While the Pension Investment Association of Canada is applauding proposed changes to Manitoba’s Pension Benefits Act that would allow for in-plan solvency reserve accounts for defined benefit pension plans, it’s calling on the province to make further reforms.

In a letter to Manitoba’s Finance Minister Scott Fielding, the PIAC said the suggested amendments, which were introduced in November 2019, fall short because they don’t make plans to enable target-benefit plans.

“While we appreciate that there are some difficult policy issues to be considered in the transition of existing liabilities from a traditional defined benefit to a target-benefit plan, we encourage you to move forward in this area as it offers the promise of a more flexible and sustainable plan design,” wrote Simon Fréchet, chair of the PIAC.

Read: Proposed Manitoba pension rule changes would permit creation of solvency reserve accounts

The association is also calling on the provincial government to allow the full legal discharge of liabilities in the case of annuity purchases, noting that several provinces have made this possible and the federal government indicated in its 2019 federal budget that it’s interest in doing so as well.

“We would encourage the Manitoba government to move in the same direction as annuitization transfers risk to a highly regulated and heavily capitalized part of the financial system and thereby ensures ongoing security for plan members and regulatory oversight,” wrote Fréchet. “We believe that many plan sponsors with closed plans will be unwilling to incur the high cost of annuitization without certainty around legal discharge, thereby maintaining these liabilities in a less regulated and capitalized framework.”

Manitoba’s proposed amendments would allow DB plan sponsors to withdraw funds from a solvency reserve account when the plan is in surplus. However, plan sponsors would be prohibited from transferring assets from “any other account” within the fund to the reserve account.

Read: A look at the landscape for pension solvency funding reform across Canada

The PIAC also cheered the government’s intention to reduce the solvency threshold for additional funding to 85 per cent while strengthening going-concern funding requirements.

It also supported increasing plan member flexibility by making it easier for individuals to unlock their locked-in retirement accounts in certain situations.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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