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Potential Solvency Relief for Pension Plans
A recent Educational Note released by the Canadian Institute of Actuaries could help alleviate the impact of solvency requirements on large defined benefit pension plans (i.e., with at least $1 billion in solvency liabilities), as well as smaller plans that provide indexed retirement benefits. The Educational Note gives plan actuaries more flexibility in estimating annuity settlement rates, which can reduce a plan’s solvency funding costs.
Kerry Decision Imposes Limits on Use of Pension Funds
Sponsors of Ontario-registered pension plans may be limited in their ability to pay expenses out of pension funds and to use surplus from a defined benefit provision to satisfy contributions to a defined contribution provision following the recent Ontario Divisional Court decision in Nolan v. Ontario (Superintendent of Financial Services) (known as Kerry). The Court’s decision is only binding in Ontario, although it has persuasive value in other provinces. Accordingly, all employers and other plan sponsors should be aware of the possible impact of the decision on their pension plans.
2006 Federal Budget: Pension Surprises and Tax Relief
Finance Minister Jim Flaherty tabled the 2006 Federal Budget on May 2, 2006. In addition to widely-expected tax relief, which included a reduction in the Goods and Services Tax and tax benefits and credits for children, employees and others, the Budget contained a welcome surprise – temporary funding relief for federal defined benefit pension plans.
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