The Ontario government has launched consultations on proposed regulations for the implementation of a permanent legislative framework for target benefit multi-employer pension plans (MEPPs) in the province, says a Hicks Morley ‘FTR.’ The permanent framework would replace temporary funding regulations first introduced in 2007 for specified multi-employer pension plans (SOMEPPs).
The Ontario government has launched consultations on proposed regulations for the implementation of a permanent legislative framework for target benefit multi-employer pension plans (MEPPs) in the province, says a Hicks Morley ‘FTR.’ The permanent framework would replace temporary funding regulations first introduced in 2007 for specified multi-employer pension plans (SOMEPPs).These expire in 2024. The temporary regulations granted SOMEPPs an exemption from solvency funding requirements. Eligible SOMEPPs are plans where employer contributions are fixed in a collective agreement or other plan document and the plan authorizes the plan administrator to reduce benefits on an ongoing basis or during plan wind-up. In addition, no more than 95% of the members of a SOMEPP can be employed by one employer as of the previous year-end and SOMEPPs must have received contributions from at least 15 employers in the previous year or at least 10% of the plan members were employed by two or more employers. The consultation document sets out the proposed SOMEPP funding framework, which the government states is designed to provide certainty to MEPPs when drafting funding and governance policies, increase transparency with respect to member communications around potential reductions to target benefits, and encourage prudent investment strategies to protect future plan members from bearing the brunt of adverse events or lower-than-expected returns. The proposed regulations will include an application process for approval to convert an existing plan to the new regime, but will not require member consent. Plans will be required to file governance and funding policies with the Financial Services Regulatory Authority of Ontario which will need to be reviewed every three years. The regulations also call for enhanced member disclosure requirements which will include a statement to members noting that benefits can be reduced and are not covered by the Pension Benefits Guarantee Fund. Plans will be exempt from solvency funding requirements and commuted values will be determined using going concern assumptions. Stakeholders can provide comments to the ministry of finance by June 30.
