Minister of Finance Jim Flaherty released proposed regulations, which were announced in the budget, designed to give federally regulated defined benefit pension plans more flexibility in funding their deficits.

Under the proposed regulations, sponsors of defined benefit pension plans would be able to choose one of four options for relief: consolidate previous solvency payment schedules and amortize the entire solvency deficiency over a single, new five-year period; extend the solvency funding payment period to 10 years from five years with buy-in from members and retirees; extend the solvency funding payment period to 10 years when the difference between the five-year and 10-year level of payments is secured by a letter of credit; or, extend the solvency funding payment period to 10 years for federal agent Crown corporations with terms and conditions to ensure a level playing field.

The regulations are being released today for public comment. The official pre-publication in the Canada Gazette will be on June 10, and commenters will then have 30 days to make their views known.

Finance says that the Superintendent of Financial Institutions indicates that until the proposed regulations are finalized and come into force, pension plans are expected to prepare actuarial reports using current regulations governing pension funding and to file those reports within six months of the valuation date. Once the proposed regulations come into force, pension plans will have the option of re-filing an actuarial report with the same valuation date in order to apply the proposed funding relief measures. OSFI will provide further guidance shortly.

“The proposed measures will provide safeguards for plan members and promote the long-term health and viability of federally regulated defined benefit pension plans,” said Flaherty. “The intent of these measures is to help re-establish full funding of plans in an orderly manner, while also protecting pension benefits.”