Solvency Funding Relief Regulations (SOR/2006-275)

Interpretation

• 1 (1) The following definitions apply in these Regulations.

  acceptable rating

  acceptable rating means the rating given by a credit rating agency to an issuer at the time of the issuance or renewal of a letter of credit that is at least equal to one of the following ratings:

  • (a) A, from Dominion Bond Rating Service Limited;

  • (b) A, from Fitch Ratings;

  • (c) A2, from Moody's Investors Service; or

  • (d) A, from Standard & Poor's Ratings Services. (note acceptable)

  Act

  Act means the Pension Benefits Standards Act, 1985. (Loi)

  bank

  bank means a bank or authorized foreign bank within the meaning of section 2 of the Bank Act. (banque)

  beneficiary

  beneficiary means a member or a former member of a plan or any person who is entitled to pension benefits under the plan except

  • (a) a former member who has transferred or has chosen to transfer their pension benefit credit under section 26 of the Act; and

  • (b) a former member for whom the administrator has purchased an immediate or deferred life annuity. (bénéficiaire)

  beneficiary representative

  beneficiary representative means a union representative or court-appointed representative of a beneficiary. (représentant des bénéficiaires)

  cooperative credit society

  cooperative credit society means a cooperative credit society to which the Cooperative Credit Associations Act applies or a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province. (coopérative de crédit)

  Crown Corporation

  Crown Corporation means a Crown corporation that is an agent of Her Majesty in right of Canada in respect of which employment has not been excepted from included employment by a regulation made under subsection 4(6) of the Act. (société d'État)

  default

  default means the occurrence of one of the following:

  • (a) the written notification to the Superintendent that the administrator intends to terminate or wind up the whole plan under subsection 29(5) of the Act;

  • (b) the amendment of the plan, resolution by the employer or coming into force of any other measure that effects the termination of the whole plan;

  • (c) the Superintendent’s declaration under subsection 29(2) or (2.1) of the Act that terminates the whole plan;

  • (d) the filing of any application or petition by the employer, or against the employer, under the Companies' Creditors Arrangement Act, the Bankruptcy and Insolvency Act or the Winding-up and Restructuring Act;

  • (e) the termination of the whole plan;

  • (f) the non-renewal of a letter of credit referred to in Part 3 for its full face amount unless

    • (i) it has been replaced by another letter of credit for the same face amount at least 30 days before the beginning of the following plan year,

    • (ii) an amount equal to the face amount of the letter of credit has been remitted to the pension fund at least 30 days before the beginning of the following plan year, or

    • (iii) the face amount has been reduced in accordance with section 26; or

  • (g) the failure by an employer to comply with a direction issued by the Superintendent pursuant to section 11 of the Act with respect to the face amount of the letters of credit required by subsection 19(2). (défaut)

  holder

  holder means a trust company that is licensed to carry on business in Canada and that has entered into a trust agreement with the employer or, if the employer is not the administrator, with the employer and the administrator. (détenteur)

  initial solvency deficiency

  initial solvency deficiency means the solvency deficiency of a plan that emerged on the date on which the valuation that identified the deficiency was performed, as reported in the first actuarial report filed after the coming into force of these Regulations, and that values the plan as of a date that is later than December 30, 2005 and before January 2, 2008. (déficit initial de solvabilité)

  issuer

  issuer means a bank or cooperative credit society that has an acceptable rating and that is not the employer or affiliated with the employer within the meaning of subsection 2(2) of the Canada Business Corporations Act. (émetteur)

  special payment

  special payment means a payment or one of a series of payments that is determined in accordance with section 9 of the Pension Benefits Standards Regulations, 1985 or section 5, 6, 7 or 19 of these Regulations. (paiement spécial)

• (2) Except as otherwise provided, expressions used in these Regulations have the same meaning as in the Pension Benefits Standards Regulations, 1985.

Application

• 2 (1) These Regulations apply to the funding of a defined benefit plan and, except as otherwise provided, the Pension Benefits Standards Regulations, 1985 also apply to the funding of a plan under these Regulations.

