They are here! At long last, the regulations implementing Ontario’s new funding framework for defined benefit (DB) plans have been filed and are to be effective May 1, 2018. The government first announced the proposed new funding framework on May 19, 2017, and encouraged stakeholders to provide feedback by January 29, 2018.
Now that the regulations have been finalized, this should help alleviate some of the funding concerns DB plan sponsors have due to the low long-term interest rates.
Some of the key updates include shortening the going concern amortization period to 10 years from 15 years; requiring funding on a solvency basis to improve the plan’s funded status to 85 per cent (rather than to 100%); introducing the provision for adverse deviation (PfAD) which is used to a determine increased normal cost and going concern liabilities for the plan; providing new funding rules for benefit improvements; restricting contribution holidays; increasing the guarantee provided by the Pension Benefits Guarantee Fund to $1,500 a month; providing a discharge of liabilities when annuities are purchased for retirees or deferred plan members.
These and other changes will be applicable to valuation reports dated on or after December 31, 2017, and filed after May 1, 2018.
We will summarize the detail surrounding the updated regulations in another post, but below are links to the updates.