Ontario is reviewing the solvency funding regulations for defined benefit (DB) pension plans.
In a recent statement, the government of Ontario acknowledged that persistently low interest rates have created funding pressures for single employer defined benefit pension plans.
The measures the province introduced in 2009 to give DB plan sponsors more time to fulfill their pension obligations were supposed to be temporary, but they were renewed again in 2012; although the recession is over, interest rates remain low and many sponsors are still struggling to meet the funding requirements of Ontario’s Pension Benefits Act.
"The successive rounds of temporary solvency relief indicate a review of existing pension funding rules would be useful to ensure that they are appropriate for different economic conditions, including those currently affecting the pension system," reads the announcement from the Ontario Ministry of Finance. The province has decided to extend the relief measures for another three years while it contemplates an overhaul of the its DB pension funding rules.
"A balanced set of solvency funding reforms"
The government says its review will develop “a balanced set of solvency funding reforms that would focus on plan sustainability, affordability and benefit security, and take into account the interests of pension stakeholders – including sponsors, unions, members and retirees.” In the broadest terms, the review will examine two options: maintaining the requirement to fund on both going concern and solvency bases while modifying solvency funding requirements, and enhancing the going concern funding requirements while eliminating current solvency funding requirements.
The consultation paper is available on the Ontario Ministry of Finance web site, and submissions must be received by September 30, 2016.