NS Extends Time to Fund Solvency Deficiencies for Defined Benefit Pension Plans
March 6, 2013
By Kiersten Amos, Former Lawyer at McInnes Cooper
Effective February 12, 2013, the NS government amended the NS Pension Benefits Regulations to provide further relief from solvency funding for private defined benefit pension plans in NS. Under the amended Regulations, employers who are sponsors of defined benefit pension plans may have 15 years, rather than only 5 years, to bring underfunded plans into a solvent (fully funded) position, provided they:
- take the necessary steps set out in the amended Regulations required to extend the period; and
- satisfy the ongoing requirements set out in the amended Regulations if the period is extended.
Some key highlights of the amendments for employers which sponsor defined benefit pension plans include:
Election by Administrator. Pension plan administrators may elect to make the special payments required to fund a solvency deficiency in the pension plan over 15 years, instead of 5 years, if the administrator meets the following requirements:
- Notice of Election. The administrator must give notice to all current, former and retired members.
- Member Objections. If more than one third of the members object, solvency funding relief will not be granted and the plan must be funded in 5 years.
- Certificate of Consent. If more than one third of the members do not object to the election, the administrator must file a certificate of consent in the prescribed form.
Union Speaks for Members. Under the prior solvency funding relief regulations, plan members who are members of a union could object individually and the union also had the right to object. However, under the new amended Regulations, the union speaks exclusively for its members; the union alone has the ability to exercise the right of its members to object. If the union does not object, all plan members who are members of the union are deemed to not object.
Extension Can Run From Valuation Filing Date. The 15 year period does not have to start on the valuation date; it can start up to 12 months after the valuation date, and run for a further 15 years.
Flexible Valuation Dates. The amended Regulations introduce flexible valuation dates for plans seeking solvency funding relief through an extended the funding period. The valuation date must be between January 3, 2011 and January 2, 2014. If the Administrator has already filed a report, it may file a new valuation report for the same date to take advantage of the 15 year period, provided the valuation date is not less than one year prior to the date on which the new report is filed.
Consolidation of Solvency Schedules. Plan administrators can consolidate prior solvency schedules and start afresh with a new 15 year schedule. However, special payments under this election cannot be less than the amount required to fully liquidate any new solvency deficiency determined as at the valuation date along with the amount required to fully liquidate any existing solvency deficiency not fully liquidated as at the valuation date.
Annual Progress Reports. If an Administrator secures the 15 year solvency funding relief, it must now send annual progress reports to the members no later than 6 months after the end of the fiscal year of the pension plan.
No Plan Amendments. Plan administrators electing the 15 year solvency funding relief cannot amend the plan to increase the cost of benefits, create or increase a going concern unfunded liability, or create or increase a solvency deficiency under the plan during the 10 years immediately following the valuation date.
Valuation Report. Plans with a funding ratio of less than 85% on a valuation report filed on or after February 11, 2013 must file the next valuation report within 1-year rather than the 3-year period.
The amended Regulations apply only to private pension plans registered in the Province of N.S. under the Pension Benefits Act. Click here to read the complete amendment to the Pension Benefits Regulations, N.S. Reg. 33/2013 as published in Part II of the Royal Gazette.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Pension & Benefits Team to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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