Flexible Funding Rules for Certain Jointly Sponsored Pension Plans (JSPPs) and Related Measures
ONTARIO REGULATION 177/11
Regulation - LGIC
Bill or Act:
Pension Benefits Act
Summary of Decision:
Ontario Regulation 177/11 was filed on May 20, 2011.
June 20, 2011
Summary of Proposal:
Effective June 1, 2011, the regulation provides a solvency funding exemption for six JSPPs that existed on August 24, 2010.
The Expert Commission on Pensions said pension plans with joint governance and risk sharing should be funded according to more flexible rules. Consistent with this recommendation, the government will consider a solvency exemption for new JSPPs in the future, subject to appropriate conditions on a case-by-case basis, such as the protection of accrued benefits.
Effective January 1, 2012, all defined benefit plans must disclose information regarding their funded position to members annually.
In addition, effective January 1, 2012, JSPPs which do not fund on a solvency basis are required to include the following on annual member statements:
- a statement that the plan's benefits are not guaranteed by the Pension Benefits Guarantee Fund.
- a statement that on wind up of the plan, if the plan's assets of the are not sufficient to meet its liabilities, the Act allows pension benefits to be reduced (if plan terms so provide - see PBA clauses 75.1 (1) (b) and 75.1 (1) (b)).
- disclosure of employer and member contribution rates for the last two years and a statement that employer and member contributions could change; and
- if the plan has a solvency funding shortfall which develops on or after December 31, 2010, a statement that contributions are not being made to eliminate this shortfall.
Effective June 1, 2011, the regulation phases in a uniform solvency funding threshold of 85% below which a plan has "solvency concerns" (see subsections 14 (2) and (3) of Regulation 909) and valuations must be filed annually:
- For reports dated on or after December 31, 2010, the threshold for plans with a solvency deficiency of at least $5M is lowered to 85%.
- For reports dated on or after December 31, 2012, the threshold for all plans is set at 85% (regardless of the size of the solvency deficiency).
Effective the date the regulation is filed, JSPPs which are exempt from solvency funding and specified Ontario multi-employer pension plans (SOMEPPs) are exempted from the "solvency concerns" requirements until December 31, 2012. While this exemption is in effect, it is anticipated that a different test will be developed to determine when these plans, which are presently not required to fund on a solvency basis, should file valuation reports annually.
Effective the date the regulation is filed, certain public sector pension plans are given an extension to file required valuations. This measure is related to temporary solvency funding relief measures for eligible public sector plans.
Pension Policy Branch
Office of Taxation, Agencies, and Pensions
Ministry of Finance
5th Floor Frost Building South
7 Queen’s Park Crescent East
Toronto, ON M7A 1Y7
May 20, 2011