- News Release 2006-064 -
(SOR/DORS)
Her Excellency the Governor General in Council, on the recommendation of
the Minister of Finance, pursuant to the definition "surplus"a
in subsection 2(1), to subsection 9(1), to paragraph 10.1(2)(b)b,
to subsection 12(3), to paragraph 28(1)(b)c and to section
39d of the Pension Benefits Standards Act, 1985e,
hereby makes the annexed Solvency Funding Relief Regulations.
(SOR/DORS)
SOLVENCY FUNDING RELIEF REGULATIONS
interpretation
1. (1) The following definitions apply in these Regulations.
"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" means the Pension Benefits Standards Act, 1985.
(Loi)
"bank" means a bank or authorized foreign bank within the
meaning of section 2 of the Bank Act. (banque)
"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" means a union representative or
court-appointed representative of a beneficiary. (représentant des
bénéficiaires)
"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. (société coopérative de crédit)
"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" 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) 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" 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" 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" 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" 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 1
NEW 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 2
NEW 10-YEAR FUNDING
General Funding Rules
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 set out 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 actuarial
gains that were applied under paragraph 9(9)(a) 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
initial 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) a statement indicating that an actuarial report is to be
filed at least annually with the Superintendent while the plan is being
funded in accordance with this Part;
(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.
9. 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
10. 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
11. 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 that is filed with the Superintendent in
accordance with subsection 12(3) of the Act.
New Solvency Deficiency
12. 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
(a) the present value of the special payments referred to in
section 6 or 7; and
(b) the present value of the special payments calculated with
respect to an initial unfunded liability that are due in the period that
is the greater of
(i) the five years following the emergence of the new solvency
deficiency, and
(ii) the period then remaining of the 10 years following the
emergence of the initial solvency deficiency.
Termination of Plan
13. 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.
Ceasing 10-year Funding
14. (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
15. 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
16. 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
17. (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 C in
which the present value of the special payments referred to in section 6
or 7 shall be zero C 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 actuarial
gains that were applied under paragraph 9(9)(a) 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,
(iii) any remaining initial solvency deficiency disclosed by the
actuarial report, which shall be calculated by including the amount
remitted in accordance with subparagraph (ii) as an asset of the pension
fund, shall be considered to have emerged as of the day on which the
initial solvency deficiency emerged,
(iv) the remaining initial solvency deficiency calculated under
subparagraph (iii) shall be funded by special payments sufficient to
liquidate that initial solvency deficiency by equal annual payments over
a period not exceeding five years minus the number of years that the
plan was funded in accordance with this Part, and
(v) the special payments set out 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 actuarial
gains that were applied under paragraph 9(9)(a) 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) 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.
Crown Corporations
18. (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 3
10-YEAR FUNDING WITH LETTERS OF CREDIT
General Funding Rules
19. (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
20. (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 the Superintendent, under subsection
12(3) of the Act, 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.
21. 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.
22. 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 quarterly payment is made to the pension fund in accordance with
subsection 9(14) of the Pension Benefits Standards Regulations, 1985.
Trust Agreement
23. (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).
Documents and Information To Be Filed with Superintendent
24. (1) The administrator shall file the following documents and
information with the Superintendent for the first plan year of funding of
the initial solvency deficiency:
(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) 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;
(d) a copy of each letter of credit in effect for the plan year;
(e) a written statement from the administrator that the letters
of credit comply with this Part; and
(f) a copy of the trust agreement set out in section 23 together
with the name and address of the holder of the letters of credit.
(2) For each subsequent plan year of funding, the administrator shall
file with the Superintendent copies of all subsequent letters of credit that
have been obtained by the employer and a written statement, for each letter
of credit filed, that it complies with this Part.
Statement to Members
25. 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.
Reduction of the Face Amount of a Letter of Credit
26. (1) The face amount of a letter of credit may be reduced,
effective the beginning of a plan year, by
(a) the amount by which the aggregate amount of payments that
the employer has made to the pension fund in the previous plan year
exceeds the total of the required special payments and the normal cost of
the plan for that year as shown in an actuarial report that was filed with
the Superintendent for that year in accordance with subsection 12(3) of
the Act; or
(b) the amount by which the aggregate face amount of all of the
letters of credit that are held by the holder in respect of the plan
exceeds the amount set out in paragraph 19(2)(a) or (b), as
the case may be.
(2) The face amount of the letter of credit shall not be reduced
following a default.
New Solvency Deficiency
27. 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
(a) the present value of the special payments referred to in
subsection 19(1); and
(b) the present value of the special payments calculated with
respect to an initial unfunded liability that are due in the period that
is the greater of
(i) the five years following the emergence of the new solvency
deficiency, and
(ii) the period then remaining of the 10 years following the
emergence of the initial solvency deficiency.
Failure to Pay Letter of Credit
28. On receipt of the notice from a holder that an issuer has not
paid the face amount of a letter of credit after a demand for payment has
been made, the employer shall remit to the pension fund no later than
30 days after the day on which the demand for payment was made, an
amount equal to the face amount of that letter of credit.
Occurrence of Default
29. (1) If a default occurs, the amount by which the aggregate amount
of special payments that would have been remitted to the pension fund in
accordance with Part 1 from the day on which the initial solvency deficiency
emerged, as adjusted to take into account the actuarial gains that were
applied under paragraph 9(9)(a) 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) Except if a plan is fully terminated, the administrator shall have an
actuarial report prepared C in which the present value of the special
payments referred to in subsection 19(1) shall be zero C valuing the plan as
of the last day of the plan year in which the default occurs and shall file
a copy of the report with the Superintendent in accordance with subsection
12(3) of the Act.
(3) Any remaining initial solvency deficiency disclosed by the actuarial
report prepared in accordance with subsection (2) shall be calculated by
including as an asset any amount remitted to the pension fund in accordance
with subsection (1) and the remaining initial solvency deficiency shall be
considered to have emerged as of the day on which the initial solvency
deficiency emerged.
(4) The remaining initial solvency deficiency calculated under subsection
(3) shall be funded by special payments sufficient to liquidate that initial
solvency deficiency by equal annual payments over a period not exceeding
five years minus the number of years that the plan was funded in accordance
with this Part.
Ceasing 10-year Funding
30. A plan may cease to be funded in accordance with this Part,
beginning on the first day of a plan year, if
(a) the administrator gives written notice to the Superintendent
not later than six months after the beginning of that plan year;
(b) the amount by which the aggregate amount of special payments
that would have been remitted to the pension fund in accordance with Part
1 from the day on which the initial solvency deficiency emerged, as
adjusted to take into account the actuarial gains that were applied under
paragraph 9(9)(a) 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, is
remitted to the pension fund at least 30 days before the plan's year end;
and
(c) an actuarial report is prepared in accordance with
subsection 29(2) and any remaining initial solvency deficiency is
calculated and funded in accordance with subsections 29(3) and (4) as if a
default occurred, except that the actuarial report shall be prepared
valuing the plan as of the first day of the plan year in which funding
ceases.
cease to be in force
31. These Regulations cease to be in force on February 1, 2019.
coming into force
32. These Regulations come into force on the day on which they are
registered.
- News Release 2006-064 -
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