In response to the current economic downturn, the Alberta and British Columbia governments have each recently implemented measures to respond to the significant financial pressures being faced by sponsors of defined benefit pension plans, albeit in different ways.


On February 18, 2009 the Alberta Employment Pension Plans Amendment Regulation, 2009 (A.R. 28/2009) came into force. The Regulation amends the regulations under the Alberta Employment Pension Plans Act to provide solvency funding relief for Alberta registered defined benefit plans. These regulations provide the following relief:

Single-Employer Pension Plans (SEPPs) and Multi-Unit Pension Plans (MUPPs): 3-Year Solvency Funding Moratorium

  • Administrators of SEPPs and MUPPs may, at any time before 2010, apply to the Superintendent for a moratorium suspending the employer’s solvency funding obligations for a 3-year period from the review date of an actuarial valuation that is not before September 1, 2008 or after December 31, 2009.
  • Where such a moratorium is granted, the plan must adopt a schedule to amortize going concern unfunded liabilities established on or after the review date to which the application relates over 10 years, and amortize previously established unfunded liabilities over the lesser of 10 years and the remainder of the original 15-year amortization period for the unfunded liability.

Specified Multi-Employer Plans (SMEPPs): 3-Year Solvency Funding Moratorium or Extension of Existing Moratorium

  • For SMEPPs that had sought and received relief under the solvency funding moratorium introduced in 2006 and whose term ended at any time in 2008, the moratorium is automatically extended without any break until the end of 2011 on the same conditions.
  • For SMEPPs that had not yet sought relief or that had a solvency moratorium period ending after December 31, 2008, the plan’s administrator may apply for a 3-year solvency funding moratorium at any time before 2012, based on an actuarial valuation with a review date not before August 31, 2008.

Any plan (SEPP, MUPP or SMEPP) that is granted consent to one of the moratoriums referred to above is also subject to the following conditions:

  • No benefit improvements can occur during the period of any approved moratorium in solvency deficiency funding.
  • After the end of the suspension period, a new valuation must be filed within 180 days for SEPPs and MUPPs and within 270 days for SMEPPs. If such valuation reveals the existence of a solvency deficiency, the deficiency must be funded over 5 years.

All Plans: Extension of Solvency Amortization Period from 5 Years to 10 Years

  • The administrator of any plan containing defined benefit provisions may apply to have the 5-year solvency funding amortization period extended to 10 years for solvency deficiencies created after August 31, 2008 and before 2010 and identified in a valuation report with a review date between September 1, 2008 and December 31, 2009. No restrictions on benefit improvements accompany this alternative.

Note that the Regulation is “retroactive to the extent necessary to achieve its purposes.”

The Alberta Superintendent of Pensions has also published Policy Bulletin #41, Funding Relief Provisions – 2009, summarizing the funding relief alternatives and providing guidance about how the Superintendent will exercise discretion granted by the regulations in certain areas. Included in the Bulletin are the following:

  • The Superintendent will accept valuations done with review dates on or after September 1, 2008 that use the Canadian Institute of Actuaries’ new Standards of Practice for Determining Commuted Values (effective April 1, 2009). The existing standards must continue to be used for determining commuted values for members who terminate prior to April 1, 2009.
  • Detailed requirements for applications for the SEPP / MUPP solvency funding moratorium include a requirement that annual member statements contain a statement that the plan has been granted a moratorium on making solvency deficiency special payments and that the plan complies with any other conditions set by the Superintendent.
  • The solvency amortization period extension from 5 years to 10 years will not apply to previously established solvency deficiencies or solvency deficiencies established after the date of the valuation in support of the application, which deficiencies must continue to be amortized over the remainder of their 5-year schedule.
  • Additional, specified conditions for the preparation of actuarial valuation reports (such as limits on discount rates) must be met by plan sponsors applying for either the solvency funding moratorium or the solvency amortization extension, and for SMEPPs that have had their moratorium extended. The Superintendent will give due consideration where plans employ assumptions that vary from those specified; but, administrators must demonstrate why the variation is appropriate. The Bulletin specifies items that the Superintendent will consider when reviewing a valuation and reiterates that the Superintendent ultimately reserves the right to accept or refuse any valuation.

