The Financial Services Commission of Ontario is making changes to the process of allocating funds from the Pension Benefits Guarantee Fund to the pension plans of insolvent companies.

The regulator says that the objective of the revised process is to address issues related to reductions to pension benefits, liability matching and settlement of benefits.

The revised process will require that pension benefits to retirees be immediately reduced to the PBGF guaranteed level, and not to the funded level of the pension plan. This change will help to alleviate financial instability for retirees, FSCO says.

Funds held in the PBGF are not matched to the liabilities of the pension plan that is being wound up. The revised process will require that funds be transferred from the PBGF to the pension plan, thus allowing the Administrator to better immunize the pension fund and minimize its risk of loss in regards to pension obligations.

Also, FSCO says that the settlement of benefits to members is often unnecessarily delayed due to hold ups in making payment from the PBGF to the pension funds. Changes to the allocation process will enable the Administrator to maintain the assets in the pension fund and make benefits payments to members in a more timely manner.

In total, the revised process will expedite the transfer of funds from the PBGF to the pension plan while maintaining current accountability and safeguards, FSCO says.

Other changes are being made to expedite the application process. In the past, a completed wind up report was required to support a claim for an allocation under the PBGF.

Now, FSCO says, in recognition of the delays that result from the data verification required to complete an insolvency wind up report, an actuarial statement signed by the actuary will be accepted in lieu of a wind up report for the purposes of the declaration and allocation only.

FSCO will review the allocation request and, upon acceptance of the estimates provided, the allocation will be authorized. A final wind up report must still be filed and accepted by FSCO prior to the distribution of benefits to the members. If necessary, there may be an additional allocation request.