The government of Ontario is providing employers with the option to defer contributions to certain defined benefit pension plans to help with their organization’s cash flow during the coronavirus pandemic while providing safeguards for funding plan member benefits.
The province has amended its Pension Benefits Act to allow for the temporary deferral of contributions, while the Financial Services Regulatory Authority of Ontario is administering the temporary framework.
Eligible private sector employers will be able to defer up to six months of pension contributions from Oct. 1, 2020 to March 31, 2021. However, all deferred contributions must be paid with interest and in accordance with a schedule by March 31, 2022.
DB plan sponsors will also have 120 days, instead of 60 days, to make a catch-up contribution if a valuation report is filed on or before April 1, 2021.
For employers that choose to defer contributions, there will be restrictions to help ensure that the funds made available from the contribution deferral are used to maintain business operations, according to a press release.
“These changes will help support the stability and sustainability of employers in Ontario, while continuing to make pensioners’ retirement funds a priority,” noted the release. “As a result, FSRA is updating its pension sector emergency management response guidelines. The updated guidance sets forth the process by which FSRA will administer the temporary contribution deferral framework established by the regulation.”