Solvency is a multifaceted issue that ACPM’s Advocacy and Government Relations Committee (AGRC) addresses frequently. For example, it is addressed in the Model Pension Law and is affected by other issues such as Grow-in. It is also an issue focused on in the ACPM funding report ACPM Funding Task Force.
Two specific issues related to solvency are:
- Concern about the state and use of the Ontario Pension Benefits Guarantee Fund (PBGF); and
- The ability of pension plan sponsors to use a letter of credit to meet solvency deficit amortization contribution requirements.
Actions to date
In April 2003, the Chair of the AGRC sent a letter to the Ontario Minister of Finance requesting information about the PBGF. A reply with some explanation was received. The AGRC remains concerned, however, particularly in light of well-publicized difficulties at STELCO and in the auto sector.
At its November 2004 meeting, the AGRC endorsed a recommendation from its Funding Task Force that letters of credit be permissible to meet solvency deficiency contributions. The AGRC endorsed the concept; details were addressed by the Funding Task Force.
The AGRC has contacted OSFI, which is currently reviewing the potential use of letters of credit, and the Canadian Association of Pension Supervisory Authorities (CAPSA) to begin a dialogue around the use of letters of credit as a means of meeting solvency deficiency contribution requirements.
The AGRC has responded to many governmental discussion papers seeking comment on the review of their pension legislation (Ontario, Alberta/British Columbia, Nova Scotia, Federal ). Each of these responses has addressed solvency issues.
The AGRC continues to monitor the status of the Ontario PBGF and other potential similar initiatives and continues to advocate for appropriate relief from solvency contributions, such as the use of letters of credit.