Solvency Funding Relief Regulations (SOR/2006-275)

Interpretation

• 1 (1) The following definitions apply in these Regulations.

  acceptable rating

  acceptable rating means the rating given by a credit rating agency to an issuer at the time of the issuance or renewal of a letter of credit that is at least equal to one of the following ratings:

  • (a) A, from Dominion Bond Rating Service Limited;

  • (b) A, from Fitch Ratings;

  • (c) A2, from Moody's Investors Service; or

  • (d) A, from Standard & Poor's Ratings Services. (note acceptable)

  Act

  Act means the Pension Benefits Standards Act, 1985. (Loi)

  bank

  bank means a bank or authorized foreign bank within the meaning of section 2 of the Bank Act. (banque)

  beneficiary

  beneficiary means a member or a former member of a plan or any person who is entitled to pension benefits under the plan except

  • (a) a former member who has transferred or has chosen to transfer their pension benefit credit under section 26 of the Act; and

  • (b) a former member for whom the administrator has purchased an immediate or deferred life annuity. (bénéficiaire)

  beneficiary representative

  beneficiary representative means a union representative or court-appointed representative of a beneficiary. (représentant des bénéficiaires)

  cooperative credit society

  cooperative credit society means a cooperative credit society to which the Cooperative Credit Associations Act applies or a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province. (coopérative de crédit)

  Crown Corporation

  Crown Corporation means a Crown corporation that is an agent of Her Majesty in right of Canada in respect of which employment has not been excepted from included employment by a regulation made under subsection 4(6) of the Act. (société d'État)

  default

  default means the occurrence of one of the following:

  • (a) the written notification to the Superintendent that the administrator intends to terminate or wind up the whole plan under subsection 29(5) of the Act;

  • (b) the amendment of the plan, resolution by the employer or coming into force of any other measure that effects the termination of the whole plan;

  • (c) the Superintendent’s declaration under subsection 29(2) or (2.1) of the Act that terminates the whole plan;

  • (d) the filing of any application or petition by the employer, or against the employer, under the Companies' Creditors Arrangement Act, the Bankruptcy and Insolvency Act or the Winding-up and Restructuring Act;

  • (e) the termination of the whole plan;

  • (f) the non-renewal of a letter of credit referred to in Part 3 for its full face amount unless

    • (i) it has been replaced by another letter of credit for the same face amount at least 30 days before the beginning of the following plan year,

    • (ii) an amount equal to the face amount of the letter of credit has been remitted to the pension fund at least 30 days before the beginning of the following plan year, or

    • (iii) the face amount has been reduced in accordance with section 26; or

  • (g) the failure by an employer to comply with a direction issued by the Superintendent pursuant to section 11 of the Act with respect to the face amount of the letters of credit required by subsection 19(2). (défaut)

  holder

  holder means a trust company that is licensed to carry on business in Canada and that has entered into a trust agreement with the employer or, if the employer is not the administrator, with the employer and the administrator. (détenteur)

  initial solvency deficiency

  initial solvency deficiency means the solvency deficiency of a plan that emerged on the date on which the valuation that identified the deficiency was performed, as reported in the first actuarial report filed after the coming into force of these Regulations, and that values the plan as of a date that is later than December 30, 2005 and before January 2, 2008. (déficit initial de solvabilité)

  issuer

  issuer means a bank or cooperative credit society that has an acceptable rating and that is not the employer or affiliated with the employer within the meaning of subsection 2(2) of the Canada Business Corporations Act. (émetteur)

  special payment

  special payment means a payment or one of a series of payments that is determined in accordance with section 9 of the Pension Benefits Standards Regulations, 1985 or section 5, 6, 7 or 19 of these Regulations. (paiement spécial)

• (2) Except as otherwise provided, expressions used in these Regulations have the same meaning as in the Pension Benefits Standards Regulations, 1985.

Application

• 2 (1) These Regulations apply to the funding of a defined benefit plan and, except as otherwise provided, the Pension Benefits Standards Regulations, 1985 also apply to the funding of a plan under these Regulations.

