Comments on the consultation paper are due by September 30,
2016. The Government intends to hold a second public consultation
on any proposed funding reforms that arise out of the consultation
process in the Fall of 2016. Employers with DB pension plans and DB
pension plan sponsors and administrators are encouraged to speak
now and submit comments.
Ontario's Current DB Funding Regime
Currently, Ontario registered DB pension plans must be funded on
the greater of a going concern or solvency basis. Going concern
funding assumes that the pension plan will continue indefinitely.
Any deficit determined on a going concern basis must be eliminated
through special payments over a period of no more than 15 years.
Solvency funding assumes that the pension plan will be wound up on
the applicable valuation date. Subject to certain exceptions, any
deficit determined on a solvency basis must be eliminated through
special payments over a period of no more than 5 years.
Given the current economic climate and prolonged low interest
rates, many DB pension plans are in deficit on a solvency basis,
requiring many employers to make large special payments within a 5
year period. Many employers have found the solvency funding
requirements to be onerous, which led the Government to introduce
special temporary funding relief measures in 2009 and 2012 and
prompted the consultation process that is underway.
Proposed Changes to Ontario's DB Funding Regime
The consultation paper sets out two approaches to changing the
current DB funding rules:
1. Modify Solvency Funding Regime
The options suggested under this approach include allowing DB
pension plan sponsors to amortize deficits over a longer period of
time (for example, 10 years rather than 5 years) and reducing the
target for solvency funding from the current 100% to a lower
threshold (for example, 80%).
2. Eliminate Solvency Funding Regime
The options suggested under this approach include eliminating
the solvency funding regime and enhancing the going concern funding
requirements by, for example, requiring a funding cushion (a
required amount in excess of the plan's liabilities that must
be funded before the plan sponsor can take any action that could
potentially weaken the plan's funded position). Alternatively,
the Government proposes enhancing the going concern funding
requirements by requiring that special payments be amortized over a
shorter period than the current 15 year period and requiring that
the superintendent set the maximum interest rate that may be used
for the purposes of determining the plan's going concern
The consultation paper also proposes a number of other proposed
reforms, including increasing employer-paid assessments to the
Pension Benefits Guarantee Fund, requiring plan administrators to
conduct an annual actuarial valuation report, and requiring plan
sponsors to create and implement a written funding policy.
Changes to DB Funding Regimes Across Canada
The review of the solvency funding regime for DB pension plans
in Ontario comes in the wake of the introduction of alternative
funding regimes in Alberta, British Columbia and Quebec.
Significantly, effective January 1, 2016, Quebec eliminated the
solvency funding requirements for private sector DB pension plans
in exchange for a more robust going-concern funding regime. While
DB pension plan funding reform is in its infancy in Ontario, the
national trend suggests that changes may occur in the near
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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