The Ontario Finance Ministry on Friday announced it would seek to mandate solvency funding for the province's defined benefit plans only for those that are 85% funded or less.
Currently, any DB plan in the province that is less than 100% funded must be funded on a solvency basis, which requires it to have enough assets to wind down if it were terminated immediately. Plans must also fund on a going-concern basis, which assumes a plan will stay active.
The reduced threshold for plans would mean only 15% of Ontario pension plans would need to follow solvency funding rules, the Finance Ministry said in a news release.
Along with the solvency funding change, Ontario's ministry also said it would seek to shorten the amortization period for the province's going-concern funding rules to 10 years from 15 years.
Other changes proposed by the ministry are increasing the monthly guarantee provided for a plan participant's pension by the Pension Benefits Guarantee Fund, Ontario's government pension insurer, by 50% to C$1,500 ($1,093); and releasing plan sponsors from liability if they purchase annuities for retirees or deferred plan members.
Ontario's 2017 budget, introduced April 27, included provisions for the proposed pension rule changes, which are expected to be presented to the Ontario Legislature in the fall.
Ontario's move on solvency funding would follow changes to solvency rules made by other Canadian provinces. Quebec in 2016 eliminated solvency valuation entirely for corporate DB plans and enhanced its going-concern valuation rules to increase pension fund contributions; public pension plans in Quebec were exempt from solvency valuation. Saskatchewan is considering legislation that would eliminate solvency valuation for the six multiemployer plans based in the province, and Alberta and British Columbia changed their solvency valuation rules to allow plan sponsors to hold surplus solvency assets in a reserve fund that they can access.
Pension regulations in Canada vary by province except for plans of employers that are regulated by the Canadian government, such as banks and telecommunications firms; those plans are regulated by the federal government.