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
IN THIS ISSUE: Consistent Use: The Collection of Union Members’ Personal Information by their Union by Alison Strachan and Jonah Clements. Single Incident of Offensive and Threatening Facebook Post is Just Cause by Harold Smith, QC. The New Anti-Spam Law –…
Read MoreYesterday, Monday June 2, 2014, the Government of Newfoundland and Labrador introduced brand new (and unexpected) amendments to the Labour Relations Act. The full text of the proposed amendment can be accessed here. Bill 22, if it…
Read MoreDownload as a PDF
Read MoreDownload as a PDF
Read MoreThis morning the Supreme Court of Canada released its much awaited decision in McCormick v. Fasken Martineau DuMoulin, holding that most legal (and other professional) partnerships are not subject to Human Rights obligations to partners,…
Read MoreNo really. We mean it this time. During the Spring 2014 sitting of the legislature, the PEI government passed legislation that will result in significant changes to the standard automobile policy, effective October 1, 2014. Most…
Read MoreThe Editor’s Corner Clarence Bennett This edition focuses on employment and labour issues in Construction. From occupational health and safety legislation to what you need to know when the union organizer arrives at your workplace.…
Read MoreFederally regulated employers should be aware of changes to the Canada Labour Code (“the Code“) effective April 1, 2014, namely subsections 219 and 223-231 of the Jobs and Growth Act, 2012, chapter 31 of the Statutes of Canada (also…
Read MorePEI Auto Accident Benefits – Behind the Times No More Nicole McKenna and Janet Clark Significant changes are coming to the standard automobile policy in Prince Edward Island (“PEI”), including increases to the accident benefits available under…
Read MoreIN THIS ISSUE: 10 Things employers need to know about employing temporary foreign workers by Andrea Baldwin, Michelle McCann and Sean Kelly. Landlords’ protection from mechanic’ (builders’) liens by Hugh Cameron and Lara MacDougall. The new Canada not-for-profit Corporations Act by Alanna Waberski, Sarah Almon and Kimberly Bungay. Download…
Read More