Pension Benefits Standards Regulations, 1985

9 (1) For the purposes of this section,

initial unfunded liability

initial unfunded liability means the increase on or after January 1, 1987 in the going concern liabilities of a plan or the decrease on or after January 1, 1987 in the going concern assets of a plan as a result of

• (a) the establishment of the plan,

• (b) an amendment to the plan,

• (c) a change in the methods or bases of valuation of the plan, or

• (d) an experience loss; (passif initial non capitalisé)

solvency deficiency

solvency deficiency means the extent to which the liabilities of a plan, determined on the basis that the plan is terminated, or on a basis that is certified by an actuary to be reasonably approximate thereto, and that takes into account any significant increases or decreases in benefits to the plan members as a result of the termination, exceed the aggregate of

• (a) the value of the assets of the plan, determined on the basis of market value or of a value related to the market value by means of a method using market values over a period of not more than five years to stabilize short-term fluctuations,

• (b) the present value of a special payment established pursuant to the Pension Benefits Standards Regulations, as those Regulations read on December 31, 1986,

• (c) the present value of a special payment in respect of an initial unfunded liability that emerged after December 31, 1986 as a result of benefits granted for a period of employment prior to the effective date of the plan, where such employment had not previously been recognized by the plan,

• (d) the present value of any other special payment due in the next five years; and

• (e) in respect of a plan that becomes subject to the Act after January 1, 1987, the present value of special payments with respect to an initial unfunded liability that emerged before the plan became subject to the Act, established in a valuation report that has been filed with the Superintendent and, in the Superintendent’s opinion, has been prepared

  • (i) on the basis of actuarial assumptions or methods that are adequate and appropriate,

  • (ii) in accordance with paragraph 12(3.1)(a) of the Act, and

  • (iii) prior to the plan becoming subject to the Act. (déficit de solvabilité)

(2) For the purposes of this section,

• (a) the date of emergence of an initial unfunded liability in respect of an occurrence described in

  • (i) paragraph (a) of the definition “initial unfunded liability” in subsection (1), is the effective date of the plan,

  • (ii) paragraph (b) of the definition “initial unfunded liability” in subsection (1), is the effective date of the amendment,

  • (iii) paragraph (c) of the definition “initial unfunded liability” in subsection (1), is the date as of which the change is made, and

  • (iv) paragraph (d) of the definition “initial unfunded liability” in subsection (1), is the date as of which the going concern valuation that identified the experience loss was performed;

• (b) the present values referred to in paragraphs (b), (c) and (d) of the definition “solvency deficiency” in subsection (1), shall be determined on the basis of the assumed interest rate used in the valuation of the liabilities for the purpose of that definition; and

• (c) the date of emergence of a solvency deficiency is the date as of which the valuation that identified the deficiency was performed.

(3) An initial unfunded liability of a plan shall be funded

• (a) first, by the amount by which the going concern assets of the plan exceed the going concern liabilities of the plan; and

• (b) second, by special payments sufficient to liquidate the remaining amount of the initial unfunded liability by equal annual payments over a period not exceeding 15 years from the date on which the initial unfunded liability emerged.

(4) A solvency deficiency of a plan emerging after December 31, 1986 shall be funded by special payments sufficient to liquidate the solvency deficiency by equal annual payments over a period not exceeding five years from the date on which the solvency deficiency emerged.

(5) At the date of the emergence of a solvency deficiency, any special payments required to fund an initial unfunded liability that are to be made after the five-year period over which the solvency deficiency is to be funded may be reduced pro rata so that at the date of the emergence of the solvency deficiency the present value of the special payments made to fund the initial unfunded liability and the solvency deficiency is not less than the amount by which the going concern liabilities of the plan exceed the going concern assets of the plan.

(6) The interest rate used to determine the present value of the reduced special payments in accordance with subsection (5) shall be the same as the interest rate used to determine the going concern liabilities of the plan.

(7) Subject to subsection (8), a plan shall be funded in each plan year by

• (a) a contribution equal to the normal cost of the plan;

• (b) a special payment referred to in subsection (3);

• (c) a special payment referred to in subsection (4); and

• (d) a special payment established pursuant to the Pension Benefits Standards Regulations, as those Regulations read on December 31, 1986.

(7.1) The amount of a contribution described in paragraph (7)(a) may be reduced by all or a portion of the lesser of

• (a) the amount by which the going concern assets of the plan exceed the going concern liabilities of the plan, and

• (b) the amount by which the solvency assets of the plan, as referred to in paragraph (a) of the definition “solvency deficiency” in subsection 9(1), exceed the solvency liabilities of the plan.

(8) In lieu of the special payments referred to in paragraphs (7)(b) and (c), special payments may be established as of the date of the emergence of the initial unfunded liability or the solvency deficiency, so that each payment is the same percentage of the anticipated remuneration to be paid to the plan members

• (a) in the case of an initial unfunded liability, for a period not exceeding 15 years, or

• (b) in the case of a solvency deficiency, for a period not exceeding five years,

and the present value of the payments shall be equal to the remaining amount of the initial unfunded liability referred to in paragraph (3)(b) or the solvency deficiency.

(9) Where an actuarial report filed pursuant to subsection 12(3) of the Act reveals an actuarial gain under a plan that emerges on or after January 1, 1987, the amount of the gain shall

• (a) first, be applied to reduce the outstanding balance of any initial unfunded liability or solvency deficiency; and

• (b) second,

  • (i) be applied to increase benefits under the plan,

  • (ii) be applied to reduce the contribution of the employer to the normal cost of the plan, or

  • (iii) be left in the fund.

(10) Subject to subsection (11), where an outstanding balance of a solvency deficiency or an initial unfunded liability has been reduced by the application of an actuarial gain in accordance with subsection (9), the special payments remaining to be made in respect of the initial unfunded liability or solvency deficiency shall be reduced pro rata to take into account the application of the actuarial gain.

(11) A special payment shall not be reduced if the reduction has the effect of increasing the time over which a solvency deficiency is liquidated in accordance with subsection (4).

(12) An actuarial gain under a plan that emerged prior to January 1, 1987 may be applied in accordance with the Pension Benefits Standards Regulations, as those Regulations read on December 31, 1986.

(13) Where an initial unfunded liability or solvency deficiency has been liquidated at a rate greater than the minimum rate required under subsections (3) and (4) by the making of an additional payment of any kind, the amount of a special payment for a subsequent plan year may be reduced if the outstanding balance of any initial unfunded liability or solvency deficiency will at no time be greater than it would have been had the special payment referred to in subsection (3) or (4) been made, taking into account the effect of the application of paragraph (9)(a) or (b).

(14) Payments to a plan shall be made as follows:

• (a) the normal cost of the plan and any special payment to be made during the plan year shall be paid in equal instalments or as an equal percentage of the anticipated remuneration to be paid to the members during the plan year and shall be paid not less frequently than quarterly and not later than 30 days after the end of the period in respect of which the instalment is paid;

• (b) the contributions of plan members shall be remitted to the administrator not later than 30 days after the end of the period in respect of which such contributions were deducted;

• (c) any other payment shall be remitted to the administrator not later than 30 days after the end of the period in respect of which it is made; and

• (d) the administrator shall forthwith pay into the fund any amount remitted to the administrator.