The government of Newfoundland and Labrador is amending funding rules for the province’s multi-employer pension plans.
The amendments include a permanent exemption from solvency funding requirements for MEPPs, retroactive to Dec. 31, 2020, when the previous temporary exemption ended. In addition, going-concern unfunded liabilities must now be funded over 10 years instead of the previous 12-year requirement and solvency holdbacks for commuted-value payouts are no longer required.
MEPPs will continue to be required to file full actuarial valuation reports every three years, with cost certificates in the interim years.
Domenic Barbiero, a principal and consulting actuary at Eckler, says the province first implemented a temporary solvency funding exemption for MEPPs following the 2008/09 financial crisis. “What we’re seeing [in this amendment] is something that’s been in the making for quite a while, with this permanent exemption being put in place as the rule rather than an ongoing series of extensions for temporary measures. . . . A lot of jurisdictions are acknowledging that solvency isn’t the appropriate funding measure for MEPPs. They put the temporary rules in place and now a number of them are making them permanent.”
In addition, he says the coronavirus pandemic has had a financial impact on the industries covered by MEPPs in Newfoundland and Labrador and, as a result, there’s been less contributions flowing into these plans. “In the absence of a permanent exemption, if new legislation had increased the funding requirements, we would’ve seen a lot of these MEPPs having further funding issues.”
And the amendments will allow the boards of trustees at the province’s MEPPs to set funding requirements based on their plan’s specific circumstances, says Barbiero. “By going this route, what [the provincial government] has done is provided flexibility to boards and given them the ability to prudently manage the plan in the best interest of plan members.”