Canadian Pensions Also Face Trouble

August 24, 2005 (PLANSPONSOR.com) - A report by the Association of Canadian Pension Management (ACPM) says that fewer Canadians will be covered by defined benefit pension plans and many plans will be underfunded unless existing legislation is changed.

According to a Canadian news report, the ACPM report calls for governments to review current funding rules for pension plans and remove barriers to plan funding, such as preventing companies from accessing excess funds to make up shortfalls.

“Existing rules do not encourage the adequate funding of DB plans-which results in under-funded plans offering less benefit security,” says Paul Litner, Chair of the ACPM’s Funding Issues Task Force, in the news report.   He also noted, “From 1992 to 2003, the percentage of Canadian workers covered by DB plans dropped from 44% to 34% of the labour force. The decline in coverage has been most significant in the private sector.”

The ACPM makes recommendations such as strengthening disclosure requirements around plan funding and ensuring plans have a written funding policy.   More specifically, the association recommends amending the Income Tax Act to enable sponsors to better manage the funding of their pension plans.

Litner believes continued sponsorship of pension plans is critical and the ACPM believes its not too late to fix the problem with sufficient reform.

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