• (2) For the purposes of these Regulations, an initial solvency deficiency shall be calculated in accordance with the definition solvency deficiency in subsection 9(1) of the Pension Benefits Standards Regulations, 1985 except that

  • (a) the present value of any special payment referred to in paragraph (d) of that definition calculated in respect of the funding of a solvency deficiency that emerged before the emergence of the initial solvency deficiency shall be zero; and

  • (b) for the purposes of Parts 2 and 3, that definition shall be interpreted as including the present value of the special payments calculated with respect to an initial unfunded liability that are due in the next 10 years.

• (3) For the purposes of these Regulations, any special payment that would have been required to be made under subsection 9(4) of the Pension Benefits Standards Regulations, 1985 with respect to the funding of a solvency deficiency that emerged before the emergence of the initial solvency deficiency is not required to be made.

• (4) In the case of an inconsistency between these Regulations and the Pension Benefits Standards Regulations, 1985, these Regulations shall prevail.

3 These Regulations do not apply to

• (a) a plan that is established after December 31, 2005 unless the plan is formed as a result of a merger of plans one or more of which was established before December 31, 2005 or is formed as a result of a splitting of a plan that was established before December 31, 2005; or

• (b) a plan to which the Air Canada Pension Plan Solvency Deficiency Funding Regulations apply.

• 4 (1) Plans may only be funded under these Regulations if all of the payments that are owed to the pension fund before the day on which the initial solvency deficiency emerges, as required by subsection 9(14) of the Pension Benefits Standards Regulations, 1985, have been made as of the filing date of the actuarial report that shows the emergence of that initial solvency deficiency.

• (2) Despite section 8 of the Pension Benefits Standards Regulations, 1985, the funding of a plan shall be considered to meet the standards for solvency if the funding is in accordance with Part 1, 2 or 3 of these Regulations.

PART 1New Five-year Funding

General Funding Rules

• 5 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985, an initial solvency deficiency of a plan may be funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding five years from the day on which the initial solvency deficiency emerged.

• (2) If the initial solvency deficiency is funded in accordance with this Part, the administrator of the plan shall notify the Superintendent in writing at the time of filing of the first actuarial report after the coming into force of these Regulations.

• (3) When a solvency deficiency emerges after the day on which the initial solvency deficiency emerged, the new solvency deficiency shall be calculated, for the purposes of subsection 9(4) of the Pension Benefits Standards Regulations, 1985, in accordance with the definition solvency deficiency in subsection 9(1) of those Regulations and that definition shall be interpreted as including the present value of the special payments referred to in subsection (1).

PART 2New 10-year Funding

General Funding Rules

5.1 For the purposes of this Part,

• (a) despite paragraph 9(4)(c) of the Pension Benefits Standards Regulations, 1985, if there is a solvency deficiency, a plan shall be funded in each plan year by annual solvency special payments equal to the amount by which the solvency deficiency divided by 5 exceeds the amount of going concern special payments — other than those referred to in paragraph 12(1)(c) — that are payable during the plan year; and

• (b) unfunded liability means

  • (i) the going concern deficit of a plan as determined on the date that the plan was established;

  • (ii) the amount by which an increase in the going concern liabilities of a plan resulting from an amendment to the plan exceeds the going concern excess of the plan as determined on the day before the effective date of the amendment; or

  • (iii) the amount by which the going concern deficit of a plan determined at the valuation date exceeds the sum of

    • (A) the present value of going concern special payments established in respect of periods after the valuation date, and

    • (B) the present value of special payments referred to in paragraph 12(1)(b).

• 6 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985, an initial solvency deficiency of a plan may be funded in accordance with Part 1, but the remittance to the pension fund of a portion of the special payments determined under that Part may be deferred as if the initial solvency deficiency were funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding 10 years from the day on which the initial solvency deficiency emerged.

• (2) The initial solvency deficiency may be funded in accordance with this Part only if less than one third of the members and less than one third of the beneficiaries excluding members object before the date indicated in the statement referred to in paragraph 8(1)(j).

• (3) Any objection expressed by a beneficiary representative on behalf of the persons that they represent shall be counted as a separate objection for each person that they represent.

