Pension bywords: Solvency, sustainability, security

  • February 25, 2019

Three guiding principles must form the framework of any discussion of retirement security, according to the CBA’s Pensions and Benefits Law Section: Income security, sustainability and, as much as possible, the harmonization of rules between the federal government and the provinces.

That is the lens through which the Section reviewed the consultation document Enhancing Retirement Security for Canadians released by the Minister of Seniors on behalf of Innovation, Science and Economic Development, Finance Canada and Employment and Social Development Canada.

The Section is happy to see public consultations on this serious issue, and commends the government for its recent reforms of the Canada Pension Plan. It notes that private workplace pensions make up just one of the three pillars of the existing retirement income system, with the public Old Age Security and Canada Pension Plan programs, and all three merit examination and improvement.

The Section limits its comments to the pension options discussed in the consultation document, but says it supports a broader review that considers action beyond the implementation of those options.

The Section discusses the drawbacks of current pension funding relief options available to federally regulated employers, and notes that in some cases custom-made regulations unique to the plan sponsor are more appropriate than a one-size-fits all program like the Distressed Pension Plan Workout Scheme.

The Section says broader review of the solvency funding regime is required – because temporary solvency funding relief measures already in place have been inadequate to respond to general pressures or volatility, the vast majority of plan sponsors are not able to access special funding relief, and solvency funding regimes have not prevented pension losses related to insolvent employers.

“The objectives of this review should be to develop balanced solvency funding reforms in the federal jurisdiction, geared to ensuring benefit security for plan beneficiaries, affordability for plan sponsors, and the long-term sustainability of DB plans generally.”

The Section touches on issues such as solvency reserve accounts, the pros and cons of allowing retirees in insolvency or bankruptcy circumstances to transfer their reduced pension amount to a self-managed locked-in savings plan, and clarifying benefit entitlement, among others.