Aug 26, 2016
The Ontario government is seeking feedback from provincial pension plan administrators regarding the revision of its valuation rules for defined benefit plans. Ontario's Ministry of Finance has laid out its suggestions for reform in a consultation paper released in July 2016, which is available for comment until September 30, 2016.
In his article for Pensions & Investments, reporter Rick Baert examines the topic up for discussion: the practice of Ontario public and corporate pension plans having to file both a solvency valuation and a going-concern valuation each plan year. The province is looking at whether it should eradicate or revise the requirements of the solvency valuation (which “values a DB plan as though it had been terminated and all obligations settled as of the filing year”) or amend the rules of the going-concern funding. (The going-concern valuation presumes the plan won’t be terminated.)
According to the article, while Ontario usually leads other provinces in terms of pension regulation, it has fallen behind some regarding the restructuring of pension fund valuation rules. The province provided “temporary relief for solvency funding” in 2012, but as Julien Ranger, a partner in Osler’s Pensions and Benefits Practice Group, indicates moving beyond that point has proven to be challenging.
“There’s been reluctance because of the importance of benefit security to this government,” says Julien. “Most unionized employees are in Ontario and Quebec. Solvency originally became a concern in the late 1960s because of economic concerns then. Now we’re at a very different time for governments. On the one hand, do you give incentives to maintain the few defined benefit plans that are left, or do you just say those plans are gone and we should protect the employees some other way? There’s been a history of bankruptcies in Canada that have hurt pensions, like Nortel, U.S. Steel Canada. Those bankruptcies have stuck in people’s minds.”
For more information on Ontario’s review of its solvency funding framework for DB pension plans, read Rick Baert’s article “Ontario looks to ease valuation rules for defined benefit plans” in the August edition of Pensions & Investments.