April 22, 2020
Faced with financial adversity as a result of COVID-19, many Canadian employers are being forced to find ways to curb their expenses. For some, as writer Martha Porado explains in an article on the Benefits Canada website, this may mean contemplating changes to the design of their pension plan. For insight into the legal considerations associated with such changes, Porado relies on comments made by Osler lawyers, Jana Steele, partner and chair of the Pensions & Benefits Group, and Omar Sunderji, an associate in the Pensions & Benefits Group, in a webinar hosted by the firm on April 6, 2020, Uncertain times: Canada’s pension industry faces COVID-19 (available on demand).
“Some plan sponsors may be considering changes to their plan design to address these costs concerns during these turbulent times,” Jana explains.
Omar goes on to discuss the options available to plan sponsors, depending on the structure of the plan, emphasizing that currently, “employers are required to continue to make contributions to their pension plans in a normal course, in accordance with applicable law and the terms of the plan.”
With defined contribution plans, he says, “the plan can be amended to reduce the level of employer contributions on a prospective basis – for example, by reducing any required employer contributions or employer matching contributions.”
For defined benefit plans, on the other hand, Omar recommends that administrators determine their next valuation date and discuss their options with their actuary. “It may be worth considering the possibility of a valuation date pre-pandemic, which may provide the option to lock in pre-crisis interest rate assumptions and avoid using depressed asset values.”
Regardless of the type of change being contemplated, plan sponsors are strongly encouraged to consult with the relevant pension regulator to ensure they stay on the right side of the law.
Learn more by reading Martha Porado’s full article “Legal considerations for pension plan sponsors on design changes amid coronavirus” from April 7, 2020 on the Benefits Canada website.