The Ontario government is consulting on proposed changes to pension regulations that would introduce a permanent solvency test for plans that are now exempt from that requirement.
Currently, certain jointly sponsored pension plans have a temporary exemption from solvency testing, which is set to expire on Jan. 1, 2025. As a result, plans only have to file asset valuation reports every three years, regardless of their funding status.
Now, the Ministry of Finance is proposing regulatory amendments that would introduce a test designed to “help to identify the risk of a plan developing a major funding issue.”
“Implementing a permanent funding concerns test for listed [plans] would strengthen the pension regulatory framework in Ontario, supporting timely actions by plan boards in case of plan funding deficiencies,” the government said in a notice detailing the proposals.
“This would help support contribution stability, maintaining long-term plan stability and, in turn, providing plan members with better pension benefit security.”
Among other things, the proposed test would include a 90% “going concern funding threshold” — determined as the ratio of the value of a plan’s assets to its liabilities — which would trigger a requirement to file an annual valuation report.
Assuming the new test is approved, it would take effect Jan. 1, 2025. This would followed by a one-year transition period, so that the new test would be required beginning Jan. 1, 2026.
Additionally, the finance department is proposing to remove the requirement for the these plans to disclose their transfer ratio in statements to plan members.
That step is being proposed to “simplify member disclosure requirements and ensure a more effective communication between plan administrators and plan members,” the province said.
The proposed changes are out for comment until Aug. 22.