Proposed Amendment to Ontario Regulation 178/11 under the Pension Benefits Act - Solvency Funding Relief for Certain Public Sector Pension Plans
Regulation - LGIC
Bill or Act:
Pension Benefits Act
Summary of Decision:
July 29, 2016
Summary of Proposal:
The government is seeking feedback on a proposal to allow sponsors of pension plans to reduce the minimum required level of solvency funding, on a temporary basis. The structure of the relief proposed would be as follows:
•The relief is in respect of the first report filed after the Stage 2 valuation report and with a valuation date on or before December 31, 2018 (First Subsequent Report).
• Remaining special payments based on the valuation report prior to the First Subsequent Report date would no longer be required.
• The solvency funding requirement would be reset to be midway between the solvency ratio, calculated as solvency assets / solvency liabilities (as determined in the First Subsequent Report) and 100%.
•For example, if the solvency ratio is 80% as at the First Subsequent Report, the solvency funding requirement would be 80% + ½ x (100% - 80%) = 90%. In this example, the solvency deficit to be funded would be calculated as the sum of solvency assets and solvency asset adjustment minus 90% of solvency liabilities (i,e., new solvency deficit).
• For the purpose of this provision, the solvency asset adjustment determined in accordance with section 1.2 of the General Regulation would include the present value of all going concern special payments that are scheduled for payment during the same 7-year period.
•The new solvency deficit would have to be liquidated by equal monthly instalments over a period of no longer than 7 years, commencing no later than 12 months after the First Subsequent Report valuation date.
• The next required filing following the First Subsequent Report would have to be no later than three years after the valuation date of the First Subsequent Report and normal funding rules in effect at that time will apply.
• The minimum special payments for the period starting no later than 12 months after the First Subsequent Report valuation date until the date the next report is filed in accordance with the PBA would be the sum of:
• Going concern special payments as scheduled for payment during the period,
• Special payments to liquidate the new solvency deficit scheduled for payment during the period, and
• Interest payments on the remainder of the solvency deficit that is not being liquidated, based on the solvency valuation interest rates as of the first subsequent report date.
BPS Temporary Solvency Funding Relief Program
Broader Public Sector Pensions Branch
Ministry of Finance
1st Floor, Frost Building South
7 Queen's Park Crescent
Toronto ON M7A 1Y7
October 31, 2016