The federal government has proposed changes to rules governing federally supervised private pension plans to make them less sensitive to financial market volatility, Reuters reports.
Finance Minister Jim Flaherty said the regulatory amendments would provide more tools to sponsors of federally regulated private pension plans to “better manage their funding obligations while providing additional protection to plan members and retirees.”
The changes, which were proposed on Tuesday, Dec. 14, would only affect about 7% of all private pension plans in the country.
The suggested amendments are as follows:
• allow plan sponsors to secure letters of credit in lieu of making solvency payments to pension funds, up to a limit of 15% of plan assets;
• require the plan sponsor to fully fund pension benefits on plan termination;
• void any amendments to a plan that would reduce the solvency ratio contrary to regulations;
• permit plan sponsors, members and retirees of a distressed pension plan to negotiate their own funding arrangements to facilitate a plan restructuring.
These amendments come less than a week before the federal, provincial and territorial governments are scheduled to meet in Alberta to discuss reforming Canada’s current retirement income system.