Federal government releases draft regulations for solvency reserve accounts, multi-employer pension plan solvency funding requirements
October 17, 2024
The federal government has released draft regulations addressing solvency reserve accounts (SRAs) and solvency funding requirements for multi-employer pension plans (MEPPs).
SRAs:
The draft regulations aim to implement the legislative framework for SRAs established by the Budget Implementation Act, 2022, No. 1 (see our previous update here). SRAs allow plan sponsors to withdraw excess funds from the pension fund if the plan is sufficiently funded. The draft regulations set out the requirements for establishing an SRA, acceptable SRA remittances, and reporting obligations to plan members. Additionally, the draft regulation proposes the following limits on SRA withdrawals:
- withdrawals must not reduce the plan’s going concern or solvency ratio below 1.05;
- employers may not withdraw more than 20% of the SRA’s eligible surplus per year, and;
- upon plan termination, employers may withdraw remaining SRA funds only after the Superintendent approves the termination report and all benefit obligations are fully paid.
MEPPs Solvency Funding Requirements:
The draft regulations proposed amendments to better the “funding flexibility of federally regulated defined benefit MEPPs” to improve the long-term financial sustainability of these plans. Specifically, the draft regulations propose to reduce the solvency funding requirement for MEPPs (excluding NC plans) from 100% to 85%.
To learn more about the draft regulations, click on more information below:
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