Since the financial crisis of 2008, defined benefit pension
plans have been confronted with a major problem, that is the
problem of solvency deficiencies. Over the last two years, this
problem has been raised on several occasions by various news media.
Due to the historically low long-term interest rates and the
decline of stock markets, numerous defined benefit pension plans
are currently showing substantial solvency deficiencies. Because
the rules provided for in the Supplemental Pension Plans
Act1 (the "SPPA") require most employers
to eliminate these deficiencies over a 5-year period by paying
additional contributions, many businesses are forced to use a
significant part of their assets for the payment thereof.
To help certain employers catch their breath, temporary funding
relief measures were established in 2009. These measures included,
in particular, the extension of the amortization period to
eliminate solvency deficiencies.
The employer had the choice of availing itself of one or more of
these temporary measures and could make his choice at the time of
the first actuarial valuation after December 30, 2008. Furthermore,
certain conditions also had to be met, including the condition
relating to minimum contributions, to make sure that the
employer's contributions were not less than those that he would
have had to pay had there not been the financial crisis of
The temporary funding relief measures will expire next December
31st, while the problem of defined benefit plans' solvency
deficiencies is still far from being solved.
On October 20, 2011, Mr. Denys Jean, President and Chief
Executive Officer of the Régie des rentes du Québec
(the "Régie") stated that the Minister of
Employment and Social Solidarity, Mrs. Julie Boulet, will soon be
proposing that the Quebec government extend the temporary funding
relief measures for a period of two to three years.
Based on the information provided, we understand that during
such an extension, the Régie would try to find a more
permanent solution to the problem of defined benefit plans'
solvency deficiencies. This exercise by the Régie might
result in a less restrictive solution for employers. According to
Mr. Jean, Minister Boulet is aware of the prospective issues on the
future of supplemental pension plans and she has established a work
plan in conjunction with the Régie.
On November 15, 2011, the Quebec government announced that it
intends to extend the temporary fundig relief measures for a period
of two years, thus until December 31, 2013.
When exactly will the temporary funding relief measures be
extended? Will the Quebec government take the opportunity to add
new temporary funding relief measures in order to help employers
breathe easier? We will likely have answers to these questions in
the near future.
On the other hand, as regards the changes that the Régie
might propose to attempt to settle the problem of defined pension
plans' solvency deficiencies in a more permanent way, we will
probably have to keep waiting for several months, or even a few
1. Under An Act to amend the Supplemental Pension
Plans Act and other legislative provisions in order to reduce
the effects of the financial crisis on plans covered by the Act,
S.Q. 2009, c. 1 and the Regulation respecting measures to reduce
the effects of the financial crisis on plans covered by the
Supplemental Pension Plans Act, (2009) 141 G.O. part II,
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