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Compliance May 3, 2006
Canada's Budget Provides Temporary Relief for DB Plans
May 3, 2006 (PLANSPONSOR.com) - Canada's legislators
approved a federal budget that left room for some assistance
to companies struggling to pull their defined benefit pension
plans out of steep shortfalls.
Reported by Adrien Martin
The budget offers some temporary funding relief measures to help federally regulated companies shrink the deficits caused by defined benefits plans, one being to slow the rate at which these solvency deficits must be paid off, according to a press release from Hewitt Associates.
Federally regulated DB plans will be able to choose to:
- Increase the funding of solvency deficits to a 10-year term rather than the current five-year term, if at least two-thirds of plan members (including retirees) approve the change.
- Consolidate solvency payment schedules and amortize the entire existing solvency deficits over a new, five-year period, allowing allows plans to smooth their outstanding solvency payment obligations through five equal payments over the next five years.
These measure are only open to plan sponsors whose funding payments are up to date, and only available for the first funding valuation report filed with the Office of Superintendent of Financial Institutions before 2008.