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Solvency Funding Relief Regulations (SOR/2006-275)

Regulations are current to 2024-03-06 and last amended on 2015-04-01. Previous Versions

PART 2New 10-year Funding (continued)

Information To Be Provided to Beneficiaries (continued)

 If a beneficiary representative has the authority to act on behalf of a beneficiary with respect to any matter under this Part, the administrator shall deal with the beneficiary representative.

Documents and Information To Be Filed with Superintendent

 The administrator shall file the following documents and information with the Superintendent:

  • (a) written notification that the initial solvency deficiency is to be funded in accordance with this Part;

  • (b) the actuarial report valuing the plan as of the day on which the initial solvency deficiency emerged;

  • (c) other than in the case of a multi-employer pension plan, a written statement confirming that a resolution of the board of directors of the employer has been passed, if the employer is a corporation, or, if the employer is not a corporation, an approval of the persons who have the authority to direct or authorize the actions of that body, has been given, authorizing the special payment schedule calculated in accordance with this Part; and

  • (d) a written statement confirming that the information set out in section 8 has been provided to the beneficiaries or to the beneficiary representatives and that less than one third of the members have objected and less than one third of the beneficiaries excluding members have objected.

Prescribed Solvency Ratio

 For the purposes of paragraph 10.1(2)(b) of the Act, the prescribed solvency ratio level for the first five plan years of funding in accordance with this Part is the solvency ratio calculated on the basis of the most recent actuarial report.

  • SOR/2011-85, s. 18

New Solvency Deficiency

  •  (1) Despite section 9 of the Pension Benefits Standards Regulations, 1985, a solvency deficiency that emerges after the day on which the initial solvency deficiency emerged shall be calculated as the amount by which the solvency liabilities exceed the sum of the following amounts:

    • (a) the adjusted solvency asset amount,

    • (b) the present value of special payments made under section 6 or 7 if at least one of those payments is due more than five years after the valuation date, and

    • (c) the present value of the going concern special payments that were used to fund the initial solvency deficiency that are due during the period beginning on the valuation date and ending on the 10th anniversary of the date of emergence of the initial solvency deficiency if at least one of those payments is due more than five years after the valuation date.

  • (2) The interest rate used to determine the present value of the special payments referred to in subsection (1) is the same as the interest rate used to determine the solvency liabilities.

  • SOR/2010-149, s. 10

Termination of Plan

 If a plan is fully terminated and on the day on which it terminates the liabilities of the plan exceed its assets, the lesser of the amount determined in subsection 6(4) and the amount by which the liabilities of the plan exceed its assets shall immediately be remitted to the pension fund.

  • SOR/2015-60, s. 35(F)

Ceasing 10-year Funding

  •  (1) A plan may cease to be funded under this Part, beginning on the first day of a plan year, by giving written notice to the Superintendent not later than six months after the beginning of that plan year.

  • (2) The notice shall indicate whether the plan has a surplus as of the first day of the plan year.

  • (3) If funding ceases, section 9 of the Pension Benefits Standards Regulations, 1985 applies in respect of the plan except as otherwise provided under this Part.

Calculating Surplus

 A surplus in respect of a plan shall be determined in the manner prescribed by subsection 16(1) of the Pension Benefits Standards Regulations, 1985 as if the plan had been fully terminated.

Plan with Surplus

 If a plan ceases to be funded in accordance with this Part and the plan has a surplus as of the first day of the plan year, this Part ceases to apply to the plan on the first day of that plan year.

Plan Without Surplus

  •  (1) If a plan ceases to be funded in accordance with this Part and the plan does not have a surplus as of the first day of the plan year, section 9 of the Pension Benefits Standards Regulations, 1985 applies except as follows:

    • (a) when funding ceases before the sixth plan year,

      • (i) the administrator shall have an actuarial report prepared — in which the present value of the special payments referred to in section 6 or 7 shall be zero — valuing the plan as of the first day of the plan year in which funding ceases,

      • (ii) the amount by which the aggregate amount of special payments that would have been made to the pension fund in accordance with Part 1 from the day on which the initial solvency deficiency emerged to the day on which funding ceases, 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 immediately be remitted to the pension fund, and

      • (iii) and (iv) [Repealed, SOR/2010-149, s. 11]

      • (v) the special payments referred to in section 6 or 7 shall continue to be made until the first special payment required to fund the remaining initial solvency deficiency referred to in subparagraph (iii) is made to the pension fund; and

    • (b) when funding ceases after the fifth plan year,

      • (i) the administrator shall have an actuarial report prepared as of the first day of the plan year in which funding ceases, and

      • (ii) the amount by which the aggregate amount of special payments that would have been made to the pension fund in accordance with Part 1 from the day on which the initial solvency deficiency emerged to the day on which funding ceases, 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 immediately be remitted to the pension fund.

  • (2) [Repealed, SOR/2010-149, s. 11]

  • SOR/2010-149, s. 11
  • SOR/2015-60, s. 36

Crown Corporations

  •  (1) The administrator of a plan of a Crown Corporation with an initial solvency deficiency that is funded in accordance with this Part shall not have to comply with subsection 6(2) and sections 8 and 10 if the administrator files the following documents and information with the Superintendent:

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

    • (b) a written statement confirming that a resolution of the board of directors of the Crown Corporation has been passed authorizing the special payment schedule calculated in accordance with this Part;

    • (c) a written statement confirming that the board of directors of the Crown Corporation has notified the Minister and the Minister responsible for the Crown Corporation of the decision that the initial solvency deficiency is to be funded in accordance with this Part; and

    • (d) a copy of letters from the Minister and the Minister responsible for the Crown Corporation acknowledging that they have been informed of the fact that the Crown Corporation intends to fund the initial solvency deficiency in accordance with this Part.