• (4) Despite the fact that the special payments referred to in subsection (1) may be made over a period that exceeds the period applicable under Part 1, for the purposes of subsection 8(1) of the Act, the amount by which the aggregate amount of special payments that would have been remitted to the pension fund in accordance with that Part from the day on which the initial solvency deficiency emerged, as adjusted to take into account the reductions in special payments resulting from the application of the Pension Benefits Standards Regulations, 1985, plus interest, exceeds the aggregate amount of special payments made to the pension fund in accordance with this Part, plus interest, shall be considered to be an amount accrued to the pension fund.

• (5) Interest shall be calculated by using the interest rate that was assumed in valuing the liabilities of the plan for the purpose of calculating the initial solvency deficiency.

Multi-employer Pension Plan

• 7 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985 and section 6 of these Regulations, and subject to subsection (2), an initial solvency deficiency of a multi-employer pension plan may be funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding 10 years from the day on which the initial solvency deficiency emerged.

• (2) If the funding is for an initial solvency deficiency of a multi-employer pension plan and if the annual amount of payments required to be made to the pension fund under subsection (1) is less than the aggregate amount of payments that are required to be made to the pension fund, excluding the normal cost and the special payments required to liquidate an unfunded liability, under all applicable collective agreements, the amount of payments required to be made to the pension fund in accordance with this Part shall be the aggregate amount of payments required to be made to the pension fund pursuant to all applicable collective agreements.

• (3) The initial solvency deficiency may be funded in accordance with this Part only if less than one third of the members and less than one third of the beneficiaries excluding members object before the date indicated in the statement referred to in paragraph 8(1)(j).

• (4) Any objection expressed by a beneficiary representative on behalf of the persons that they represent shall be counted as a separate objection for each person that they represent.

Information To Be Provided to Beneficiaries

• 8 (1) Subject to subsection (2), the administrator shall provide the following information to the beneficiaries:

  • (a) the solvency ratio of the plan as of the day on which the initial solvency deficiency emerged;

  • (b) the amount of the initial solvency deficiency;

  • (c) a description of the extent to which the beneficiaries' benefits would be reduced if the plan were fully terminated and wound up with the solvency ratio referred to in paragraph (a);

  • (d) a statement indicating that extending the period for funding the initial solvency deficiency as permitted by this Part may result in a lower value of the plan assets during the funding period than would be the case if the deficiency were funded over a period not exceeding five years and that the longer funding period may also extend the period during which the plan assets are less than the plan liabilities;

  • (e) the special payments that would have been made during the first plan year covered by the actuarial report referred to in paragraph 10(b) if the initial solvency deficiency were to be funded in accordance with Part 1;

  • (f) the special payments that are to be made during the first plan year covered by the actuarial report referred to in paragraph 10(b) if the initial solvency deficiency is funded in accordance with this Part;

  • (g) [Repealed, SOR/2015-60, s. 34]

  • (h) a statement indicating that the plan may be funded in accordance with this Part only if less than one third of the members object and less than one third of the beneficiaries excluding members object;

  • (i) a statement indicating that the Superintendent's approval is not required to fund the initial solvency deficiency in accordance with this Part;

  • (j) a statement indicating that the beneficiaries may object to the proposal to fund the plan in accordance with this Part by sending an objection to the administrator at the address and by the date indicated in the statement, and that date shall not be less than 30 days after the day on which the other information required to be provided under this section is provided by the administrator;

  • (k) a statement indicating that if the plan is funded in accordance with this Part, amendments to the plan that increase the pension benefits will be restricted for the first five plan years of funding in accordance with this Part; and

  • (l) a statement setting out the right of access to the documents described in paragraph 28(1)(c) of the Act.

• (2) If a beneficiary is represented by a beneficiary representative, the administrator shall provide the information set out in subsection (1) to the beneficiary representative.

9 If a beneficiary representative has the authority to act on behalf of a beneficiary with respect to any matter under this Part, the administrator shall deal with the beneficiary representative.

