On­tario loosens sol­vency re­quire­ments for de­fined ben­e­fit pen­sions


On­tario is chang­ing rules on work­place de­fined ben­e­fit pen­sions, i nclud­ing con­sid­er­ing them to be sol­vent when they are 85 per cent funded.

The pro­vin­cial Lib­eral gov­ern­ment an­nounced Fri­day that it would in­tro­duce leg­is­lation in the fall to make that change and oth­ers that it says will help keep de­fined ben­e­fit pen­sion plans sus­tain­able.

Sin­gle-em­ployer de­fined ben­e­fit plans cur­rently re­quire fund­ing on a sol­vency ba­sis if they are any­thing less than 100 per cent funded, but the gov­ern­ment is plan­ning to lower that level to 85 per cent.

That means if a pen­sion plan is 85 per cent funded and is forced to wind up im­me­di­ately, there would only be enough to pay 85 cents on the dollar to meet its obli­ga­tions.

Em­ploy­ers would have five years to make spe­cial sol­vency pay­ments to get back to 85 per cent if their plan falls below that thresh­old.

That move would give em­ploy­ers re­lief as de­fined ben­e­fit plans face chal­lenges in­clud­ing his­tor­i­cally low in­ter­est rates. As well, the gov­ern­ment is also strength­en­ing other em­ployer pen­sion obli­ga­tions.

If plans can’t meet a go­ing con­cern test of be­ing able to fully fund their present obli­ga­tions, they will have 10 years to make spe­cial pay­ments to get to the ap­pro­pri­ate fund­ing. The gov­ern­ment will also be re­quir­ing em­ploy­ers to fund a re­serve within their plans.

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