  • (2) When the administrator provides the written statement under paragraph 28(1)(b) of the Act, the administrator shall also indicate the amount of the initial solvency deficiency and that the deficiency is to be funded in accordance with this Part by equal annual payments over a period not exceeding 10 years.

  • (3) Section 11 shall not apply in respect of a plan if the documents and information set out in subsection (1) are filed with the Superintendent.

PART 310-year Funding with Letters of Credit

General Funding Rules

 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 27(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 27(1)(b).

  • SOR/2010-149, s. 12
  •  (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 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 if the employer

    • (a) obtains letters of credit for each of the first five plan years of funding under this Part, for the amount representing the difference between the present value, at the end of each plan year, of the remaining special payments under this Part and the present value of the remaining special payments that would have been required to be made to liquidate the initial solvency deficiency as if it had been funded under Part 1; and

    • (b) maintains letters of credit for the sixth plan year of funding and for each plan year after that year, representing the present value at the beginning of each plan year of the remaining special payments under this Part.

  • (3) The present value of the remaining special payments shall be determined by using the interest rate that was assumed in valuing the liabilities of the plan for the purpose of calculating the initial solvency deficiency.

Letter of Credit

  •  (1) A letter of credit required by this Part shall be an irrevocable, unconditional standby letter of credit that

    • (a) is in accordance with the rules of International Standby Practices 1998 (publication No. 590 of the International Chamber of Commerce), as amended from time to time;

    • (b) is payable only in Canadian currency;

    • (c) is issued or confirmed by an issuer who is a member of the Canadian Payments Association that has been assigned an acceptable rating; and

    • (d) provides that

      • (i) the letter of credit is made out to the holder's benefit,

      • (ii) the issuer will pay the face amount of the letter of credit on demand from the holder without inquiring whether the holder has a right to make the demand,

      • (iii) the bankruptcy of the employer shall have no effect on the rights and obligations of the issuer and the holder set out in the letter of credit,

      • (iv) the letter of credit will expire on the day on which the plan's year ends,

      • (v) the letter of credit will automatically be renewed for the full face amount for further one-year periods on the expiry date referred to in subparagraph (iv) unless the issuer notifies the holder, in writing, of the non-renewal not less than 90 days before the expiry date, and

      • (vi) the letter of credit may not be amended during the term of the letter of credit and may not be assigned except to another holder.

  • (2) A letter of credit shall be obtained not later than the day on which the actuarial report is filed with or provided to the Superintendent for the first plan year of funding, and at least 30 days before the beginning of each subsequent plan year that is covered by it.

  • (3) The letter of credit shall immediately be provided to the holder.

  • SOR/2011-85, s. 19

 If separate letters of credit have been obtained for each plan year, a letter of credit is not required to be automatically renewed after the fifth year following the plan year for which it was obtained.

 If the face amount of letters of credit obtained or maintained in accordance with this Part for a plan year is less than the amount required by subsection 19(2) for that plan year, the employer shall make up the difference either by increasing the amount of letters of credit or by making additional payments to the pension fund no later than on the day on which the next payment is made to the pension fund in accordance with subsection 9(14) of the Pension Benefits Standards Regulations, 1985.

  • SOR/2010-149, s. 13
  • SOR/2015-60, s. 37(F)

Trust Agreement

  •  (1) The employer and, if the employer is not the administrator of the plan, the administrator shall enter into a trust agreement or shall amend any existing trust agreement it may have with the holder regarding the letters of credit referred to in this Part.

  • (2) The trust agreement shall provide that

    • (a) the holder shall hold the letters of credit in Canada in trust for the plan;

    • (b) the definition default in subsection 1(1) applies to the agreement;

    • (c) the employer shall immediately notify, in writing, the holder and the Superintendent and, if the employer is not the administrator of the plan, the administrator of a default;

    • (d) if not otherwise notified under paragraph (c), the administrator shall notify, in writing, the holder and the Superintendent of a default immediately after becoming aware of it;

    • (e) on receipt of the notice referred to in paragraph (c) or (d), the holder shall immediately make a demand for payment of the face amount of all of the letters of credit held in respect of the plan;

    • (f) on receipt of a written notice of default from any person other than the employer or the administrator, the holder shall

      • (i) immediately notify, in writing, the employer, the administrator and the Superintendent of the notice; and

      • (ii) make a demand for payment of the face amount of all of the letters of credit held in respect of the plan unless the administrator provides a written notice to the holder within 30 days after receipt of the notice that the default has not occurred;

    • (g) when a holder makes a demand for payment of a letter of credit held for the plan, it shall notify, in writing, the employer, the administrator and the Superintendent that it has made the demand;

    • (h) the holder shall immediately notify, in writing, the employer, the administrator and the Superintendent if the issuer does not pay the face amount of a letter of credit after a demand for payment has been made,

    • (i) the holder shall not make a demand for payment if a letter of credit expires without being renewed, or the face amount is being reduced, in accordance with this Part;

    • (j) the administrator shall notify the holder of any circumstance when a letter of credit may expire, or when the face amount of a letter of credit may be reduced, in accordance with this Part; and

    • (k) the administrator shall provide the holder with a copy of the statements referred to in paragraph 24(1)(e) and subsection 24(2) and with a copy of the written notice referred to in paragraph 30(a).

  • SOR/2015-60, s. 38(F)

 [Repealed, SOR/2015-60, s. 39]

Statement to Members

 When the administrator provides the written statement under paragraph 28(1)(b) of the Act, the administrator shall also provide the following information:

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

  • (b) the fact that the deficiency is to be funded in accordance with this Part by equal annual payments over a period not exceeding 10 years; and

  • (c) the aggregate face amount of all of the letters of credit that are held by the holder in respect of the plan.

 

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