Canada: An Update On Federal And Ontario Temporary Solvency Funding Relief

Last Updated: April 14 2009
Article by BLG's Pension & Benefits Group

Most Read Contributor in Canada, September 2016

More than 6 months have passed since the onset of the economic turmoil resulting in funding difficulty for plan sponsors of defined benefit pension plans. Solvency funding relief is currently available in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Quebec and Saskatchewan. Nova Scotia has not introduced any funding relief measures (except for certain university plans, municipality plans and specified multi-employer pension plans) and is not currently proposing any but the Pension Review Panel, in its final report "Promises to Keep" (January 27, 2009), recommended permanent changes to the funding rules applicable to all defined benefit pension plans.

Recently, both the federal and the Ontario budgets contain information about proposed funding relief measures. This Pension Alert discusses the recent developments relating to solvency funding relief measures for defined benefit pension plans governed by the Ontario or the federal pension legislation.

Ontario. The Ontario government announced in December 2008 that the government would provide temporary solvency funding relief to pension plans affected by the financial market turmoil. The 2009 Ontario budget tabled by the Ontario Minister of Finance on March 26, 2009 contained a number of initiatives relating to solvency funding relief and permanent changes to modernize Ontario's pension system. The Ontario budget anticipates the introduction of relief measures through new regulations to the Pension Benefits Act (Ontario), with retroactive effect to September 30, 2008. The relief, when introduced, will provide a plan administrator with an election to:

  • consolidate existing solvency payment schedules into a new 5-year payment schedule;
  • defer for one year from the valuation date, the start of new going-concern and solvency special payments identified in the valuation report; and
  • subject to member consent, extend the solvency payment schedule to a maximum of 10 years for a new solvency deficiency determined in the report.

In addition, up to 10 years of going-concern special payments could be taken into account to determine the net solvency deficiency where the special payment schedule is extended to a maximum of 10 years. Also, if a plan administrator makes an election, a solvency excess identified in subsequent valuation reports could be used to reduce or eliminate solvency special payments identified in the initial report.

To balance these proposed relief measures against the security of pension benefits, enhanced member notice regarding the plan's funded status and the effect of the election is required. If solvency payment schedules are consolidated and extended, future benefit enhancements are required to be funded over a maximum of 5 years on both a solvency and going-concern basis. Contribution holidays in fiscal years ending in 2010 to 2012 will not be permitted unless certain conditions are satisfied.

There are a number of observations regarding the relief measures mentioned in the Ontario budget:

  1. The time-frame for the Ontario legislature to introduce the regulations to the Pension Benefits Act (Ontario) to implement the relief measures is still unknown. The timeliness of implementation is crucial as there is no other practical alternative funding relief available to plan sponsors.
  2. Member consent requirement for the extension of the funding payment schedule is satisfied if not more than one-third of the aggregate of all active, deferred and retired plan members indicate that they do not consent. Beneficiaries entitled to payments under a pension plan (e.g., a spouse of a deceased member entitled to survivor pension or pre-retirement death benefits in the form of an immediate or deferred pension) are not included in this group of individuals for the purpose of determining whether the consent requirement is met.
  3. The Ontario budget states that collective bargaining agents would be able to provide consent only for the proportionate share of active members whom they represent. It seems that collective bargaining agents would not be able to provide consent for deferred vested and retired members.

Federal. Following the November 2008 Economic and Fiscal Statement and the 2009 federal budget tabled by the federal Minister of Finance on January 27, 2009, the proposed Solvency Funding Relief Regulations, 2009 (the "Proposed 2009 Regulations") were published in Part I of the Canada Gazette on April 4, 2009. Interested persons are invited to make representations concerning the Proposed 2009 Regulations within 30 days after the date of publication of the notice. The relief introduced by the Proposed 2009 Regulations is available to only those federally-regulated pension plans with a solvency deficiency reported at a plan year-end date from November 1, 2008 to October 31, 2009. The relief provides a plan sponsor with an election to:

  • extend the solvency funding payment period from 5 years to 10 years with member consent (subject to restrictions on benefit improvements) or with the difference each year between the 2 levels of payment secured by a letter of credit; or
  • if such member consent or letter of credit cannot be secured by the next plan year, the outstanding deficiency is required to be funded over a new 5-year schedule commencing on that date.

A specific option of extending the solvency funding payment period to 10 years is available to agent Crown corporations. In addition to these relief measures, federally regulated pension plans are permitted to take advantage of asset smoothing over a period of not more than 5 years, using market values above the 110% limit.

To balance these relief measures against the security of pension benefits, the difference between 5-year and 10-year level of payments in the extension of solvency funding payment period with member consent is subject to a deemed trust and any deferral of funding resulting from the use of an asset value (in smoothing) in excess of 110% is also subject to a deemed trust.

There are a number of observations relating to the Proposed 2009 Regulations:

  1. According to the Analysis Statement accompanying the Proposed 2009 Regulations, the proposals have benefited from the consultations in 2005 in respect of the Solvency Funding Relief Regulations, 2006 (the "2006 Regulations"). There are a number of conceptual and functional similarities between the relief measures and required formalities in the 2006 Regulations and those in the Proposed 2009 Regulations.
  2. Like the 2006 Regulations, the relief measures in the Proposed 2009 Regulations are available only to plan sponsors which are up to date in their funding payments.
  3. For a pension plan which is unable to secure a letter of credit or member consent by the following plan year, it is in effect granted a one-year payment moratorium because its outstanding deficiency is required to be funded over a new 5-year period only after it is determined that the letter of credit or member consent cannot be obtained.
  4. To satisfy the member consent requirement, "no objection" of active members and beneficiaries must be considered separately, i.e., less than one-third of members and less than one-third of beneficiaries (excluding members) object to the extension of payment period. Beneficiaries include deferred vested members, retirees and other beneficiaries entitled to pension benefits under the pension plan. Further, a union representative or a court-appointed representative which has authority to act on behalf of retirees, deferred vested members and other persons entitled to benefits (i.e., not only active members) has authority to indicate "no objection" for them.

About BLG

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.