• (2) For the purposes of these Regulations, an initial solvency deficiency shall be calculated in accordance with the definition solvency deficiency in subsection 9(1) of the Pension Benefits Standards Regulations, 1985 except that

  • (a) the present value of any special payment referred to in paragraph (d) of that definition calculated in respect of the funding of a solvency deficiency that emerged before the emergence of the initial solvency deficiency shall be zero; and

  • (b) for the purposes of Parts 2 and 3, that definition shall be interpreted as including the present value of the special payments calculated with respect to an initial unfunded liability that are due in the next 10 years.

• (3) For the purposes of these Regulations, any special payment that would have been required to be made under subsection 9(4) of the Pension Benefits Standards Regulations, 1985 with respect to the funding of a solvency deficiency that emerged before the emergence of the initial solvency deficiency is not required to be made.

• (4) In the case of an inconsistency between these Regulations and the Pension Benefits Standards Regulations, 1985, these Regulations shall prevail.

3 These Regulations do not apply to

• (a) a plan that is established after December 31, 2005 unless the plan is formed as a result of a merger of plans one or more of which was established before December 31, 2005 or is formed as a result of a splitting of a plan that was established before December 31, 2005; or

• (b) a plan to which the Air Canada Pension Plan Solvency Deficiency Funding Regulations apply.

• 4 (1) Plans may only be funded under these Regulations if all of the payments that are owed to the pension fund before the day on which the initial solvency deficiency emerges, as required by subsection 9(14) of the Pension Benefits Standards Regulations, 1985, have been made as of the filing date of the actuarial report that shows the emergence of that initial solvency deficiency.

• (2) Despite section 8 of the Pension Benefits Standards Regulations, 1985, the funding of a plan shall be considered to meet the standards for solvency if the funding is in accordance with Part 1, 2 or 3 of these Regulations.

PART 1New Five-year Funding

General Funding Rules

• 5 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985, an initial solvency deficiency of a plan may be funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding five years from the day on which the initial solvency deficiency emerged.

• (2) If the initial solvency deficiency is funded in accordance with this Part, the administrator of the plan shall notify the Superintendent in writing at the time of filing of the first actuarial report after the coming into force of these Regulations.

• (3) When a solvency deficiency emerges after the day on which the initial solvency deficiency emerged, the new solvency deficiency shall be calculated, for the purposes of subsection 9(4) of the Pension Benefits Standards Regulations, 1985, in accordance with the definition solvency deficiency in subsection 9(1) of those Regulations and that definition shall be interpreted as including the present value of the special payments referred to in subsection (1).

PART 2New 10-year Funding

General Funding Rules

5.1 For the purposes of this Part,

• (a) despite paragraph 9(4)(c) of the Pension Benefits Standards Regulations, 1985, if there is a solvency deficiency, a plan shall be funded in each plan year by annual solvency special payments equal to the amount by which the solvency deficiency divided by 5 exceeds the amount of going concern special payments — other than those referred to in paragraph 12(1)(c) — that are payable during the plan year; and

• (b) unfunded liability means

  • (i) the going concern deficit of a plan as determined on the date that the plan was established;

  • (ii) the amount by which an increase in the going concern liabilities of a plan resulting from an amendment to the plan exceeds the going concern excess of the plan as determined on the day before the effective date of the amendment; or

  • (iii) the amount by which the going concern deficit of a plan determined at the valuation date exceeds the sum of

    • (A) the present value of going concern special payments established in respect of periods after the valuation date, and

    • (B) the present value of special payments referred to in paragraph 12(1)(b).

• 6 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985, an initial solvency deficiency of a plan may be funded in accordance with Part 1, but the remittance to the pension fund of a portion of the special payments determined under that Part may be deferred as if the initial solvency deficiency were funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding 10 years from the day on which the initial solvency deficiency emerged.

• (2) The initial solvency deficiency may be funded in accordance with this Part only if less than one third of the members and less than one third of the beneficiaries excluding members object before the date indicated in the statement referred to in paragraph 8(1)(j).

