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=3802.