By Gloria Gonzalez
OTTAWA — The adoption of regulations to provide temporary funding relief for defined benefit plans in federally regulated industries in Canada creates more options for employers, but there are barriers to the widespread implementation of these options.
The new rules set out a range of options to help sponsors fund pension deficits caused by declining interest rates and changes to actuarial standards for the 10% of Canadian pension plans that fall under federal jurisdiction, primarily in industries such as transportation, telecommunications and banking.
Under the new rules, sponsors will be allowed to extend the schedule for funding deficits to 10 years from five years if no more than one-third of current plan members or retirees object to the change. In addition, sponsors can extend the funding period to 10 years if the difference between the five- and 10-year payments is secured by a letter of credit. They also will be able to consolidate previous funding schedules and repay the entire deficit over a new five-year period.
"These are temporary relief measures, albeit a step in the right direction,'' said a statement issued by Canadian National Railway Co., a federally regulated Montreal-based employer with a contributory defined benefit plan.
The regulations, issued by the Department of Finance Canada, expire in 2019.