Update: Quebec temporary relief measures for private sector pension plans
The Regulation providing temporary relief measures for the funding of solvency deficiencies was released on May 30, 2012. It came into force on June 14, 2012, and has effect retroactively to December 31, 2011.
The purpose of the regulation is to provide temporary relief measures for a period of two years (i.e. until December 31, 2013). These measures are similar to those offered following the 2008 financial crisis, which ended at the end of 2011.
The choice to use all or some of the temporary relief measures must be made at the time of the first actuarial valuation of the plan that has a date after December 30, 2011. The employer who wishes to use temporary relief measures must provide a written instruction to the pension committee.
The temporary relief measures are:
- Asset smoothing on solvency basis: the asset valuation method must take into account the short-term fluctuations in the market value of the assets of the plan for the period indicated in the instruction, subject to a maximum period of five years. If this relief measure was used before December 31, 2011, under the previous regulation with respect to temporary relief measures, the asset valuation method used in the previous instruction must also be used, except for the determination of the solvency ratio of the plan.
- Consolidation of certain deficits: this measure provides for the elimination, as of the date of the actuarial valuation, of any amortization payments related to an improvement unfunded actuarial liability determined on the date of a previous valuation and related to an amendment made before December 31, 2008, and of any amortization payments related to a technical actuarial deficiency determined on the date of a previous actuarial valuation of the plan.
- Extension of the amortization period: the maximum amortization period for a technical deficiency determined while relief measures are in effect is 10 years.
The provisions of the previous regulation (i.e. temporary relief measures following the 2008 financial crisis) cease to apply as of the date of the first actuarial valuation that has a date after December 30, 2011, if a new instruction is provided to the pension committee to apply one of the relief measures included in the new regulation.
The regulation also contains provisions on the amount of pension that the Régie des rentes du Québec (“Régie”) must have guaranteed by an insurer where the Régie administers a plan in cases of plan termination or employer withdrawal due to employer’s bankruptcy or insolvency.