On August 24, 2007, O. Reg. 489/07 under the Pension Benefits Act (SOMEPP Regulation) was filed. The Regulation makes changes to the funding rules for multi-employer pension plans. The following are answers to some of the questions that may arise as a result of these changes.
Please note: In 2009, Ontario Regulation 447/09 extended the SOMEPP Regulation to August 31, 2012. In July 2012, Ontario Regulation 203/12 further extended the SOMEPP Regulation to August 31, 2017.
Overview of changes
Q1: What are the key changes to the funding rules for multi-employer pension plans (MEPPs)?
A2: The key changes are:
- Introduction of temporary solvency funding relief for Specified Ontario Multi-Employer Pension Plans (SOMEPPs).
- Clarification of the funding requirements for multi-employer pension plans. -08/07
Rules applicable to SOMEPPs
Q2: What is a Specified Ontario Multi-Employer Pension Plan (SOMEPP)?
A2: A SOMEPP is a multi-employer pension plan which meets the eligibility criteria set out in the new regulation and for which the administrator has filed an election, in writing, with the Superintendent (declaring the pension plan to be a SOMEPP) on or after September 1, 2007 and before September 1, 2017. -07/12
Q3: What eligibility criteria must be satisfied by a MEPP to be a SOMEPP?
A3: The eligibility criteria are:
- No more than 95% of the membership are employed by one employer at the end of the previous year;
- During the previous year at least 15 employers were making contributions to the plan or at least 10% of the members were employed by two or more employers;
- All or substantially all of the employers are not exempt from tax under Part 1 of the Income Tax Act;
- All employers make contributions to the plan pursuant to one or more collective agreements;
- The employers’ contributions are limited to a fixed amount set out in one or more collective agreements;
- Under the plan the administrator is authorized to determine the benefits that are to be provided under the plan;
- Nothing in the documents that create and support the plan prevents the administrator from reducing the amount of or the commuted value of the pension benefit, a pension, a deferred pension or an ancillary benefit in the circumstances described in subsection 14(2) of the Pension Benefits Act. -08/07
Q4: What funding requirements will be applied to a SOMEPP?
A4: Each actuarial valuation report filed for a SOMEPP, with a valuation date on or after September 1, 2007 and before September 1, 2017, must include a demonstration that the required contributions to the plan are not less than the sum of the following amounts:
- The normal cost of the plan.
- The special payments set out in a previous report that remain to be paid with respect to any going concern unfunded liability.
- The special payments to be paid with respect to any going concern unfunded liability determined in the report.
Any going concern unfunded liability determined in a report for a SOMEPP must be liquidated by special payments over a period of 12 years. -07/12
Q5: Are there limitations on the ability of a SOMEPP to improve benefits?
A5: Yes. If, after an amendment to improve benefits, the transfer ratio of the plan is less than 0.8 or the ratio of the market value of the plan assets to the going concern liabilities is less than 0.9, any increase in the going concern unfunded liability as a result of the amendment must be liquidated by special payments over a period of 8 years. -08/07
Q6: Given that a SOMEPP is temporarily not required to make solvency special payments, is there still a need to determine the existence of a solvency deficiency?
A6: Yes. A SOMEPP is not exempt from the determination of a solvency deficiency under section 17 of Regulation 909 under the Pension Benefits Act (Regulation). An actuarial valuation report filed for a SOMEPP must still set out the amount of the solvency deficiency, if any, and the special payments required to liquidate it in accordance with section 5 of the Regulation. However, these special payments will not be taken into account in determining the sufficiency of contributions for a SOMEPP. -08/07
Q7: Is a SOMEPP required to provide notice to the members?
A7: Yes. Notice is required within 60 days of filing a report to which the special funding rules of a SOMEPP apply, and it is to be given to each member and former member of the plan. -08/07
Q8: What information must be included in the notice?
A8: The notice shall include the following:
- name and the provincial registration number of the plan;
- name and contact information of the administrator;
- transfer ratio of the plan;
- if the plan is amended to increase pension benefits or ancillary benefits, the transfer ratio both before and after the amendment; and
- an explanation of how the security of the pension benefits and ancillary benefits for the members and former members might be affected as a result of the election. -08/07
Q9: Who else gets a copy of the notice?
A9: A copy of the notice is given to the Superintendent, every employer who makes contributions to the plan and to every bargaining agent who represents members of the plan. The administrator shall also give a copy of the notice to each member who becomes eligible to join or is required to become a member of the plan after the filing of the report and before the plan ceases to be a SOMEPP. -08/07
Clarification o Funding Requirements for MEPPs
Q10: What clarifications have been made to the funding rules for MEPPs?
A10: Ontario Regulation 489/07 clarifies the funding requirements for MEPPs. The sufficiency of the required contributions under these plans must be determined on the basis of a going concern valuation and a solvency valuation.
Specifically, an actuarial valuation report with a valuation date on or after September 1, 2007 must include a demonstration that the required contributions to the plan are not less than the sum of the following amounts:
- The normal cost of the plan.
- The special payments set out in a previous report that remain to be paid with respect to any going concern unfunded liability or solvency deficiency.
- The special payments to be paid with respect to any going concern unfunded liability or solvency deficiency determined in the report. -08/07, reference updated 07/12.
Q11: If an actuarial valuation report for a MEPP discloses a going concern unfunded liability or solvency deficiency, is there a requirement to establish a fixed-period schedule of special payments to liquidate either one of them?
A11: Yes. A going concern unfunded liability or solvency deficiency must be liquidated by special payments over the period that is stipulated in section 5 of the Regulation. The filed report must set out the amount of the going concern unfunded liability or solvency deficiency, if any, and the schedule of special payments required to liquidate them. -08/07