The 2012 Report on the Funding of Defined Benefit Pension Plans in Ontario is FSCO’s ninth annual report that provides information on the status of pension plan funding and investment of defined benefit (DB) pension plans registered in Ontario.
Since 2000, funding valuation reports of DB pension plans that are filed with FSCO have been accompanied by an Actuarial Information Summary (AIS). Starting in 2006, an Investment Information Summary (IIS) has also been filed for all DB pension plans registered with FSCO (except for designated plans) in addition to the financial statements required under section 76 of the regulations under the Pension Benefits Act (the Act).
The AIS and the IIS allow FSCO to:
- Collect key actuarial, financial and investment information contained in the funding valuation reports and financial statements filed under the Act;
- Use this data to analyze the funded status, contribution levels, actuarial assumptions and investment management practices of DB pension plans;
- Identify pension and investment market trends; and
- Conduct additional analysis in its monitoring of pension plan risks.
The 2012 Report Size: ## kb has been prepared based on filed funding valuation reports with valuation dates between July 1, 2009 and June 30, 2012 and financial statements and IIS for plan years ending in the period from July 1, 2011 to June 30, 2012. The report also provides an estimate of the solvency funded ratio as at December 31, 2012 of the pension plans included in the analysis, taking into account the actual median returns for Canadian pension plans, the changes in solvency valuation interest rates, and the estimated special payments to be paid into the pension plan to liquidate any funding deficits. In addition to the information noted above, it also includes information on the funding relief measures implemented in 2007, 2009, and 2012 by the Ontario Government.
Specified Ontario Multi-Employer Pension Plans (SOMEPPs)
The 2007 measures provide temporary funding relief for SOMEPPs by exempting them from funding on a solvency basis – the relief period was extended in 2012 to end on September 1, 2017.
Certain Defined Benefit Pension Plans
The 2009 measures provide certain DB pension plans with the following types of funding relief options based on the filing of a solvency relief report with a valuation date between September 30, 2008 and September 29, 2011:
- Deferral of the start special payments required to liquidate a new going concern unfunded liability or new solvency deficiency for up to twelve months;
- Consolidation of existing solvency special payments into a new five years payment schedule commencing on the valuation date of the solvency relief report; and
- Extension of the period for liquidating a new solvency deficiency from five years to a maximum of ten years (with member consent).
The 2012 measures provide certain DB pension plans with similar options for temporary solvency relief as those introduced in 2009 by the Ontario government. The 2012 temporary solvency funding relief measures apply to the first filed valuation report with a valuation date on or after September 30, 2011 and before September 30, 2014. The relief measures include consolidation of existing solvency special payments into a new five-year payment schedule, and allowing new solvency deficiencies to be amortized over a period of up to 10 years instead of five years, with member consent. In addition, the Regulation has since been amended to generally allow for all plans to defer, for up to one year, the start of special payments required to liquidate new going concern unfunded liability or new solvency deficiency.
Certain Public Sector Pension Plans
In addition to the above, the Ontario government implemented changes that would provide solvency funding relief to certain pension plans in the public sector and broader public sector. The funding relief is to be provided in two stages over a number of years. An eligible pension plan would enter Stage 1 of relief by submitting a proposal to the Ministry of Finance outlining changes that would make it more sustainable. This process may involve negotiations with plan members and their representatives (e.g. collective bargaining agents). Those pension plans that meet the criteria for temporary Stage 1 solvency funding relief are named in Schedule 1 of Ontario Regulation 178/11 . Similarly, those pension plans that meet the criteria for temporary Stage 2 solvency funding relief will be named in Schedule 2 of Regulation 178/11. The substantive relief measures are outlined in Regulation 178/11. Eligibility criteria, the application process and additional conditions as well as examples of steps that eligible pension plans could take and the measurement of financial impacts are not part of the regulation, but are outlined in a technical paper Size: ## kb issued by the Ministry of Finance.
For more information on this report, please contact:
Mr. Lester Wong
Chief Actuary (A), Pension Division