Ottawa gives break to DB sponsors with deficits

Letter of credit could provide funding relief
By Uyen Vu
|Canadian HR Reporter|Last Updated: 07/12/2007

Last month’s federal budget gave pension plan sponsors some much sought funding relief, a move that many in the pension industry say will partly help out employers facing shortfalls in their defined benefit (DB) pension funding.

The relief measures apply to solvency funding obligations, which are determined by an assessment as to whether the plan has enough cash to cover its obligations to employees in the event it is wound up.

Current pension rules allow a plan sponsor to make up that deficit over a period of five years. The relief measures in the budget give plan sponsors several options through which to take 10 years to fund that solvency deficit.