Update: Pension Solvency Funding Relief

Article by Barbara Austin, © 2007, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Pension and Employee Benefits, August 2007

Canadian pension legislation has typically provided a five-year period for funding any solvency deficiencies under defined benefit plans. In the face of large pension plan deficits, governments in Canada, the U.S. and the U.K. are taking proactive steps to provide funding relief.

The issue of funding deficiencies has been highlighted in Canada by several recent high-profile corporate insolvencies with significant pension funding shortfalls, including Air Canada and Stelco. The problem is, of course, more widespread. For example, the Office of the Superintendent of Financial Institutions (OSFI) estimated that as of December 31, 2005, 78 per cent of federally-regulated defined benefit pension plans had a solvency deficit.

What is a Solvency Deficit?

Pension standards legislation in every jurisdiction includes minimum funding rules for defined benefit plans. The purpose of these rules is to provide ass...

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