Ottawa, March 27 2009
Archived - Government Implements Pension Measures
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The Honourable Jim Flaherty, Minister of Finance, today released regulations to provide temporary solvency funding relief for federally regulated defined benefit pension plans.
The measures cover plans established for employees working in areas that fall under federal jurisdiction. These plans currently represent 7 per cent of all private pension plans in Canada, accounting for approximately 12 per cent of pension assets.
"The measures will offer temporary relief to sponsors, while also protecting pension benefits," said Minister Flaherty.
Recently, the sharp decline in global equity markets has led to significant solvency deficits for many sponsors of private defined benefit pension plans.
The Government proposed in the November 2008 Economic and Fiscal Statement to provide temporary solvency funding relief. In Budget 2009, the Government announced that it would assist the Office of the Superintendent of Financial Institutions to provide further funding relief by allowing plans to use asset smoothing with values above the current 110 per cent limit, by making any payment differential subject to a deemed trust.
The proposed regulations, to be pre-published on April 4, 2009, in Part I of the Canada Gazette, set out a series of optional measures, which would:
- Extend the solvency funding period by one year for deficiencies reported as of year-end between November 1, 2008 and October 31, 2009.
- Extend the solvency funding payment to 10 years from 5 with the agreement of members and retirees.
- Extend the solvency funding payment to 10 years from 5 when the difference is secured with a letter of credit.
- Extend the solvency funding payment period to 10 years from 5 for agent Crown corporations with terms and conditions to ensure a level playing field.
- Allow asset smoothing above 110 per cent with the difference in payments subject to a deemed trust.
As announced in Budget 2009, the Government is currently conducting national consultations on Canada's legislative and regulatory framework for federally regulated private pension plans, chaired by Ted Menzies, Parliamentary Secretary to the Minister of Finance, with a view to introducing comprehensive new regulations in the fall.
"Once we have heard from Canadians, we will take steps to improve the legislation in order to ensure the framework is balanced and appropriate," said Minister Flaherty.
Further information is available on the Department of Finance website
For further information, media may contact:
Office of the Minister of Finance
Department of Finance
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