Ontario confirms new temporary solvency funding relief
As promised in the solvency funding reform measures that were announced on May 19, 2017 (see our News & Views of June 2017), the Government of Ontario released interim funding relief measures on June 29, 2017. An administrator will be permitted to elect a two year deferral of funding for any new solvency deficiency revealed in the first solvency valuation with a valuation date on or after December 31, 2016 and before December 31, 2017. This provides an additional deferral above and beyond the one year already permitted, but only in respect of a new deficiency revealed in the solvency relief report.
A pension plan that takes advantage of this deferral is not permitted to elect the extension of solvency funding period from 5 to 10 years in the same valuation report. The funding extension was made available last year in the first solvency valuation with a valuation date on or after December 31, 2015 and before December 31, 2018. The two forms of relief could apparently be combined only if the extension was elected in a previous report filed with a valuation date on or after December 31, 2015, and prior to December 31, 2016.
Written notice of the election would have to be provided to plan members in the same format as other solvency funding relief notices. Member consent is not required.
The deferral is not available to specified Ontario multi-employer pension plans or to public sector plans that have taken advantage of the special public sector funding relief measures that have been provided to certain public sector plans by regulation.
The announcement will be welcome to defined benefit pension plan sponsors in Ontario, but it is important to note that the measures only apply to new solvency deficiencies disclosed in a valuation report, and not to pre-existing solvency deficiencies.
The interim solvency funding relief provisions came into force on July 1, 2017. The details of the permanent solvency reform measures are expected to be released in the Fall of 2017.