The Ontario government announced today it will introduce legislation, next spring, to provide pension plans with temporary solvency funding relief retroactive to September 30, 2008.
If passed, the new law would extend solvency amortization periods from five to ten years, but only with the consent of active plan members or their collective bargaining agent and retired plan members. This is the same relief that the federal government is proposing for pension plans that fall under its jurisdiction, except that federally there may be an option to secure a letter of credit instead of obtaining member consent.
Other relief measures proposed are:
- Consolidation of previous funding schedules,
- Deferral of catch-up payments to provide one year of cash flow relief,
- Permitting the use of actuarial gains to reduce annual cash payments by employers.
In an apparent effort to balance employer and employee interests, the Government also proposes to legislate certain protections for plan members such as:
- Enhanced notice to active and retired plan members,
- Accelerated funding of benefit improvements (which may diminish the effect of the solvency funding relief),
- Temporary limitations going forward on certain contribution holidays,
- Adoption of new actuarial standards for commuted value calculations in solvency valuations.