Canadian corporate pension plans will be able to negotiate funding arrangements with participants and retirees when restructuring their plans as part of the proposals announced Tuesday by Canadian Finance Minister Jim Flaherty.
The proposals would amend the 1985 Pension Benefits Standards Regulations, according to a news release from the Canada Department of Finance.
Among the proposals were the following:
• allow plan sponsors to secure letters of credit in lieu of making funding payments to the pension fund, up to a limit of 15% of plan assets;
• require corporate plans to be fully funded before being terminated; and
• void any amendments to a pension plan that would reduce the plan’s solvency to below 85%.
The proposed changes are a federal initiative and would not apply to provincially regulated pension plans.
“These changes will help pension plan sponsors to better manage their funding obligations while providing additional protection to plan members and retirees,” Mr. Flaherty said in the release.
Annette Robertson, spokeswoman for the Finance Ministry, could not be reached for further details.
Following a 30-day public comment period, the proposals will go to the government for further consideration.