New Brunswick regulator seeks input on changes to defined benefit pension plan funding
Christopher Marr, TEP & Lauren Henderson
As defined benefit pension plans (“DB Plans”) throughout Canada continue to face funding challenges due to mounting solvency deficits, the New Brunswick Financial and Consumer Services Commission (“FCNB”) is proposing amendments to the General Regulation (the “Regulation”) under the Pension Benefits Act (“Act”), meant to reduce the volatility of funding requirements placed on plan sponsors and eliminate the need for funding relief measures. Many of the revisions reflect recent amendments in other provinces of Canada, though some differ.
FCNB is seeking public input on the proposed amendments, with a July 13, 2020 deadline for submissions.
Summary of proposed changes:
The following are highlights of the proposed amendments:
- Enhanced going concern funding and introduction of PfAD – The period of time to fund going concern deficiencies has been reduced from fifteen years to ten years. As a new requirement, a provision for adverse deviation (“PfAD”) must be established (applied to liabilities, but not current service cost), and funded in the same manner as the other going concern obligations. The PfAD approach proposed is the same as that recently adopted in Nova Scotia.
- Permanent solvency funding relief – DB plan sponsors will be permitted, on a go-forward basis, to elect to permanently fund their plans to an 85% solvency standard (rather than the current standard of 100%), still with a maximum five-year amortization period. Existing solvency funding exemptions will continue under the new regime.
- Use of letters of credit – Instead of making payments into DB plans to fund solvency deficits, plan sponsors, for plans that are not multi-employer plans, will be permitted to use a letter(s) of credit, so long as it satisfies the requirements set out in the Regulation, including a cap on the total amount of all letters of credit of 15% of the solvency liabilities of the plan. This will provide more flexibility to plan sponsors and diminish the risk of trapped surpluses.
- Governance policy – Plan administrators will now be required to adopt and follow a written governance policy that meets the specific criteria set out in the Regulations, and which generally sets out the structures and processes involved in overseeing, managing and administering the plan.
- Individual Pension Plan (“IPP”) recognition and exemption – New in the Regulation is the recognition of IPPs. It is proposed that IPPs will be exempt from all requirements set out in the Act and Regulations.
The full text of the amendments is available here.
This article is provided for general information only. If you have any questions about the above, please contact a member of our Pensions and Benefits group.
Click here to subscribe to Stewart McKelvey Thought Leadership.
Archive
By Jennifer Taylor Why is this case a big deal? It started with two salmon. Now, after several years of litigation, the Nova Scotia Provincial Court in R v Martin, 2016 NSPC 14 has stayed proceedings against…
Read MoreTHE EDITORS’ CORNER Michelle Black and Sean Kelly One day, the line between mental and physical disabilities may not be so pronounced, but, for now, distinctions are still drawn between Employee A with, for example, diabetes and…
Read MoreBy Lisa Gallivan Employees can be your biggest asset, if you hire the right people. This can often be one of the biggest decisions that you make as a business owner or employer. The “right” employee…
Read MoreBy Burtley Francis and Kathleen Leighton Order Up: Apple, P.I. Recently, the public safety versus personal privacy debate has been brought to main headlines. Apple is facing a court order (available here) requiring the company to assist the FBI in the investigation of…
Read MoreIn preparing for the 2016 proxy season, you should be aware of some regulatory changes and institutional investor guidance that may impact disclosure to and interactions with your shareholders. This update highlights what is new…
Read MoreBy Burtley Francis and Michael MacIsaac You remember Left Shark… The Super Bowl is a lot of things to a lot of people and is arguably the most anticipated event of the year that is not a holiday…
Read MoreBy Jennifer Taylor Summary The Canada Industrial Relations Board recently held that it had no jurisdiction as a federal board to certify a bargaining unit comprised of fisheries employees of the Waycobah First Nation. The decision…
Read MoreBy Peter McLellan, QC In the 1970s the issue for employers was long hair and sideburns. In the 1980’s it was earrings for men. Today the employer’s concerns are with tattoos and facial piercings. What are…
Read MoreBy Jennifer Taylor Introduction It sounds simple: Two disputing parties, hoping to resolve their disagreement without drawn-out court proceedings, will mutually agree to a settlement on clear terms; release each other from all claims; and move…
Read More2015 ends with changes in workplace laws that our region’s employers will want to be aware of moving into 2016. Some legislation has been proclaimed and is in force, some has passed and will be…
Read More