Securitatem, sustineri, concordia – if the CBA Pension and Benefits Section had a motto, this would be it: financial security, sustainability, harmony.
The Section took the opportunity to repeat this message in a submission to Finance Canada this summer, in response to an invitation to share its perspective on solvency funding in the federal pension framework.
Whatever the particulars of that framework, the Section asks Finance Canada to keep the need to keep in mind retirement income security, sustainability of the solvency funding framework, and harmony between federal and provincial regulations as guiding principles when contemplating changes to the funding model.
“(P)romoting retirement income security is an important function of government,” the Section writes. “We urge governments to support and promote reasonable measures that increase the funding and security of pension benefits.”
The government “might consider the appropriateness of new temporary solvency funding relief measures” but the Section says “there should be sufficient flexibility” built into the solvency funding regime to withstand shifts in the overall economy without these measures.
Harmonizing pension legislation is key to creating an efficient and effective pension regulatory system in Canada, but the Section acknowledges that the current environment is complex and there are concerns about the current rules.
“Some proposed methods for addressing these concerns would add another layer of complexity to determining the funding standards for a multi-jurisdictional plan,” it writes. “Adopting a distinct solvency funding framework that applies to federally regulated plans would further complicate the implementation of an agreement or potentially the ability for the federal government to become a signatory to an agreement.”
The Section discusses federal initiatives to introduce a regulatory framework for target benefit plans. While Section members disagree about target benefit plans, they do agree that this type of plan should not “be seen as a panacea for concerns with the funding framework for defined benefit plans,” because target benefit plans wouldn’t fit into all work environments.
The Section reviews the solvency funding approaches that have been adopted or are being considered in several provinces, and says it will follow any developments with interest.
“In addition to facilitating harmonization, the CBA Section hopes that these ongoing discussions will lead to greater long-term sustainability of pension plans. In our view, this will require greater intervention than the introduction of pension plan design features and we are in favour of changes to the funding framework of defined-benefit plans to support their future sustainability.”