Archived - Minister of Finance Moves to Enhance Protection for Private Pension Plan Members

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The Honourable Jim Flaherty, Minister of Finance, today proposed changes to federally regulated private pension plans that will enhance protection for plan members, reduce funding volatility and modernize the rules for investments by pension funds.

The changes proposed today are in respect of regulation and complement the legislative changes in Bill C-9, which was introduced in the House of Commons on March 29, 2010. These changes are part of the comprehensive package of reforms announced on October 27, 2009.

“The volatility in financial markets in recent years has shown us that changes are needed to enhance protection for plan members and modernize the rules for pension fund investments,” said Minister Flaherty.

The amendments to the Pension Benefits Standards Regulations, 1985 include:

A new standard that uses average—rather than current—solvency ratios to determine minimum funding requirements. This will soften the impact of short-term market fluctuations on a plan’s solvency funding requirements.
Limiting contribution holidays unless the solvency ratio exceeds full funding plus a new solvency margin, set at a level of 5 per cent of solvency liabilities. The practice of taking contribution holidays was widespread in the past and added to the underfunding of pension plans.
A modernized investment framework that removes the limits on the amounts pension plans can invest in resource and real property investments. This will offer greater latitude in building a prudent fund portfolio.

“These amendments will allow sponsors to better manage their funding obligations and give them greater flexibility in terms of investment allocation, in order to fulfill their funding obligations,” said Minister Flaherty.

The amendments are being released today for public comment. The official pre-publication in the Canada Gazette will be on May 8, 2010. At that time, interested persons may make representations on the proposed amendments within 21 days, prior to final consideration by the Government.

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For further information, media may contact:

Annette Robertson
Press Secretary
Office of the Minister of Finance
613-996-7861

David Barnabe
Media Relations
Department of Finance
613-996-8080

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