The November Economic Statement announced temporary solvency funding relief for federally regulated pension plans. Further assistance is being proposed to increase the 110% limit on asset value smoothing – a formula that determines the deficiency funding requirements. As with the solvency funding relief, there will be some protection for plan members – any deferral of funding resulting from that increased limit will be subject ot a deemed trust.
However, more protection for plan members is needed when the market downturn has reached so deeply. Rather than giving plan sponsors more leniency in funding the deficiencies, they should be required to fully fund those deficiencies and the government can assist by guaranteeing a portion of the borrowing necessary to do so. The plan members are least able to do anything about the plan’s solvency and government support should target their vulnerability. The Quebec proposals to assist plan members of troubled funds reflects that approach.
The January 9th, 2009 consultation document invites comment on measures that could better protect plan solvency and plan members. Pension reform is long overdue and with several provincial panels already having reported, there could be real improvements in protection for plan members.