Client Update: New Nova Scotia temporary solvency relief for defined benefit pension plans
On August 9, 2017, the Nova Scotia Superintendent of Pensions announced temporary solvency relief for defined benefit pension plans available effective August 8, 2017. The changes allow pension plan sponsors a one-time option to fund eligible solvency deficiencies over a period up to 15 years, rather than the usual 5-year period. Eligible solvency deficiencies are those determined in valuation reports with valuation dates from December 30, 2016 to January 2, 2019 as well as existing solvency deficiencies being funded over a 5-year period.
Nova Scotia previously introduced solvency relief measures in February, 2013 (when the amortization period was also extended to 15 years), and November, 2009 (10 years). As previously, plan administrators must notify plan members, former members, retired members and bargaining agents if solvency relief is being sought. Essentially, if one-third of the plan members, former members or retired members object in writing, the plan cannot take advantage of the solvency relief. Bargaining agents can object or consent on behalf of their members.
The measures were effected by amendments to the Nova Scotia Pension Benefits Regulations, which also apply some new administrative requirements. One is that an administrator must make all required normal cost contributions and remit all employee contributions in order to qualify. There are also additional requirements on the solvency relief reports that must be submitted to the Superintendent, which now must contain:
- A statement that the administrator proposes to make an extension to the amortization period;
- The special payments required once the election to extend is made; and
- The special payments that would have been required if the election were not made.
Plan members must also be advised that interest on the solvency liabilities will also be amortized and be given the start and end dates of the amortization period.
Relief was also previously provided for Nova Scotia university and municipality pension plans in the form of a permanent solvency exemption. New Brunswick municipalities and university plans may be exempted with consent of members, former members and beneficiaries. No other general solvency relief has been announced recently in Atlantic Canada, where the last relief granted in New Brunswick was for deficiencies in 2010-2012 and Newfoundland and Labrador for deficiencies in 2007-2009 and 2010-2013 and for multi-employer plans for 2016-2020.
This update is intended for general information only. If you have questions about how the cases or tips above may affect you, please contact our pension and benefits law practitioners such as Level Chan and Dante Manna in Halifax.