Documents and Information To Be Filed with Superintendent

10 The administrator shall file the following documents and information with the Superintendent:

• (a) written notification that the initial solvency deficiency is to be funded in accordance with this Part;

• (b) the actuarial report valuing the plan as of the day on which the initial solvency deficiency emerged;

• (c) other than in the case of a multi-employer pension plan, a written statement confirming that a resolution of the board of directors of the employer has been passed, if the employer is a corporation, or, if the employer is not a corporation, an approval of the persons who have the authority to direct or authorize the actions of that body, has been given, authorizing the special payment schedule calculated in accordance with this Part; and

• (d) a written statement confirming that the information set out in section 8 has been provided to the beneficiaries or to the beneficiary representatives and that less than one third of the members have objected and less than one third of the beneficiaries excluding members have objected.

Prescribed Solvency Ratio

11 For the purposes of paragraph 10.1(2)(b) of the Act, the prescribed solvency ratio level for the first five plan years of funding in accordance with this Part is the solvency ratio calculated on the basis of the most recent actuarial report.

New Solvency Deficiency

• 12 (1) Despite section 9 of the Pension Benefits Standards Regulations, 1985, a solvency deficiency that emerges after the day on which the initial solvency deficiency emerged shall be calculated as the amount by which the solvency liabilities exceed the sum of the following amounts:

  • (a) the adjusted solvency asset amount,

  • (b) the present value of special payments made under section 6 or 7 if at least one of those payments is due more than five years after the valuation date, and

  • (c) the present value of the going concern special payments that were used to fund the initial solvency deficiency that are due during the period beginning on the valuation date and ending on the 10th anniversary of the date of emergence of the initial solvency deficiency if at least one of those payments is due more than five years after the valuation date.

• (2) The interest rate used to determine the present value of the special payments referred to in subsection (1) is the same as the interest rate used to determine the solvency liabilities.

Termination of Plan

13 If a plan is fully terminated and on the day on which it terminates the liabilities of the plan exceed its assets, the lesser of the amount determined in subsection 6(4) and the amount by which the liabilities of the plan exceed its assets shall immediately be remitted to the pension fund.

Ceasing 10-year Funding

• 14 (1) A plan may cease to be funded under this Part, beginning on the first day of a plan year, by giving written notice to the Superintendent not later than six months after the beginning of that plan year.

• (2) The notice shall indicate whether the plan has a surplus as of the first day of the plan year.

• (3) If funding ceases, section 9 of the Pension Benefits Standards Regulations, 1985 applies in respect of the plan except as otherwise provided under this Part.

Calculating Surplus

15 A surplus in respect of a plan shall be determined in the manner prescribed by subsection 16(1) of the Pension Benefits Standards Regulations, 1985 as if the plan had been fully terminated.

Plan with Surplus

16 If a plan ceases to be funded in accordance with this Part and the plan has a surplus as of the first day of the plan year, this Part ceases to apply to the plan on the first day of that plan year.

Plan Without Surplus

• 17 (1) If a plan ceases to be funded in accordance with this Part and the plan does not have a surplus as of the first day of the plan year, section 9 of the Pension Benefits Standards Regulations, 1985 applies except as follows:

  • (a) when funding ceases before the sixth plan year,

    • (i) the administrator shall have an actuarial report prepared — in which the present value of the special payments referred to in section 6 or 7 shall be zero — valuing the plan as of the first day of the plan year in which funding ceases,

    • (ii) the amount by which the aggregate amount of special payments that would have been made to the pension fund in accordance with Part 1 from the day on which the initial solvency deficiency emerged to the day on which funding ceases, as adjusted to take into account the reductions in special payments resulting from the application of the Pension Benefits Standards Regulations, 1985, plus interest, exceeds the aggregate amount of special payments made to the pension fund in accordance with this Part, plus interest, shall immediately be remitted to the pension fund, and

    • (iii) and (iv) [Repealed, SOR/2010-149, s. 11]

    • (v) the special payments referred to in section 6 or 7 shall continue to be made until the first special payment required to fund the remaining initial solvency deficiency referred to in subparagraph (iii) is made to the pension fund; and

  • (b) when funding ceases after the fifth plan year,

    • (i) the administrator shall have an actuarial report prepared as of the first day of the plan year in which funding ceases, and

    • (ii) the amount by which the aggregate amount of special payments that would have been made to the pension fund in accordance with Part 1 from the day on which the initial solvency deficiency emerged to the day on which funding ceases, as adjusted to take into account the reductions in special payments resulting from the application of the Pension Benefits Standards Regulations, 1985, plus interest, exceeds the aggregate amount of special payments made to the pension fund in accordance with this Part, plus interest, shall immediately be remitted to the pension fund.

