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Saskatchewan pensions plan sponsors given funding relief without consent of plan members

Unlike funding relief measures adopted by other jurisdictions, workers have no say but assume the risks to their pension plans if the current market downturn continues for an extended period

Ottawa (15 June 2009) – The Saskatchewan government has tabled a funding relief proposal for sponsors of registered pension plans that does not require consent of plan members

Under the proposal, defined benefit plan sponsors can elect a three-year moratorium from funding a new solvency deficiency revealed in a valuation prepared between December 31, 2008, and January 1, 2011. This election can only be made once and does not require the consent of plan members.

At the end of the solvency moratorium period, any solvency deficiencies existing at that time must be funded over no more than five years. During the moratorium period, there is no requirement to make special payments towards a newly established solvency deficiency, subject to conditions, such as only allowing benefit improvements where those improvements are established by a collective bargaining agreement.

Saskatchewan has followed the federal government and several other provinces in providing funding relief at a time when many pension plan sponsors are experiencing significant cash flow strain.

But unlike measures adopted by other jurisdictions, there is no requirement that member consent be obtained as a precondition to the funding relief. This is not acceptable since plan members assume all the risks but have no say in how those risks are managed.

The National Union supports temporary funding relief to pension plan sponsors to help resolve a plan deficit, but only if workers are protected from the risk associated with temporary funding relief. It has to be a two-way street – a solution that gives employers funding relief but does not jeopardize benefit security.

In Its policy paper Pensions and the Economic Crisis published in December 2008, the National Union proposed, as a way to minimize the risk to workers, the following legislative conditions with respect to granting an extension to the five-year amortization of solvency funding for defined-benefit (DB) plans:

  • Extending the five-year period for making up deficits should be on a case-by-case basis and should not extend beyond 10 years;
  • There must be minimum catch-up contributions made each year to the plan;
  • Requests should require approval of the bargaining agent, or the active plan members and the retirees and allow full access to corporate financial records and any plans for restructuring; and
  • Employers must be prepared to negotiate with the union to give it a greater say in the administration and management of the plan including joint trusteeship.

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More information:

Pensions and the Economic Crisis