The Ontario government recently filed regulations under the Pension Benefits Act (the PBA), which implement funding changes for jointly sponsored pension plans (JSPPs) and certain public sector plans, as well as more general changes applicable to all defined benefit (DB) plans.
- JSPPs that existed on August 24, 2010 (as listed in the regulations) are exempt from solvency funding requirements. However, JSPPs will still be required to determine solvency deficiencies using the method set out in the amendments, and a valuation report will have to be filed if a plan amendment changes the amount of the solvency deficiency.
- In exchange for this solvency funding exemption, JSPPs must file certain statements with the regulator and provide enhanced reporting to plan members. For example, JSPPs must include additional information in annual statements for members, such as informing them that their benefits are not guaranteed by the PBGF and may be reduced on plan wind-up, the contribution rates for employers and members could change, additional contributions are not being made to eliminate the solvency funding shortfall, and what the amounts of contribution rates were for the year before and the year after the statement.
- It is important to note that the regulations’ JSPP solvency funding exemption applies only to the six named JSPPs. All other JSPPs interested in exploring solvency funding exemptions will have to consider seeking specific exemptions.
- New regulation 3.2 requires the administrator of all JSPPs to file a statement certifying that the plan satisfies the criteria to be a JSPP and describing how this criteria has been met. This statement must be filed no later than the filing date of the first plan valuation after becoming a JSPP (or the filing date of the next plan valuation after June 1, 2011 for existing JSPPs).
- Certain changes were also implemented with respect to DB plans more generally. For valuations on or after December 31, 2012, plans with a funding threshold below 85% (as opposed to 80%) will be required to undertake annual valuations. (JSPPs, specified Ontario multi-employer plans and certain other specified plans are exempt from this provision.) In addition, as of January 1, 2012, all DB plans must include information regarding funding levels in annual plan member statements.
The Ontario government also filed Regulation 178/11, which sets out rules and procedures for certain public sector plans seeking temporary solvency funding relief through the two-stage process announced earlier this year. (Please see our February 14, 2011 post for further discussion of this funding relief initiative.)