The Ontario Ministry of Finance recently closed its consultation on proposed amendments to the province’s solvency funding framework for defined benefit pension plans as plan sponsors across the country continue to face challenges around their funding obligations.
In its letter of feedback, the Association of Canadian Pension Management recommended that the government build a framework that’s reflective of Quebec’s new funding regime, which eliminates solvency funding requirements and instead requires enhanced going-concern funding. According to the ACPM, such an approach is ideal because it includes a funding cushion that acts as a buffer for poorer economic environments.
Read: Ontario’s pension solvency framework should mirror Quebec’s new regime: ACPM
Read: Eliminating solvency funding on the table as Ontario reviews DB rules
Read: Quebec shakes up pension landscape with shift to going-concern funding
The association noted that, as under the Quebec legislation, there should be a special account where employer contributions for the provision for adverse deviation are accumulated to enhance benefit security when the plan is below a threshold surplus level. However, the association did note concerns about increasing the costs for plan sponsors that already apply appropriate governance and risk management principles to their plans, and are currently in a going-concern surplus situation.
Saskatchewan opened a consultation in August that also includes proposals to eliminate solvency funding for the province’s negotiated cost pension plans.
Read: Saskatchewan proposes elimination of solvency funding for certain pension plans
As both provinces evaluate the funding requirements of defined benefit pension plans, Benefits Canada‘s weekly online poll tackles the question: Should other Canadian provinces follow Quebec’s lead and move away from requiring pension plans to be funded on a solvency basis in favour of going-concern valuations? Take our weekly online poll to weigh in.
As for last week’s poll, which asked whether the 70 per cent replacement rate is a good measure of retirement income adequacy, 34 per cent of respondents said the rate is straightforward and the best available way to approximate what someone realistically needs to live on in retirement. However, 66 per cent disagreed and said it’s an overly simplistic way of looking at something that requires a more individualistic assessment.
