Canadian Payroll Reporter

CPR_JULY_2013V2:Canadian Employer.qxd 13-06-14 12:42 PM Page 6 JULY 2013 Suspend vested benefits in QPP: Committee Continued from page 3 Cost sharing According to the committee, the SPPA should be amended so as to expressly provide that the cost of a pension plan may be shared by the employer and active members with respect to the cost of current service, any deficiency for future service from the date on which the measure is introduced, or any deficiency related to past service. With respect to the private sector, it would be left to employers and employees to negotiate an acceptable arrangement but the committee is of the opinion the SPPA should limit the portion payable by active members to 50 per cent of the costs attributable to them. In order to avoid intergenerational transfers, the committee recommends the SPPA should allow the cost of the deficiency to be shared by not only active members but also retirees, but only with respect to deficiencies arising from service accumulated after the introduction of the new measure. The committee recommends making it compulsory to establish a policy to ensure members know the rules that apply in the event of a plan improvement or a reduction of the benefits in connection with contributory pension plans. Lastly, the committee recommends employers remain responsible for paying the total amount of the debt in the event the plan is terminated (essentially the solvency deficiency) and for paying the amount required to pay the remaining benefits payable in the event of an individual transfer of a member's benefits. Employer refunds The committee recommends employers be allowed to be refunded from the surplus assets for the amount it paid as amortization pay6 ments in respect of a funding deficiency, if the conditions provided for in order to use the surplus assets are met. For contributory plans, the refund to the employer from the surplus assets should reflect the cost actually borne by the employer. Purchasing annuities for retirees According to the committee, the purchase of guaranteed annuities from an insurer in order to pay part or all of the pensions of retirees and beneficiaries should be permitted during the life of the plan. If an employer wishes to adopt this approach, the committee recommends the purchase of the annuity would need to comply with an annuity purchase policy that must be adopted in co-operation with the pension committee. The committee further recommends employers be bound to pay the amount required to restore the solvency or "enhanced funding" ratio of the plan if the purchase of annuities would reduce it. The committee recommends pension funds be divided into two accounts. Pension fund division The committee recommends pension funds, which are currently undivided, be divided into two accounts for actuarial valuation purposes, one of which would cover the portion of the assets reflecting the benefits of retirees. In effect, this would permit separate determinations of solvency and funded ratios. According to the committee, this approach would ensure a better match of the assets and liabilities attributed to retirees. In light of such additional protection afforded to retirees, the committee recommends abolishing the fairness principle inherent in the SPPA with respect to any modifications funded with surplus assets. Withdrawal of an employer from a multi-employer pension plan The committee recommends members affected by the withdrawal of an employer from a multi-employer pension plan should no longer be allowed to retain their benefits under the plan. The benefits of so-called "orphaned" members should thus be paid at the time of withdrawal so as to prevent future liability for a deficiency relating to such benefits from being divided up among the remaining employers. As far as "orphaned" members who currently have benefits in a negotiated contribution multiemployer pension plan are concerned, the committee recommends such benefits should be payable in proportion to the degree of solvency of the plan. The committee further recommends that the Régie attempt to develop measures to restore the financial condition of negotiated contribution multi-employer pension plans that would take their characteristics into account. Pension plan restructuring The committee recommends the parties to a pension plan (the employer, active members, non-active members and retirees) should have the option of agreeing on certain measures that would reduce the cost of their pension plan and secure the accrued benefits accumulated. A period of five years would be allowed for such negotiation. Each year, the Régie would report on the changes made to the pension plans and the variation of the funded status of the plans during such period. As for the negotiations between employers and active or non-active members, the Committee recommends it be possible to reduce or Canadian HR Reporter, a Thomson Reuters business 2013 continued on page 8

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