• (2) [Repealed, SOR/2010-149, s. 11]

Crown Corporations

• 18 (1) The administrator of a plan of a Crown Corporation with an initial solvency deficiency that is funded in accordance with this Part shall not have to comply with subsection 6(2) and sections 8 and 10 if the administrator files the following documents and information with the Superintendent:

  • (a) the actuarial report valuing the plan as of the day on which the initial solvency deficiency emerged;

  • (b) a written statement confirming that a resolution of the board of directors of the Crown Corporation has been passed authorizing the special payment schedule calculated in accordance with this Part;

  • (c) a written statement confirming that the board of directors of the Crown Corporation has notified the Minister and the Minister responsible for the Crown Corporation of the decision that the initial solvency deficiency is to be funded in accordance with this Part; and

  • (d) a copy of letters from the Minister and the Minister responsible for the Crown Corporation acknowledging that they have been informed of the fact that the Crown Corporation intends to fund the initial solvency deficiency in accordance with this Part.

• (2) When the administrator provides the written statement under paragraph 28(1)(b) of the Act, the administrator shall also indicate the amount of the initial solvency deficiency and that the deficiency is to be funded in accordance with this Part by equal annual payments over a period not exceeding 10 years.

• (3) Section 11 shall not apply in respect of a plan if the documents and information set out in subsection (1) are filed with the Superintendent.

PART 310-year Funding with Letters of Credit

General Funding Rules

18.1 For the purposes of this Part,

• (a) despite paragraph 9(4)(c) of the Pension Benefits Standards Regulations, 1985, if there is a solvency deficiency, a plan shall be funded in each plan year by annual solvency special payments equal to the amount by which the solvency deficiency divided by 5 exceeds the amount of going concern special payments — other than those referred to in paragraph 27(1)(c) — that are payable during the plan year; and

• (b) unfunded liability means

  • (i) the going concern deficit of a plan as determined on the date that the plan was established;

  • (ii) the amount by which an increase in the going concern liabilities of a plan resulting from an amendment to the plan exceeds the going concern excess of the plan as determined on the day before the effective date of the amendment; or

  • (iii) the amount by which the going concern deficit of a plan determined at the valuation date exceeds the sum of

    • (A) the present value of going concern special payments established in respect of periods after the valuation date, and

    • (B) the present value of special payments referred to in paragraph 27(1)(b).

• 19 (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985, an initial solvency deficiency of a plan may be funded by special payments sufficient to liquidate the initial solvency deficiency by equal annual payments over a period not exceeding 10 years from the day on which the initial solvency deficiency emerged.

• (2) The initial solvency deficiency may be funded in accordance with this Part if the employer

  • (a) obtains letters of credit for each of the first five plan years of funding under this Part, for the amount representing the difference between the present value, at the end of each plan year, of the remaining special payments under this Part and the present value of the remaining special payments that would have been required to be made to liquidate the initial solvency deficiency as if it had been funded under Part 1; and

  • (b) maintains letters of credit for the sixth plan year of funding and for each plan year after that year, representing the present value at the beginning of each plan year of the remaining special payments under this Part.

• (3) The present value of the remaining special payments shall be determined by using the interest rate that was assumed in valuing the liabilities of the plan for the purpose of calculating the initial solvency deficiency.