British Columbia

In January, 2009 the B.C. Superintendent of Pensions issued Information Bulletin No. PEN-09-001, Guidelines for Requests for Solvency Extensions for Defined Benefit Pension Plans. The Guidelines set out the information and documents required when a plan administrator seeks the approval of the Superintendent under section 6 of the British Columbia Pension Benefits Standards Act to an extension of the time period required for solvency payments due to “extenuating reasons.”

The Guidelines list a number of specific factors that the Superintendent will consider and which all applications for extensions should address, including:

  • Is the request for a solvency deficiency payment extension demonstrably in the best interests of plan members?
  • Is the solvency deficiency the result of factors that were largely beyond the control of the plan administrator?
  • Would the special payments normally required to eliminate the solvency deficiency result in severe financial hardship for the plan sponsor which can only be resolved through the solvency extension?
  • Has the plan sponsor provided strong assurance of its ongoing financial viability for the period of the solvency extension?
  • Does the plan administrator have a good record of plan administration and regulatory filings?
  • Have all required contributions and special payments to the plan’s fundholder been remitted within the regulatory deadlines?
  • Has the plan administrator reviewed the form and design of its plan to ensure that the benefits are affordable?

The Guidelines specify that the Superintendent likely will not approve applications resulting in solvency amortization periods in excess of 15 years.

Documents required by the Superintendent as part of an extension application include:

  • a current actuarial valuation which includes a schedule of payments certified by the actuary as being sufficient to fully amortize the solvency deficiency over the extended period;
  • a letter from the administrator identifying the extenuating reasons why the plan cannot make the required solvency deficiency payments and specifying the requested extension period;
  • a commitment from the administrator not to increase benefits during the extension period without the approval of the Superintendent;
  • copies of financial statements of the plan sponsor for the last 3 years;
  • a letter from the plan sponsor providing information on the financial prospects for the plan sponsor over the period of the extension; and
  • a full report from the plan’s auditor or fundholder on the remittance of contributions for the past 3 years.

The Guidelines also require that if the application is approved by the Superintendent, the administrator must notify all plan members of the details of the extension.


These measures supplement the existing rules (which continue in place) in both Alberta and British Columbia permitting employers in SEPPs (and, in Alberta, MUPPs) to utilize letters of credit to satisfy their solvency special payment obligations.

It is noteworthy that, unlike other Canadian jurisdictions that have introduced solvency funding relief measures, neither Alberta’s nor British Columbia’s measures require advance notice to, or consent by, plan members or retirees. Both provinces do place considerable discretion in the Superintendent to determine whether the relief sought will be granted and upon what conditions. Plan sponsors that have, for example, already sought insolvency protection might find it difficult to convince the Superintendent that granting the relief is an appropriate exercise of discretion.

The difference in the approach taken by the two provinces is also striking. Alberta’s measures go farther in introducing specific new rules allowing plan sponsors to seek a complete moratorium on solvency funding or an extension in the amortization period. British Columbia relies on the Superintendent’s existing discretion to grant relief on amortization periods only. The British Columbia measures also appear more onerous in terms of the application requirements to justify the relief sought, while Alberta’s rules seem to recognize the difficult situation most defined benefit plan sponsors have found themselves in due to the current economic crisis. The British Columbia rules impose conditions that could raise issues with creditors and with the sponsor’s public markets disclosure obligations. Caution should be exercised in responding to the mandated questions in British Columbia.

It is interesting to note that Alberta’s solvency moratorium applies to all solvency deficiency payments, while the amortization period extension from 5 years to 10 years only applies to solvency deficiencies created after August 31, 2008 and before 2010.

Sponsors considering availing themselves of either the solvency moratorium in Alberta or the solvency amortization period extension in either Alberta or British Columbia should consider their fiduciary obligations in both the pension governance and corporate governance context and their contractual obligations to creditors, and assess:

  • whether the sponsor’s credit arrangements compel it to seek any pension funding relief that may be available;
  • what the impact will be on the sponsor and the pension plan at the end of the moratorium if the plan’s funded position continues to deteriorate during the moratorium;
  • if the sponsor conducts an interim valuation to determine whether to take advantage of the relief measures, what its obligations are, in its capacity as plan administrator, arising from that information; and
  • what, if anything, should be communicated to plan members beyond the minimum requirements.