British Columbia announces extension of solvency funding relief measures
The government of British Columbia has amended the Pension Benefits Standards Regulation to extend temporary solvency funding relief measures for defined benefit (DB) pension plans to valuations with review dates on and after December 31, 2018 and prior to January 1, 2021. The measures will affect DB pension plans registered in British Columbia.
Past funding relief measures
In October 2016, British Columbia enacted solvency funding relief measures for valuations with review dates between December 31, 2015 and December 31, 2017 inclusive.
The previously announced solvency relief permitted DB pension plans to reduce their solvency funding requirements by:
- extending the regular solvency amortization period from 5 to 10 years, and
- consolidating all prior solvency deficiencies into a single new solvency deficiency.
New funding relief measures
Employers who took advantage of solvency funding relief during the original 2015 to 2017 period will be eligible to fund new solvency deficiency payments over an amortization period of 10 years. They will not be able to consolidate previously established solvency deficiencies.
Employers who did not take advantage of solvency funding relief during the original 2015 to 2017 period will also be eligible to consolidate their prior solvency deficiencies up to the date of the review.
These relief measures may only be applied once in the December 31, 2018 to December 31, 2020 period.
To elect solvency relief, plan administrators must include an amortization schedule in their actuarial valuation that reflects the election to amortize the plan’s solvency deficiencies in accordance with the solvency funding relief measures. In addition, plan administrators are required to disclose on member statements that the plan has elected to amortize solvency deficiency payments over the 10-year period.
The Financial Institutions Commission of British Columbia has released bulletin PENS 19-001, titled “Updated Extension of Solvency Deficiency Payment Period,” which summarizes the regulation.
The extension of solvency funding relief measures will be welcome to British Columbia sponsors of DB pension plans.
The deadline for public submissions in respect of British Columbia’s consultation on solvency funding reform measures was January 31, 2019. Morneau Shepell made a submission to the government. After review of the public submissions, it is expected that British Columbia will consider permanent solvency funding reform measures.