Letter of Credit

• 20 (1) A letter of credit required by this Part shall be an irrevocable, unconditional standby letter of credit that

  • (a) is in accordance with the rules of International Standby Practices 1998 (publication No. 590 of the International Chamber of Commerce), as amended from time to time;

  • (b) is payable only in Canadian currency;

  • (c) is issued or confirmed by an issuer who is a member of the Canadian Payments Association that has been assigned an acceptable rating; and

  • (d) provides that

    • (i) the letter of credit is made out to the holder's benefit,

    • (ii) the issuer will pay the face amount of the letter of credit on demand from the holder without inquiring whether the holder has a right to make the demand,

    • (iii) the bankruptcy of the employer shall have no effect on the rights and obligations of the issuer and the holder set out in the letter of credit,

    • (iv) the letter of credit will expire on the day on which the plan's year ends,

    • (v) the letter of credit will automatically be renewed for the full face amount for further one-year periods on the expiry date referred to in subparagraph (iv) unless the issuer notifies the holder, in writing, of the non-renewal not less than 90 days before the expiry date, and

    • (vi) the letter of credit may not be amended during the term of the letter of credit and may not be assigned except to another holder.

• (2) A letter of credit shall be obtained not later than the day on which the actuarial report is filed with or provided to the Superintendent for the first plan year of funding, and at least 30 days before the beginning of each subsequent plan year that is covered by it.

• (3) The letter of credit shall immediately be provided to the holder.

21 If separate letters of credit have been obtained for each plan year, a letter of credit is not required to be automatically renewed after the fifth year following the plan year for which it was obtained.

22 If the face amount of letters of credit obtained or maintained in accordance with this Part for a plan year is less than the amount required by subsection 19(2) for that plan year, the employer shall make up the difference either by increasing the amount of letters of credit or by making additional payments to the pension fund no later than on the day on which the next payment is made to the pension fund in accordance with subsection 9(14) of the Pension Benefits Standards Regulations, 1985.

Trust Agreement

• 23 (1) The employer and, if the employer is not the administrator of the plan, the administrator shall enter into a trust agreement or shall amend any existing trust agreement it may have with the holder regarding the letters of credit referred to in this Part.

• (2) The trust agreement shall provide that

  • (a) the holder shall hold the letters of credit in Canada in trust for the plan;

  • (b) the definition default in subsection 1(1) applies to the agreement;

  • (c) the employer shall immediately notify, in writing, the holder and the Superintendent and, if the employer is not the administrator of the plan, the administrator of a default;

  • (d) if not otherwise notified under paragraph (c), the administrator shall notify, in writing, the holder and the Superintendent of a default immediately after becoming aware of it;

  • (e) on receipt of the notice referred to in paragraph (c) or (d), the holder shall immediately make a demand for payment of the face amount of all of the letters of credit held in respect of the plan;

  • (f) on receipt of a written notice of default from any person other than the employer or the administrator, the holder shall

    • (i) immediately notify, in writing, the employer, the administrator and the Superintendent of the notice; and

    • (ii) make a demand for payment of the face amount of all of the letters of credit held in respect of the plan unless the administrator provides a written notice to the holder within 30 days after receipt of the notice that the default has not occurred;

  • (g) when a holder makes a demand for payment of a letter of credit held for the plan, it shall notify, in writing, the employer, the administrator and the Superintendent that it has made the demand;

  • (h) the holder shall immediately notify, in writing, the employer, the administrator and the Superintendent if the issuer does not pay the face amount of a letter of credit after a demand for payment has been made,

  • (i) the holder shall not make a demand for payment if a letter of credit expires without being renewed, or the face amount is being reduced, in accordance with this Part;

  • (j) the administrator shall notify the holder of any circumstance when a letter of credit may expire, or when the face amount of a letter of credit may be reduced, in accordance with this Part; and

  • (k) the administrator shall provide the holder with a copy of the statements referred to in paragraph 24(1)(e) and subsection 24(2) and with a copy of the written notice referred to in paragraph 30(a).

24 [Repealed, SOR/2015-60, s. 39]

Statement to Members

25 When the administrator provides the written statement under paragraph 28(1)(b) of the Act, the administrator shall also provide the following information:

• (a) the amount of the initial solvency deficiency;

• (b) the fact that the deficiency is to be funded in accordance with this Part by equal annual payments over a period not exceeding 10 years; and

• (c) the aggregate face amount of all of the letters of credit that are held by the holder in respect of the plan.

