Ontario has introduced draft regulations to provide temporary solvency funding relief for defined benefit pension plans that it promised in the 2016 Budget.
Once finalized, the proposed regulations would provide private sector sponsors of single-employer defined benefit pension plans with immediate assistance by extending solvency funding relief measures provided in 2009 and 2012 for an additional three years for valuation reports dated in the three-year period starting on Dec. 31, 2015.
Read: Ontario Budget: Final report on modernization of pension plans to come this spring
Options for private sector sponsors of single-employer pension plans will have the following options under the rules:
- Consolidating existing solvency payment schedules into a new, longer five-year payment schedule.
- Extending the solvency payment schedule to a maximum of 10 years (from the current maximum of five years) for any new solvency deficiency determined in the valuation report in which relief is taken, subject to the consent of plan beneficiaries.
The government also said previous restrictions on the use of contribution holidays will be reintroduced for a plan fiscal year ending after June 29, 2017 and before Jan. 1, 2020.
Read: Ontario Budget: Province starts reviewing pension solvency rules
In a special notice, consultancy Eckler said the relief is welcome, but plan sponsors would have benefitted more from the type of relief available to broader public sector pension plans. “That relief requires sponsors to contribute only interest on solvency deficiencies during the first three years of the relief when this amount is higher than the going-concern special payments,” it wrote. “This would have provided meaningful relief until the government’s upcoming review of solvency funding rules is complete.”