COVID-19 Measures – FAQs for Federally Regulated Private Pension Plans

OSFI has communicated changes to its expectations throughout the COVID-19 pandemic and has now revised its FAQs to those that remain relevant. OSFI's actions to protect pension plan members, former members and other beneficiaries from issues stemming from COVID-19 will continue through monitoring of the economic environment and taking action if and when required.

Have a question that is not addressed in these (or other) FAQs? Please send your question to information@osfi-bsif.gc.ca.

Questions and Answers

2020 Funding Relief

  1. What relief is provided by the Solvency Special Payments Relief Regulations, 2020?

    Under the Pension Benefits Standards Regulations, 1985, solvency special payments must be made at least monthly and are due 30 days after the period in respect of which the payment is being made. For example, a solvency special payment for March 2020 is due by April 30, 2020.

    As announced by the Department of Finance, the Solvency Special Payments Relief Regulations, 2020 (the Relief Regulations) establish a moratorium that effectively applies to certain solvency special payments that become due during the period beginning on April 1, 2020 and ending on December 30, 2020.

    • The amounts of any solvency special payments that become due from April 1, 2020 to May 26, 2020 (i.e. the day before the coming-into-force date of the Relief Regulations, which is May 27, 2020), unless related to a plan year that ended before April 27, 2020, are to be reduced to zero and will not become due after December 30, 2020 once the moratorium is lifted.
    • From May 27, 2020 until December 30, 2020, the amounts of any solvency special payments that become due are to be reduced to zero and will not become due after December 30, 2020 once the moratorium is lifted.
    • The amounts of any solvency special payments that become due and are made from April 1st until May 27th may be deducted from the plan's required current service (or normal cost) contributions and/or going concern special payments in the period beginning on May 27, 2020 and ending on December 30, 2020.

    Current service contributions and going concern special payments must continue to be made.

    Other than for a negotiated contribution plan, employers continue to be required to fully fund any solvency deficit in the event of a plan termination.

  2. Does a plan administrator have to notify OSFI that they will not be making solvency special payments as permitted by the Solvency Special Payments Relief Regulations, 2020?

    No.

  3. How does the moratorium apply to solvency special payments made after March 31, 2020 and before the Solvency Special Payments Relief Regulations, 2020 were in force?

    Under the Solvency Special Payments Relief Regulations, 2020 (the Relief Regulations), the amounts of any solvency special payments that become due and are made after March 31, 2020, until the coming-into-force date (May 27, 2020), can be deducted from the plan's required current service (or normal cost) contributions and/or going concern special payments in the period beginning on May 27, 2020 and ending on December 30, 2020.

    The Relief Regulations also provide that interest is not payable on any unpaid solvency special payment instalments that became due between March 31, 2020 and May 27, 2020.

  4. Do the Solvency Special Payments Relief Regulations, 2020 affect all federally regulated pension plans?

    The Solvency Special Payments Relief Regulations, 2020 (the Relief Regulations) apply to all defined benefit plans registered or filed for registration under the Pension Benefits Standards Act, 1985 that have a solvency deficiency to be funded during the period from April 1, 2020 to December 30, 2020.

    The Relief Regulations do not apply to defined contribution plans.

  5. How does the moratorium apply to letters of credit?

    If an employer has already obtained letters of credit to cover solvency special payments for all of 2020, the Solvency Special Payments Relief Regulations, 2020 allow the employer to reduce the face value of the letters of credit, provided that, after the reduction, the letters of credit are sufficient to cover the 2020 solvency special payments not subject to the moratorium.

  6. Can an employer choose to continue to make solvency payments during the moratorium?

    Yes. Employers may continue to make solvency special payments during the moratorium.

    As solvency special payment requirements are determined on an average solvency ratio basis, plans with a solvency ratio of 1.0 or greater should contact the Canada Revenue Agency before making solvency special payments during the moratorium, as there may be tax implications.

  7. If an employer continues to make some or all of their solvency special payments, can these payments be considered 'additional payments' under subsection 9(6) of the Pension Benefits Standards Regulations, 1985 and applied towards future solvency special payments?

    The Solvency Special Payments Relief Regulations, 2020 (the Relief Regulations) provide a moratorium on the amounts of any solvency special payments due from April to December 2020. The Relief Regulations specify that solvency special payments made during the moratorium are not considered to be 'additional payments' under subsection 9(6) of the Pension Benefits Standards Regulations, 1985 unless the payments are in excess of the solvency special payments that would have been required, but for the Relief Regulations.

  8. Do the solvency special payments subject to the moratorium need to be remitted to the fund later?

    The Solvency Special Payments Relief Regulations, 2020 do not set out a separate amortization schedule for the solvency special payments that were foregone during the moratorium. At the end of the moratorium, if there are no further changes to the Pension Benefits Standards Regulations, 1985, plans will be subject to the normal funding rules, which provide that any solvency deficiency is to be amortized at least through monthly instalments over a five year period.

  9. Do the Solvency Special Payments Relief Regulations, 2020 impose restrictions on plan amendments?

    The Solvency Special Payments Relief Regulations, 2020 (the Relief Regulations) place restrictions on certain types of plan amendments in order to ensure that the amendment does not negatively impact a plan's solvency position and/or improve benefits while reduced funding requirements are in place, unless the plan is well funded on a solvency basis after the plan amendment.

    The Relief Regulations provide that, unless authorized by OSFI, any plan amendment would be void, or in Quebec, null if

    • the amendment would reduce the solvency ratio of the pension plan and the solvency ratio would be below 1.05 once the amendment is made; or
    • if the solvency ratio of the pension plan is below 1.05 and the amendment would increase pension benefits or pension benefit credits.
  10. To the extent that OSFI permits commuted value transfers, does the moratorium apply to transfer deficiency "top-up" payments by the employer?

    No. In accordance with section 8 of the Directives of the Superintendent, employers must still remit a "top-up" payment to the fund (i.e. the amount of the transfer deficiency) if the plan transfers a member's full commuted value.

  11. Would a "catch-up" payment that would normally be made with the filing of a more recent actuarial report be part of the moratorium?

    When a more recent actuarial report is filed with OSFI and the solvency deficiency to be amortized has increased relative to the previous report, a "catch-up" payment (i.e. amount equal to the difference between the new and the previous solvency special payments, plus interest) is normally made in respect of months that have elapsed in the plan year prior to filing the report.

    Under the Solvency Special Payments Relief Regulations, 2020, a catch-up payment that would normally be made between the coming-into-force date (May 27, 2020) and December 30, 2020 is considered part of a solvency special payment instalment and therefore is not required to be paid.

  12. Are there additional disclosure requirements for annual member and former member statements?

    Yes. The Solvency Special Payments Relief Regulations, 2020 (the Relief Regulations) set out that, for plan years in which the moratorium applies, plan administrators must provide information on the amounts of solvency special payments that were made during the plan year, and the amounts of solvency special payments that would have been required, but for the Relief Regulations.