Many pension plans have found themselves in trouble as a result of the three-year bear market said Nick Le Pan, head of the Office of the Superintendent of Financial Institutions, on Wednesday.

Speaking to the National Press Club of Canada Newsmaker Breakfast in Ottawa, Le Pan, said that OSFI is focused on 60 defined benefit plans of the 1,200 plans it oversees.

Le Pan noted that 177 of the 370 defined benefit plans it oversees are underfunded, according to stress testing data from December 2002.

“Looking back, it is clear that plan sponsors, unions and others have to be very careful about enhancing benefits unless they are sure they can pay for them. The current environment calls for a lot of caution when enhancing benefits, and for a focus on what is affordable.”

Le Pan says that pension plans need to be front and centre in the minds of corporate boards and senior management. And, he encouraged plan members to exercise their right to obtain information from the plan administrator.

As for OSFI, it is stepping up stress testing of pensions to every six months, from every 12 months. It is vigorously pursuing problem plans, andit is becoming less tolerant of moderate under-funding.

If plans are under-funded, even slightly, OSFI will require disclosure plus a board resolution to continue to take contribution holidays. It will also routinely require annual valuation reports for all plans that it believes are operating just short of the line

In the case of under-funded pension plans, Le Pan says, “When shortfalls are identified, OSFI’s job is to ensure that this gets recognized by the various parties involved, and gets dealt with.” He said that there is no silver bullet for dealing with shortfalls, they can either be funded, or the plan can be restructured.