Canada’s ministry of finance will begin public consultations on the legislative and regulatory framework for federally regulated private pension plans in mid-March.
These plans currently represent 7 per cent of all private pension plans in Canada, accounting for approximately 12 per cent of pension assets. They cover areas of employment under Federal jurisdiction, including banking, telecommunications and inter-provincial transportation.
Jim Flaherty, minister of finance, this week announced the Government would begin scheduled public consultations across Canada on March 13.
“Many Canadians are concerned about the long-term viability of their pension plans,” he said.
“The Government wants to hear people’s views on how we can strengthen the security of pension plan benefits and ensure that the framework is balanced and appropriate.”
The Government released a discussion paper titled Strengthening the Legislative and Regulatory Framework for Private Pension Plans Subject to the Pension Benefits Standards Act, 1985 on January 9. The national consultations will be chaired by Ted Menzies, parliamentary secretary to the minister of finance.
Late last year, Flaherty announced that the Government would provide solvency funding relief to federally regulated private pensions that had been affected by the substantial declines in equity markets.
“The purpose of this paper is to get the views of Canadians on issues related to the legislative framework for federally regulated defined benefit (DB) and defined contribution (DC) pension plans with the objective of making permanent changes in 2009,” he said.
Market declines caused by the global financial crisis left the solvency of Canadian DB pension plans at historical lows, and DC plan members with shrinking retirement savings, according to a recent analysis by Watson Wyatt.
The pension solvency funded ratio (the ratio of market value of plan assets to plan solvency liabilities) of the typical pension plan declined 27 percentage points in 2008, dropping from 96 per cent at the beginning of the year to 69 per cent at year-end.
Watson Wyatt’s Pension Barometer, which reflects the combined impact of investment performance and interest rates on the solvency funded ratio of a typical Canadian pension plan, indicates that the funded status of the typical pension plan decreased 11 percentage points in the fourth quarter alone.
“Canadian pension plans are certainly reflecting the declines in financial markets,” said David Burke, retirement practice director of Watson Wyatt’s Canadian offices.
“Because the best form of benefit security for plan members is a financially healthy employer, we are pleased to see various governments taking steps to provide temporary funding relief for DB pension plans. However, the scope of relief varies widely and some of these governments have imposed conditions that are unrealistic and we urge pension regulators and politicians to act quickly and be flexible in providing relief, while also keeping a watchful eye over benefit security.”
