The Association of Canadian Pension Management is calling on Retraite Québec to review its draft amendment of a regulation governing supplemental pension plans.
In a letter to the pension plan administrator, the ACPM said that a section of the amendment — stating that recovery measures in the event of insufficient contributions to a target-benefit pension plan must take place no later than one year after the plan’s valuation date — could result in an insufficiency of contributions for the period between the valuation date and the effective date of the recovery measure.
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Instead, the ACPM recommended contributions be determined sufficient at the valuation date, assuming, if necessary, that the recovery measures take effect on that date. “Without this adjustment, the target benefit would have to be reduced further in years two and three to compensate for the fact that the target benefit recognized in year one was too high.”
Regarding the conversion of a defined contribution plan to a target benefit plan, the ACPM said additional details are required in the draft amendment, including the process for obtaining individual plan member consent and the time limits for responding, as well as options for members and beneficiaries who don’t consent to the conversion and the obligations of the converted plan sponsor with respect to unconverted benefits.
In addition, the ACPM recommended the deferral of a measure detailing the conversion of a target-benefit plan to a defined benefit plan. “We believe that these rules are too restrictive and that the regulation should provide some flexibility in these situations, particularly in the context where the DB plan sponsor is willing to accept the risk arising from the plan.”
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The ACPM also said the method and manner of calculating the degree of solvency on a shorter than annual basis must be disclosed in a full actuarial valuation report. “When a new frequency is introduced, we note that there may be a discrepancy or lack of disclosure of the methodology in the last full actuarial valuation report. In order to avoid unnecessarily burdening the registration process of this amendment, we believe that the pension committee should be able to simply provide a description of the method and manner for calculating the degree of solvency at the request of Retraite Québec.”