Reduction of the Face Amount of a Letter of Credit

• 26 (1) The face amount of a letter of credit may be reduced, effective the beginning of a plan year, by

  • (a) the amount by which the aggregate amount of payments that the employer has made to the pension fund in the previous plan year exceeds the total of the required special payments and the normal cost of the plan for that year as shown in an actuarial report; or

  • (b) the amount by which the aggregate face amount of all of the letters of credit that are held by the holder in respect of the plan exceeds the amount set out in paragraph 19(2)(a) or (b), as the case may be.

• (2) The face amount of the letter of credit shall not be reduced following a default.

New Solvency Deficiency

• 27 (1) Despite section 9 of the Pension Benefits Standards Regulations, 1985, a solvency deficiency that emerges after the day on which the initial solvency deficiency emerged shall be calculated as the amount by which the solvency liabilities exceed the sum of the following amounts:

  • (a) the adjusted solvency asset amount,

  • (b) the present value of special payments made under section 19 if at least one of those payments is due more than five years after the valuation date, and

  • (c) the present value of the going concern special payments that were used to fund the initial solvency deficiency that are due during the period beginning on the valuation date and ending on the 10th anniversary of the date of emergence of the initial solvency deficiency if at least one of those payments is due more than five years after the valuation date.

• (2) The interest rate used to determine the present value of the special payments referred to in subsection (1) is the same as the interest rate used to determine the solvency liabilities.

Failure to Pay Letter of Credit

28 On receipt of the notice from a holder that an issuer has not paid the face amount of a letter of credit after a demand for payment has been made, the employer shall remit to the pension fund no later than 30 days after the day on which the demand for payment was made, an amount equal to the face amount of that letter of credit.

Occurrence of Default

• 29 (1) If a default occurs, the amount by which the aggregate amount of special payments that would have been remitted to the pension fund in accordance with Part 1 from the day on which the initial solvency deficiency emerged, as adjusted to take into account the reductions in special payments resulting from the application of the Pension Benefits Standards Regulations, 1985, plus interest, exceeds the aggregate amount of special payments made to the pension fund in accordance with this Part, plus interest, shall immediately be remitted to the pension fund.

• (2) Except if a plan is fully terminated, the administrator shall have an actuarial report prepared — in which the present value of the special payments referred to in subsection 19(1) shall be zero — valuing the plan as at the last day of the plan year in which the default occurs.

• (3) Any remaining initial solvency deficiency disclosed by the actuarial report prepared in accordance with subsection (2) shall be calculated by including as an asset any amount remitted to the pension fund in accordance with subsection (1) and the remaining initial solvency deficiency shall be considered to have emerged as of the day on which the initial solvency deficiency emerged.

• (4) The remaining initial solvency deficiency calculated under subsection (3) shall be funded by special payments sufficient to liquidate that initial solvency deficiency by equal annual payments over a period not exceeding five years minus the number of years that the plan was funded in accordance with this Part.

Ceasing 10-year Funding

• 30 (1) A plan may cease to be funded in accordance with this Part, beginning on the first day of a plan year, if

  • (a) the administrator gives written notice to the Superintendent not later than six months after the beginning of that plan year;

  • (b) the amount by which the aggregate amount of special payments that would have been remitted to the pension fund in accordance with Part 1 from the day on which the initial solvency deficiency emerged, as adjusted to take into account the reductions in special payments resulting from the application of the Pension Benefits Standards Regulations, 1985, plus interest, exceeds the aggregate amount of special payments made to the pension fund in accordance with this Part, plus interest, shall be remitted to the pension fund at least 30 days before the plan’s year end; and

  • (c) an actuarial report is prepared in accordance with subsection 29(2) and any remaining initial solvency deficiency is calculated and funded in accordance with subsections 29(3) and (4) as if a default occurred, except that the actuarial report shall be prepared valuing the plan as of the first day of the plan year in which funding ceases.

• (2) Paragraphs (1)(b) and (c) do not apply if the face amount of the letters of credit obtained to fund the plan under this Part is included as a solvency asset as defined in subsection 2(1) of the Pension Benefit Standards Regulations, 1985.

Cease to Be in Force

31 These Regulations cease to be in force on February 1, 2019.

Coming into Force

32 These Regulations come into force on the day on which they are registered.