New regulations under the New Brunswick Pension Benefits Act came into force in December 2011. The new regulations provide additional solvency relief for defined benefit pension plans with actuarial valuations having a review date between April 1, 2010, and Jan. 1, 2012, inclusive. A plan administrator may request that existing solvency deficiencies be consolidated and the amortization period to pay them off be extended to 10 years.
Only one request is allowed per plan, and it must be accompanied by an actuary's certification that plan assets are sufficient to provide for all expected payments under the plan for the proposed extended period. The employer must provide written notice of the request to all plan beneficiaries, with the notice containing:
•an explanation for the request
•a comparison of total annual employer contributions for each of the next 10 years, both with and without consolidation of the solvency deficiencies
•a statement that any comments or questions regarding the request may be submitted to the employer.
The employer then submits a copy of the notice, and certification of the date the notice was distributed, to the Superintendent of Pensions. There is no requirement for beneficiary consent.
Upon approval of the request, an actuarial valuation will be required every 12 months until the earlier of the date of a report indicating the special payments are no longer needed, and the end of the 10 year period.
This relief does not apply to a pension plan established under a collective agreement or trust agreement under which the employer's obligation to contribute is limited to a fixed amount set out in the collective agreement or trust agreement. The relief also does not apply to a municipal or university pension plan that currently enjoys a solvency exemption.
An amendment to the plan during the 10 year period, other than one required by law, will only be permitted if the full cost of the amendment on a solvency basis is paid into the plan within 90 days of the amendment being made, or if no further special payments are needed with respect to the solvency deficiencies.
The New Brunswick regulations were previously amended in 2003 to permit the extension of a plan's amortization period for solvency deficiency special payments to a date no later than Dec. 31, 2018, upon certain conditions. Unlike under the new 2011 regulations, however, the Superintendent had the discretion to refuse any extension.
Hugh is a Partner in McInnes Cooper’s Halifax office. He is the group leader of the firm’s pensions and benefits practice group. He can be reached at (902) 444-8616 or email@example.com.