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.
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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.”
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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.”