Saskatchewan: New funding rules for pension plans with fixed contributions
Effective August 25, 2017, the Saskatchewan Pension Benefits Regulations were amended to establish a new funding and regulatory regime for limited liability plans (LLPs). An LLP is a private sector pension plan to which contributions are limited by collective agreement or plan documents. The regulations follow a consultation on negotiated cost pension plans that was held in 2016 (see the July 2016 edition of News and Views).
In general, the new funding and regulatory regime for LLPs is as follows:
- A permanent exemption from funding solvency deficiencies, although solvency deficiencies still have to be calculated;
- Going concern deficiencies to be funded over 15 years;
- A provision for adverse deviations (PfAD) to be calculated on the basis of the equity allocation of the LLP, with the PfAD to be funded for current service costs starting with the second actuarial valuation report;
- Restrictions on benefit improvements;
- Possibility of calculating commuted values based on the plan’s going concern assumptions and decreasing the commuted value to the funded position of the plan, when the commuted value is transferred from the plan; and
- Enhanced member communications.
The Saskatchewan Financial and Consumer Affairs Authority has issued a detailed guide to LLPs.
The Saskatchewan announcement on LLPs will directly affect a small number of Saskatchewan-registered pension plans. However, it is of interest to see Canadian jurisdictions continue to develop new plan models. The LLP could be considered something of a cross between a standard multiemployer pension plan and a target benefit plan (TBP). It borrows several significant ideas from recent reforms in Canada, particularly the TBP framework in Alberta and British Columbia, namely the switch to “going-concern plus” funding approach and the option for plans to switch to a new commuted value calculation framework.