Finance minister Jim Flaherty Tuesday proposed regulatory changes to help make federally regulated private pension plans less sensitive to financial market volatility while protecting plan members and retirees.

“These changes will help pension plan sponsors to better manage their funding obligations while providing additional protection to plan members and retirees,” Flaherty said.

The proposed amendments to the Pension Benefits Standards Regulations, 1985 would:

> permit plan sponsors to secure properly structured letters of credit in lieu of making solvency payments to the pension fund, up to a limit of 15% of plan assets;

> require plan sponsors to fully fund pension benefits on plan termination;

> void any amendments to a pension plan that would reduce the solvency ratio of the pension plan if the plan’s solvency ratio would be below 0.85; and

> permit sponsors, plan members and retirees of a distressed pension plan to negotiate their own funding arrangements to facilitate a plan restructuring.

These proposed changes to federally regulated private pension plans implement elements of the government’s modernized federal pension framework announced on Oct. 27, 2009, which enhances protection for plan members, reduces funding volatility, makes it easier to negotiate changes to pension arrangements and modernizes the rules for investments made by pension funds.

The changes do not apply to provincially regulated pension plans.

The amendments are being released today for public comment. The official pre-publication in the Canada Gazette will be on December 18.

At that time, interested persons may make representations on the proposed amendments within 30 days, prior to final consideration by the government.

IE