In spite of volatile public equity markets, the median solvency ratio for Ontario’s defined benefit pension plans was slightly higher at 95 per cent for the first quarter of 2018, compared to 94 per cent at the end of 2017, according to the Financial Services Commission of Ontario’s latest quarterly report.

Equity markets were down in the first quarter of the year, with the S&P/TSX composite index showing a return of minus 4.5 per cent, the report noted. However, Ontario’s defined benefit plans maintained much of their 2017 solvency gains in part due to the slight increase in short-term Canadian bond yields during the quarter, which led to higher commuted-value initial interest rates. With pension solvency liabilities negatively leveraged against those rates, the solvency ratios remained higher than they otherwise might have been for the first quarter, according to the report.

Read: DB solvency ratios up slightly in last quarter of 2017: FSCO

Overall, the median gross plan asset-weighted index return was minus 0.8 per cent. The majority (53.1 per cent) of plans had a solvency ratio between 85 and 100 per cent, which was down from 57.2 per cent at the end of 2017. About a third (32.4 per cent) of plans had a solvency ratio above 100 per cent, which was up from 25.1 per cent at the end of 2017.

The report also made note of the province’s new funding framework for single-employer defined benefit plans, which took effect on May 1. It includes enhanced going-concern funding, provisions for adverse deviations and the requirement for plans to fund on a solvency basis if their solvency ratio falls below 85 per cent.

Read: Ontario rolls out several parts of new DB framework

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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