Temporary Solvency Funding Relief Measures

 
2009 Solvency Funding Relief Measures
 
 
The temporary solvency funding relief measures are set out below. Full details are provided in the Ontario Regulation 239/09.
 
The administrator of an eligible plan may choose one or more of three funding options in the first filed valuation report with a valuation date on or after September 30, 2008 (the solvency relief report).
 
Option 1 - Defer, up to one year, the start of special payments required to liquidate any new going concern unfunded liability or new solvency deficiency determined in the solvency relief report. (Jointly Sponsored Pension Plans (JSPPs) are not permitted to elect Option 1.)
 
Option 2 - Consolidate special payments for pre-existing solvency deficiencies into a new five-year payment schedule that starts on the valuation date of the solvency relief report. (The “new pension plans” under Ontario Regulation 202/02 (Algoma) are not permitted to elect Option 2.)
 
Option 3 - With the consent of members and former members, extend the period for liquidating the new solvency deficiency from 5 years to a maximum of 10 years. The consent requirements do not apply to jointly governed plans (which have member representation on the Board or Committee administering the plan).
 

Gains in Future Solvency Valuations

 
If the administrator elects at least one of the above options, any gains in future solvency valuations may be used to reduce or eliminate any solvency special payments determined in the solvency relief report.
 

Eligible Plans

 
All pension plans that provide defined benefits (including hybrid plans) are eligible for solvency funding relief, except for the following excluded plans.
 

Excluded Plans

 
  • A plan for which all contributions set out in previous valuation reports that are required to be made as of the valuation date of the solvency relief report have not been made.
  • A Specified Ontario Multi-Employer Pension Plan as described in section 6.0.1 of the Regulation.
  • A plan established after September 29, 2008, unless the plan is formed as a result of a merger of plans, at least one of which was established before September 30, 2008, or is formed as a result of splitting a plan that was established before September 30, 2008.  
  • The “participating pension plans” under Ontario Regulation 99/06 (Stelco).
  • A “qualifying plan” under section 5.1 of the Regulation.

How a Plan Administrator Makes an Election for Solvency Funding Relief

 
A plan administrator makes an election by filing it:
 
  • in writing
  • with the Superintendent,
  • on or before the filing of the first valuation report with a valuation date between September 30, 2008 and September 29, 2011, inclusive.
The administrator may make only one election and, once made, it cannot be rescinded.
 
Once an election is made for any option the plan administrator must provide enhanced notice to the eligible members and the eligible former members of the plan within 60 days of the start of the payments required under the solvency relief report. Enhanced notice requirements are set out for each option.
 
 

Description of Solvency Funding Relief Options

 
The following section explains the three temporary solvency funding relief options. Complete details can be found in the Regulation.
 

Option 1 - Deferral of New Special Payments for up to One Year

 
Defer, up to one year, the start of special payments required to liquidate any new going concern unfunded liability or new solvency deficiency determined in the solvency relief report.
 

Option Availability

 
  • Not available to excluded plans
  • Not available to Jointly Sponsored Pension Plans

Funding Calculations

 
  • The special payments identified in the solvency relief report which are required to liquidate any new going concern unfunded liability or solvency deficiency determined in the report may be deferred for up to one year (the deferral period) from the valuation date.
  •  
  • For the purpose of determining the new solvency deficiency in the solvency relief report, the calculation of the solvency asset adjustment under section 1.2(1) (d) of the Regulation will include the present value of special payments in respect of any going concern unfunded liability scheduled for payment between the valuation date and 5 years after the end of the deferral period.
  •  
  • Any gains in subsequent solvency valuations can be used to reduce or eliminate the amount of monthly solvency special payments determined in the solvency relief report.
  •  
  • During the deferral period, actuarial gains may not be used to reduce normal costs nor may they be applied to pay the annual assessment to the Pension Benefits Guarantee Fund (PBGF).

Amendments

 
  • No special requirements.

Member Consent

 
  • No member consent is required.

Enhanced Notice Requirements

 
  • The plan administrator must provide enhanced notice to the eligible members and the eligible former members of the plan within 60 days of the start of the special payments required under the solvency relief report.  
  • The notice must contain the information set out in the Regulation.
  • The notice is provided one time only.

Option 2 - Consolidation of Existing Solvency Deficiencies into a New Five-Year Payment Schedule

 
Consolidate special payments for pre-existing solvency deficiencies into a new five-year payment schedule that starts on the valuation date of the solvency relief report.
 

Option Availability

 
  • Not available to excluded plans.
  • Not available to the “new pension plans” under Ontario Regulation 202/02 (Algoma).

