Sponsors of Alberta-registered defined benefit (DB) pension
plans received welcome news on September 21, 2012 as the
Alberta government released new regulations providing temporary
relief from solvency funding obligations. The new rules, which
apply to all DB pension plans other than specified multi-employer
plans, provide a limited opportunity for employers to double from
five to 10 years the period over which solvency funding
deficiencies must be eliminated.
Specifically, Alberta Regulation 161/2012 permits plan
administrators filing an actuarial valuation report with a review
date between December 31, 2011 and December 31, 2012 to consolidate
all solvency deficiencies and seek the consent of the
Superintendent of Pensions for an extension of the solvency
deficiency amortization period from five to 10 years. The two
primary conditions associated with obtaining such relief are that
such consent must be disclosed to members in the first annual
statement following receipt of relief, and that should any lump sum
payments be made out of the plan (other than ordinary pension
benefits), a top-up contribution in the amount of the transfer
deficiency must be made immediately or as part of the next regular
remittance. Additional conditions may be imposed by the
Superintendent on a case-by-case basis.
Applications for relief may only be made once. An administrator
seeking relief on the basis of a valuation report with a review
date of December 31, 2011 may not subsequently seek additional
relief should a valuation report with a review date of December 31,
2012 reveal a new solvency deficiency.
Administrators who have already filed valuation reports within
the relief period may seek an amortization period extension by
filing replacement pages for the valuation report and cost
certificate, as well as a revised Form 7 with the
custodian/trustee identifying the adjusted schedule of
contributions. Recognizing that many employers who have been making
contributions on the basis of a five-year amortization period will
already have exceeded the annual contributions required under a
10-year schedule, as a transitional measure, those employers will
be permitted to cease making special payments until the earlier of
such excess funding being absorbed or the end of the plan's
Administrators who are successful in obtaining solvency funding
relief may at any time revert to a five-year amortization
Sluggish investment returns and low interest rates continue to
result in low funding ratios for many DB plan sponsors. While more
limited in scope than the temporary solvency funding relief
measures introduced by the Alberta government in 2009, this
development will nevertheless be of assistance to many employers in
alleviating cash flow pressures associated with sharply rising
solvency special payments. The temporary nature of such relief,
however, may prompt administrators not otherwise required to
prepare a valuation report with a 2012 review date to consider
making an early filing to consolidate existing deficiencies and
seek an amortization period extension. In addition, we will be
watching to see whether the pending new minimum standards pension
legislation and supporting regulations will contain more enduring
reforms to the solvency funding model.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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