Amendments to the General Regulation under the Pension Benefits Act will allow for more flexibility in funding solvency deficits in defined benefit pension plans. The amendments follow the Canadian Association of Pension Supervisory Authorities (CAPSA) Recommendations: Funding of Benefits for Plans Other Than Defined Contributions Plans released in February 2019. The amendments follow similar amendments in other jurisdictions.
- Allow defined benefit plans to fund to a threshold of 85% of solvency liabilities (rather than the previous 100% threshold).
- Strengthen the going concern funding requirements by including a provision for adverse deviation (PfAD).
- Allow solvency liabilities to be secured by letters of credit rather than contributing solvency deficiency payments to a maximum of 15% of the solvency liabilities.
The amendments related to the funding model are technical and the sections are outlined below. The funding amendments do not impact pension plans that have an exemption from funding solvency deficiencies (generally, municipalities, universities and nursing homes).
In addition to the above, the amendments exempt individual pension plans (IPPs) from the Pension Benefits Act and its regulations. This will reduce the administrative burden on some small business owners as well as owners of professional corporations.
The amendments also make the minimum withdrawal rate from Life Income Funds the same as the minimum withdrawal rate in the Income Tax Act (Canada) to better align with a federal Covid-19 relief measure.
The following provisions of the General Regulation are new or have been amended:
- Sections 2, 2.2 and 3.1
- Heading of section 8
- Sections 8.1, 8.2, 8.3, 8.4 and 9
- Subsection 10(2)
- Paragraphs 11(b) and 15(1)(n) of the French version only
- Sections 22, 35 and 36
- Section 37 of the French version only
- Sections 38 and 39
- Subsection 41(1)
- Section 42.001
- Subsection 51(3)
- Section 55.1
- Schedule A.
These amendments were posted for public comment on the Government of New Brunswick website from 29 June to 13 July 2020. Submissions received from pension plan administrators and actuarial firms resulted in improvements to the amendments.
The version of the General Regulation currently posted on the Government of New Brunswick website does not yet include the changes that came into effect on 22 October 2020. However, we expect that it will be updated soon. The amendments to the General Regulation can be found at the following link: