The federal government has proposed changes to federally regulated private pension plans that it says will enhance protection for plan members, reduce funding volatility and modernize the rules for investments by pension funds.

The changes proposed earlier this week 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. These changes are part of the comprehensive package of reforms announced on Oct. 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 Jim Flaherty, Minister of Finance.

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, the Department of Finance says.

• limiting contribution holidays unless the solvency ratio exceeds full funding plus a new solvency margin, set at a level of 5% of solvency liabilities.

• 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, Finance says.

“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 Flaherty.

The amendments will appear in the Canada Gazette will be on May 8. Interested parties have 21 days to comment on the proposals.

IE