Solvency Funding Consultation
Defined benefit pensions are important to many individuals as a stable source of retirement income. The B.C. government wants to encourage employers to continue to offer defined benefit pension plans to their employees.
The public was invited to comment on the full range of potential reform options for solvency funding rules for defined benefit pension plans registered in B.C. The purpose of the consultation was to determine whether changes exist that would better support both the protection of members’ benefits and the long-term sustainability of these plans.
The Pension Benefits Standards Act (PBSA) sets out minimum requirements for pension plans registered in B.C. Under the PBSA, employers that sponsor defined benefit pension plans must fund the plan according to certain tests and timelines. The Province consulted on a broad range of technical reforms to improve predictability for sponsoring employers so that they can fund plans on an ongoing basis to a level sufficient to pay all benefits to members.
Changes to the funding framework for defined benefit pension plans were shaped by recommendations developed through stakeholder consultation with plan members, retirees, unions, employers and other pension industry stakeholders.
An initial public consultation was held from October 2018 to January 31, 2019. That consultation is now closed. Read the consultation paper (PDF).
Recommendations provided by two stakeholder committees were released for public feedback with the Ministry of Finance’s Report on Stakeholder Committee Process in August 2019. This report set out the principles and proposals developed by the two stakeholder committees involved in the review. That consultation is now closed. Read the report (PDF).
The Order in Council (PDF) makes the following reforms by amending the Pension Benefits Standards Regulation, effective on December 31, 2019. Changes to the funding framework for defined benefit pension plans will apply to a plan for its next valuation.
- Solvency funding requirements will be reduced to 85% from 100%
- Payments for going concern deficits will be required over 10 years rather than 15 years
- A new funding buffer will be established to reduce long-term interest rate risk
- A solvency ratio of 100% will continue to be required for contribution holidays and withdrawal of a plan’s going concern excess funds. The threshold for excess funds will increase to protect the new funding buffer
- Changes to the Superintendent of Pensions’ ability to restrict benefit improvements that would result in a solvency ratio of at least 85%, from 90%
- Single employers will be able to offer a target benefit plan
Read the government information bulletin.
Read the BC Financial Services Authority's information bulletin (PDF).