The federal government is halting solvency special payments for federally regulated defined benefit pension plans until the end of 2020.
The moratorium on payments under the Pension Benefits Standards Act is aimed at ensuring that employers have financial resources to continue their operations and pension plans, as well as to protect plan members, said the federal finance ministry in a press release.
“By providing this temporary relief to federally regulated pension plan sponsors, we are helping to support plan sponsors so that they are able to continue to protect the retirement security of workers and retirees,” said Minister of Finance Bill Morneau in the release.
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The government said it will continue consulting with stakeholders on potential relief for plan sponsors from their 2021 funding obligations, if necessary.
Solvency funding relief during the coronavirus pandemic was among the proposals suggested to the Ministry of Finance by the Canadian Labour Congress and the Public Service Alliance of Canada.
The CLC also called for the federal government to provide interest-free loans to multi-employer pension plans, registered federally or in other jurisdictions, for up to 12 months of pension payments, which would be repayable within five years.
It urged the federal government to look at options to help members in defined contribution plans as well. Hassan Yussuff, president of the CLC, noted in the letter that DC plan members’ retirement savings have “suffered significant losses in recent weeks . . . . We encourage the government to continue to look at measures to strengthen the retirement savings accounts of federally regulated DC plan members.”
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In a separate submission, Chris Aylward, national president of PSAC, and Magali Picard, the union’s national executive vice-president, called for federally regulated pension plans that haven’t yet filed their actuarial valuations to receive a 90-day extension. They also asked the government to allow plan sponsors three years to file new valuations “to allow for a sufficient period of time for pension funds to implement appropriate adjustments to establish a more favourable funding level.”
In addition, the union suggested enhancing the going-concern funding requirements — subject to modified solvency funding requirements — and supplementing that with provisions for adverse deviation or stabilization funds for select plan sponsors that operate in industries with a higher financial and operational risk profile.
The PSAC also called on the government to temporarily suspend the mandatory employer contribution holidays for any pension plans that have a going-concern funded status of 125 per cent or more, unless all plan stakeholders consent.
The federal government’s 2019 move to permit annuity buy-ins/buyouts to allow federally regulated pension plans to de-risk their accrued DB liabilities should also be used to support plan sponsors, said the union. The precipitous market downturn has made those arrangements financially unfeasible, it noted, proposing that the government provide for financial covenants or guarantees to allow for plans to continue with buy-in/buyout annuitization.
The union also proposed amending the Public Service Superannuation Act to allow for select plans to join the Public Sector Pension Plan.
Read: Are pension plans considering filing early valuations to lock in pre-coronavirus funded ratios?