The Ontario Government announced yesterday its intention to
introduce legislation to provide temporary solvency funding relief
for pension plans affected by the market turmoil this year. The
proposed legislation would be introduced in the spring, and if
approved, the changes would be retroactive to September 30,
Generally registered pension plans are required to fund on both
a solvency and a going concern basis. To the extent that a pension
plan has a solvency deficiency at the time an actuarial valuation
is filed, the existing rules in Ontario require that such
deficiency be amortized over a period of five years. Under the
existing rules, going concern deficiencies can be amortized over a
period of fifteen years.
The proposed changes would allow certain pension plans to
amortize any solvency deficiency over ten years instead of five. In
order for a plan to qualify for this relief, active member or
collective bargaining agent consent and retired member consent
would have to be obtained.
The other measures proposed by the Ontario Government
Consolidation of prior funding schedules
One year deferral of catch-up payments required on the filing
of an actuarial valuation (to provide one year of cash flow
Permitting the use of actuarial gains to reduce annual cash
payments by sponsors
Adopting the revised CIA Standard of Practice for Pension
Commuted Values for solvency valuations
Enhanced notice to plan members
Accelerated funding of benefit improvements
Temporary limitations going-forward on contribution holidays
where the plan is no longer in a surplus.
If implemented, the Ontario Government's proposed changes
would provide some welcome relief for pension plans that have been
affected by the recent market turmoil.
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and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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