• (3) Any objection expressed by a beneficiary representative on behalf of the persons that they represent shall be counted as a separate objection for each person that they represent.

• (4) Despite the fact that the special payments referred to in subsection (1) may be made over a period that exceeds the period applicable under Part 1, for the purposes of subsection 8(1) of the Act, the amount by which the aggregate amount of special payments that would have been remitted to the pension fund in accordance with that Part from the day on which the initial solvency deficiency emerged, as adjusted to take into account the reductions in special payments resulting from the application of the Pension Benefits Standards Regulations, 1985, plus interest, exceeds the aggregate amount of special payments made to the pension fund in accordance with this Part, plus interest, shall be considered to be an amount accrued to the pension fund.

• (5) Interest shall be calculated by using the interest rate that was assumed in valuing the liabilities of the plan for the purpose of calculating the initial solvency deficiency.

Multi-employer Pension Plan

• 7 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985 and section 6 of these Regulations, and subject to subsection (2), an initial solvency deficiency of a multi-employer pension plan may be funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding 10 years from the day on which the initial solvency deficiency emerged.

• (2) If the funding is for an initial solvency deficiency of a multi-employer pension plan and if the annual amount of payments required to be made to the pension fund under subsection (1) is less than the aggregate amount of payments that are required to be made to the pension fund, excluding the normal cost and the special payments required to liquidate an unfunded liability, under all applicable collective agreements, the amount of payments required to be made to the pension fund in accordance with this Part shall be the aggregate amount of payments required to be made to the pension fund pursuant to all applicable collective agreements.

• (3) The initial solvency deficiency may be funded in accordance with this Part only if less than one third of the members and less than one third of the beneficiaries excluding members object before the date indicated in the statement referred to in paragraph 8(1)(j).

• (4) Any objection expressed by a beneficiary representative on behalf of the persons that they represent shall be counted as a separate objection for each person that they represent.

Information To Be Provided to Beneficiaries

• 8 (1) Subject to subsection (2), the administrator shall provide the following information to the beneficiaries:

  • (a) the solvency ratio of the plan as of the day on which the initial solvency deficiency emerged;

  • (b) the amount of the initial solvency deficiency;

  • (c) a description of the extent to which the beneficiaries' benefits would be reduced if the plan were fully terminated and wound up with the solvency ratio referred to in paragraph (a);

  • (d) a statement indicating that extending the period for funding the initial solvency deficiency as permitted by this Part may result in a lower value of the plan assets during the funding period than would be the case if the deficiency were funded over a period not exceeding five years and that the longer funding period may also extend the period during which the plan assets are less than the plan liabilities;

  • (e) the special payments that would have been made during the first plan year covered by the actuarial report referred to in paragraph 10(b) if the initial solvency deficiency were to be funded in accordance with Part 1;

  • (f) the special payments that are to be made during the first plan year covered by the actuarial report referred to in paragraph 10(b) if the initial solvency deficiency is funded in accordance with this Part;

  • (g) [Repealed, SOR/2015-60, s. 34]

  • (h) a statement indicating that the plan may be funded in accordance with this Part only if less than one third of the members object and less than one third of the beneficiaries excluding members object;

  • (i) a statement indicating that the Superintendent's approval is not required to fund the initial solvency deficiency in accordance with this Part;

  • (j) a statement indicating that the beneficiaries may object to the proposal to fund the plan in accordance with this Part by sending an objection to the administrator at the address and by the date indicated in the statement, and that date shall not be less than 30 days after the day on which the other information required to be provided under this section is provided by the administrator;

  • (k) a statement indicating that if the plan is funded in accordance with this Part, amendments to the plan that increase the pension benefits will be restricted for the first five plan years of funding in accordance with this Part; and

  • (l) a statement setting out the right of access to the documents described in paragraph 28(1)(c) of the Act.

• (2) If a beneficiary is represented by a beneficiary representative, the administrator shall provide the information set out in subsection (1) to the beneficiary representative.