Funding Calculations

 
  • Plan administrators will be permitted to consolidate the present value of special payments relating to solvency deficiencies arising before the valuation date of the solvency relief report that remain to be paid (consolidated prior solvency deficiency), and liquidate this deficiency over the 5 years beginning on the valuation date of the solvency relief report.
  •  
  • To the extent that the solvency special payments made between the valuation date and the filing date exceed those that would be required under the solvency relief report as a result of the consolidation, such excess can be used to reduce subsequent contributions made up to the date at which the next report is filed. The excess, however, cannot be used to reduce the PBGF assessment base as provided in section 37(12) of the Regulation.
  •  
  • For the purpose of determining the new solvency deficiency in the solvency relief report, the calculation of the solvency asset adjustment under section 1.2(1)(d) of the Regulation will include the present value of all of the solvency special payments under the new five-year consolidated schedule.
  •  
  • Any gains in subsequent solvency valuations can be used to reduce or eliminate the amount of monthly solvency special payments determined in the solvency relief report.

Amendments

 
  • If the plan is amended to increase pension benefits or ancillary benefits, any resulting increase in the going concern unfunded liability shall be liquidated over 5 years beginning on the valuation date of the report in which the increase in the going concern unfunded liability was determined.
  • This accelerated funding requirement remains in effect until the consolidated prior solvency deficiency has been fully liquidated.

Member Consent

 
  • No member consent is required.

Enhanced Notice Requirements

 
  • The plan administrator must provide enhanced notice to the eligible members and the eligible former members of the plan within 60 days of the start of the payments required under the solvency relief report.
  • The notice must contain the information set out in the Regulation.
  • The notice is provided one time only.

Option 3 – Extension of Up to 5 Additional Years to Liquidate New Solvency Deficiency

 
With the consent of eligible members and eligible former members, extend the period for liquidating the new solvency deficiency from 5 years to a maximum of 10 years.
 

Option Availability

 
  • Not available to excluded plans.

Funding Calculations

 
  • The five-year period to liquidate a new solvency deficiency determined in the solvency relief report may be extended to a period not to exceed 10 years (the extended liquidation period).
  •  
  • For non-JSPPs that elected Option 1 and for JSPPs, the extended liquidation period will begin on a date not later than 12 months after the valuation date of the solvency relief report and may be extended to a period not to exceed 10 years after that date.
  •  
  • For the purpose of determining the new solvency deficiency in the solvency relief report, the calculation of the solvency asset adjustment under section 1.2(1)(d) of the Regulation will include the present value of special payments in respect of any going concern unfunded liability scheduled for payment between the valuation date and the end of the extended liquidation period.
  •  
  • Any gains in subsequent solvency valuations can be used to reduce or eliminate the amount of monthly solvency special payments determined in the solvency relief report.

Amendments

 
  • If the plan is amended to increase pension benefits or ancillary benefits, any resulting increase in the going concern unfunded liability shall be liquidated over 5 years beginning on the valuation date of the report in which the increase in the going concern unfunded liability was determined.
  •  
  • For a JSPP, the resulting increase in the going concern unfunded liability shall be liquidated over 5 years beginning not later than 12 months after the valuation date of the report in which the increase in the going concern unfunded liability was determined.
  •  
  • This accelerated funding requirement continues to apply for plan amendments that have an effective date before the date on which the remainder of the extended liquidation period equals 5 years.

Member Consent

 
  • There is no consent requirement for jointly governed plans.
  •  
  • All eligible members, eligible former members and bargaining agents must be sent an information statement. Detailed information on the content is set out in the Regulation.
  •  
  • For plans which are not jointly governed, the plan administrator that proposes to elect option 3 may not proceed if more than 1/3 of the eligible members and eligible former members oppose the election. Eligible members and eligible former members who die or transfer their entire entitlement from the plan between the date of the solvency relief report and the date the information forms are sent are not included in the election.
  •  
  • If the eligible members are represented by a bargaining agent, the bargaining agent may cast a ballot on behalf of the eligible members it represents within 45 days. Eligible members who become eligible former members between the date of the solvency relief report and the date the information forms are sent would be represented by the collective bargaining agent for the purpose of determining consent.
  •  
  • Notice of Objection Forms
  •  
    • Who Gets the Notice - eligible members who are not represented by a bargaining agent, eligible former members, and all bargaining agents at the time the information statement is sent 
    • Content - set out in section 5.7 of the Regulation 
    • Timing for Responding to Notice of Objection - no less than 45 days after the information statement is sent by the administrator 
    • Deemed Consent - if the number of objections confirms that not more than one-third of the eligible members and the eligible former members object, the extension of the five year period will proceed

Enhanced Notice Requirements

 
  • The plan administrator must provide enhanced notice to the eligible members and the eligible former members of the plan within 60 days of the start of the payments required under the solvency relief report.
  •  
  • The notice has more required information than Options 1 and 2, as set out in the Regulation.
  •  
  • Until the end of the extended liquidation period, additional information must also be provided to all eligible members and eligible former members within six months after each plan fiscal year in which a valuation report is filed.
  •  
  • For eligible members, this additional information may be included with their regular annual pension statement. 

 
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