Private pension plan funding ratios improved in the second half of 2009, but many still face funding issues, the Office of the Superintendent of Financial Institutions said Thursday.

OSFI released the results of its latest solvency testing of federally regulated private defined benefit pensions, estimating that the average ratio increased modestly to 0.90 at year end.

Moreover, only 15% of those plans had a solvency ratio of less than 0.80, whereas at the end of 2008, the proportion was 40%.

Nevertheless, Judy Cameron, managing director of OSFI’s Private Pension Plans Division, cautioned the House of Commons Standing Committee on Finance that pensions will continue to face funding challenges. “The strong investment returns that pension plans earned in 2009 have been offset to some degree by the effects of very low interest rates on plan solvency liabilities,” she noted.

“While the most recent solvency testing results suggest an improving trend, many plan sponsors will still be required to make significant special payments, which may pose challenges for some plans,” she said.