Publication of a draft regulation on the funding of multi-jurisdictional defined benefit pension plans
For the purposes of the draft regulation, a pension plan that is “multi-jurisdictional” is a pension plan that is registered in Quebec which, in addition to having workers from Quebec, also includes workers from at least one other Canadian province or is under federal jurisdiction.
The draft regulation corrects a situation where Quebec members may have incurred greater financial losses than members from other provinces when the plan assets cannot cover the liabilities in the event of plan division or of an insolvent employer’s plan termination.
The draft regulation prescribes minimum funding requirements on a solvency basis for all these plans when the solvency ratio, determined based on the amortization payments otherwise required over the next five years, is less than 75%. In short, we understand that in the event of such a solvency deficiency, the portion of such deficiency that is less than 75% must be amortized over a five-year period. For multi-employer defined benefit-defined contribution pension plans and plans benefiting from special funding measures through a specific SPPA regulation, a 10-year period is used instead of five years.
All the plans covered by the regulation must file a full actuarial valuation as at December 31, 2018, except if the annual notice on the plan’s financial situation determines that the solvency ratio at this date is equal to or greater than 75%.
According to a regulatory impact analysis conducted by Retraite Québec, 170 of the 1,000 plans under its supervision are covered by the draft regulation, with contributions being increased for only two of these plans.
Once adopted, the draft regulation will enter into force retroactively on December 31, 2018.
Do you have any questions regarding the application of this regulation? Contact your Normandin Beaudry consultant or email us.