Office of the Superintendent of Financial Institutions
Amounts secured under letters of credit obtained under the solvency funding relief regulations are not counted as plan assets in actuarial valuations or in plan financial statements, as the purpose of the letters of credit is to provide security to compensate for the longer amortization period permitted under the regulations and including them would distort future contribution requirements. Amounts of these letters of credit should also not be counted in calculating the plan's solvency ratio. However, the amounts of letters of credit should be disclosed in the valuation report.
If the plan administrator opts out of the
Solvency Funding Relief Regulations, 2009 (Solvency Relief Regulations), the face value of the funding relief letter of credit can be included in solvency assets up to a limit of 15% of the plan's solvency liabilities as determined at the valuation date for purposes of an actuarial report. The letter of credit must be maintained in subsequent years at that face value, and may only be reduced or eliminated as provided by the
Pension Benefit Standards Regulations, 1985.
The decision to opt out of funding relief must be communicated to OSFI no later than 6 months after the beginning of the plan year. A plan administrator who opts out may not, at a later date, rescind this decision and resume funding the plan as per the Solvency Relief Regulations.
If a plan administrator opts out of the Solvency Relief Regulations and chooses:
In general, clause 23(1)(q)(i)(B) of the
Pension Benefits Standards Regulations, 1985 requires that the annual statements to members include a description of the measures the plan administrator has implemented or will implement to bring the solvency ratio to one. Where a plan is being funded under the
Solvency Funding Relief Regulations, 2009 (Solvency Relief Regulations),it is expected that these statements also include how the solvency deficiency is funded as per the Solvency Relief Regulations.
For a pension plan of a Crown Corporation that is an agent of Her Majesty in right of Canada, the plan administrator of that Crown Corporation's pension plan must indicate in a member's annual statement:
In addition, if a pension plan is being funded under Part 3 of the Solvency Relief Regulations,
section 27 states that the plan administrator must also include in a member's annual statement the following information: