Business man on computer
News & Views

You are here

Ontario releases new funding regulation

On May 21, 2019, the government of Ontario filed O. Reg. 105/19, which makes some clarifications, technical corrections and adjustments in the new funding framework for defined benefit (DB) pension plans that took effect on May 1, 2018 and was discussed in the May 2018 News & Views. Some of the key changes are summarized below.

Excess contributions

The regulation clarifies how excess contributions made in the period between a valuation date and when the associated actuarial report is filed may be used. These excess contributions can be applied to reduce any payment required to be made after the report is filed provided they are applied before the earlier of: (i) the last day of the fiscal year in which the report is filed and (ii) the filing date of a subsequent report. However, this option is not available if the most recent report is filed more than 12 months after the valuation date of the report, even if a filing extension was granted.

Contributions in excess of the funding requirements for a plan with a valuation date for the last-filed report before December 31, 2017 or the last report filed before May 1, 2018, may be used to create a prior year credit balance in the next valuation report and applied to reduce normal cost contributions or special payments under the new report.

Specified Ontario Multi-Employer Pension Plans (SOMEPPs)

The regulations are amended to clarify that restrictions on benefit improvements and the requirement for a target asset allocation in the SIPP do not apply to SOMEPPs.

Contribution holidays

The rules for contribution holidays are amended to provide that an actuarial cost certificate does not need to be filed in order to take a contribution holiday, if a valuation report or cost certificate with a valuation date that is not earlier than the day immediately before the beginning of the report’s fiscal year is prepared and filed. The report or cost certificate must show that there is still sufficient available actuarial surplus.

Although a cost certificate must be filed within 90 days of the start of the fiscal year in order to take a contribution holiday, a transitional extension is granted with the deadline extended to June 30, 2019 for fiscal years beginning on or after July 1, 2018. Furthermore, a plan with a valuation date for the last-filed report before December 31, 2017 or the last report filed before May 1, 2018, is exempt from the contribution holiday restrictions under the new funding rules.

Also, where a planned contribution reduction is to occur more than six months after the start of a fiscal year, the notice must be given within six months following the end of the fiscal year of the reduction. This permits the notice to be combined with the next annual statement.

Definition of “closed plan”

The definition of “closed plan” for PfAD calculations is amended. With the passage of the new regulation, a closed plan is defined as a DB plan in which at least 25% of the members of the plan who are entitled to defined benefits are in classes of employees from which new members are not permitted to join the plan and accrue DB benefits.

Target asset allocations for PfAD calculations

The regulation makes a number of changes to the PfAD calculation formula. The formula was reworded to clarify that the figure for “closed plans” pertains to plans that are closed on the valuation date.

The regulation clarifies that the minimum credit rating set out in the plan’s statement of investment policies and procedures (SIPP) may refer to a portion of—not necessarily all—fixed income assets in the investment category. This effectively allows investment grade fixed income to be recognized as fixed income in the PfAD calculation, while fixed income investments that do not meet minimum credit ratings are effectively treated as equity-like investments.

The rules are also amended to clarify that the requirement for a SIPP to specify target asset allocations does not apply to defined contribution pension plans, including those in which the administrator directs the investments.

Technical amendments and transition rules

A number of technical amendments are made in respect of the implementation of the new funding rules, disclosures to members, letters of credit and jointly sponsored pension plans.


The corrections and clarifications were required in order to help the new Ontario DB funding rules to function effectively. However, the amendments to permit the use of excess contributions to reduce any future pension contribution until the end of the fiscal year and in respect of the definition of “closed plans” are substantive amendments that will have a positive impact on some Ontario DB pension plan sponsors.

News & Views - June 2019 (PDF)