Jun 30, 2016
According to a recent article by freelance writer Michael McKiernan in Benefits Canada, review and reform of the solvency funding framework for defined benefit pension plans will be front and centre through the remainder of 2016. Existing solvency funding rules dictate that sponsors must keep their defined benefit plans in the black – a requirement they often find onerous. The provincial governments in Québec, British Columbia and Alberta have started revising their solvency funding rules, and it appears that Ontario is getting ready to follow suit. However, it isn’t clear what approach Ontario will take. In the article, Jana Steele, Osler partner and pensions lawyer, suggests that Ontario adopt Alberta and British Columbia’s strategy of creating solvency reserve accounts to receive deficit payments that can then be withdrawn if the money is no longer needed to fund the deficit.
“I like the approach because it still deals with benefit security by ensuring the money is there if needed,” Jana says.
Québec, on the other hand, has moved away from solvency funding to going-concern valuations, and as a concession to unions, has implemented a stabilization reserve that will provide a cushion in times of economic uncertainty. Julien Ranger, Osler partner and pensions lawyer in the firm’s Montréal office, comments on Québec’s reform.
“If you compare what they had to pay before and under the new regime, the amounts aren’t that far apart,” Julien explains. “Right now, everyone seems satisfied, but it will be hard to tell if either party has achieved their objectives for another few years.”
To learn more about solvency funding reform, read Michael McKiernan’s full article 2016 top 100 pension funds report: Solvency reform on the agenda in Benefits Canada.