OTTAWA, Nov. 1 /CNW Telbec/ - Today Canada's actuaries presented the
Ontario government with an action plan for reversing the decline in defined
benefit pension plans, and helping millions of Ontarians avoid bleak
post-employment prospects by strengthening this reliable savings vehicle for
an independent retirement.
In a submission to the Ontario Expert Commission on Pensions, the
Canadian Institute of Actuaries outlined legislative and regulatory measures
designed to reverse the decline of defined benefit pension plans and preserve
them as a key part of Canada's retirement income system.
"Ontario oversees most of the defined benefit pension plans in Canada, so
it's important that they take the leadership in putting these plans back on
track," Institute President James Murta said. "Our submission describes how
the Ontario government can make legislative and regulatory changes that would
safeguard the plans currently in place and encourage plan sponsors to start
"As actuaries, our professional view is that defined benefit pension
plans are too important to the financial security of retired Ontarians and
those planning to retire over the next decade, to allow their continued
decline," Murta said. "Ontario should not give up on defined benefit pension
plans -it needs to fix them."
Today, in its presentation to the Expert Commission, the Institute
outlined how Canada's patchwork of regulations, legal decisions, tax rules and
changes in accounting standards has led to the decline of defined benefit
pension plans. The Institute presented a series of measures that would help
assure benefit security for plan members, and predictable and fair funding for
plan sponsors. Highlights include:
- Enacting legislation that would permit the use of a Pension Security
Trust that would be separate from, but complementary to, regular
defined benefit pension plan funds. Plan sponsors could use the trust
to increase funding levels and enhance benefit security for plan
members. But if contributions were subsequently found not to be needed
to fund benefits, they could be released back to the plan sponsor.
- Requiring all defined benefit pension plans to establish and maintain
a target solvency margin to enhance benefit security, with levels set
based on the risks faced by the plan.
- Allowing the use of irrevocable letters of credit to secure solvency
deficiencies, which will provide plan sponsors with additional
flexibility without decreasing benefit security for plan members.
- Enacting flexible, principles-based legislation that would encourage
innovation in pension plan design and financing arrangements, and
promote the growth of Defined Benefit pension plans.
- Requiring annual actuarial valuations for plans whose solvency ratio
is less than 100 percent, rather than continue with the current three-
- Facilitating adjustments in pension plan designs and workplace policies
to adapt to the realities that plan members and retirees are working
past age 65 and living longer.
Moving forward on these measures would greatly improve the environment
for defined benefit pension plans to the advantage of plan members, plan
sponsors and retirees.
"Our proposals on pension security trusts, target solvency margins and
letters of credit, if implemented by the Ontario government, would largely
eliminate the need for the Pension Benefits Guarantee Fund, which is currently
in a deficit position of hundreds of millions of dollars," Murta said.
The Canadian Institute of Actuaries sees the shrinkage of Defined Benefit
plans and coverage as a threat to Ontarians' future financial security and
commends the government for recognizing the need to focus attention and
resources into turning around their downward spiral.
The Canadian Institute of Actuaries (CIA) is the national organization of
the actuarial profession. Member driven, the Institute is dedicated to serving
the public through the provision, by the profession, of actuarial services and
advice of the highest quality. In fact, the Institute holds the duty of the
profession to the public above the needs of the profession and its members.
For further information:
For further information: or to arrange an interview, contact: Josée
Racette, Communications Assistant, (613) 236-8196, Ext. 107; For a copy of the
Institute's submission, visit www.actuaries.ca