Solvency Funding Relief Proposal for Public Sector and BPS Pension Plans Released
On February 10, 2011, the Ontario government released its proposed details regarding solvency funding relief for the public sector and broader public sector (“BPS”).
The government first announced that it would consider providing solvency funding relief for university pension plans on August 5, 2010 (which was consistent with the 2010 Budget announcement that solvency funding relief may be provided to BPS employers). The goal of the solvency funding relief is to support sustainable public sector and BPS defined benefit or hybrid pension plans, including Ontario university pension plans.
The proposed relief will apply to single-employer pension plans provided in respect of public sector and BPS entities, such as Crown agencies, health service providers and universities.
Under the proposed relief, eligible plans may receive solvency funding relief in two stages. During Stage 1, plans will not be required to make solvency payments for a three year period while considering the necessary changes to make their pension plans sustainable. If the government is satisfied with the progress a plan is making in meeting certain “savings targets”, it will be eligible for Stage 2 relief, during which any solvency deficiency (that exists after the end of the three year period) will be amortized over 10 years.
Plans with actuarial valuation reports dated in 2010 will be required to file an application by March 23, 2011 in order to be eligible to enter Stage 1 of the relief. More deadlines will be announced in the future for plans with valuation reports dated in 2011 or 2012. The government has proposed amending the Pension Benefits Act regulations to provide an extension to the filing deadline for any plans that must file their actuarial valuation reports before April 30, 2011.
The government is also seeking comments on the proposed details by March 28, 2011. An FTR Now discussing these complex proposals will be available shortly on our website.