Defined Benefit Plan Sponsors Given Guidance On Pension Plan Funding Policies

The sponsor of a defined benefit plan is legally obliged to ensure that the pension plan is funded over time. Minimum contributions must be made as specified by applicable law. The Canadian Association of Pension Supervisory Authorities recently released Guideline No. 7: Pension Plan Funding Policy Guideline to assist plan sponsors on the development and adoption of funding policies for defined benefit pension plans. A funding policy is not required by law but the Guideline can assist plan sponsors of defined benefit pension plans in determining whether to develop and adopt the use of funding policies.

FUNDING POLICY GUIDELINE

The purpose of a funding policy is to establish a framework for funding a defined benefit pension plan. Some factors that may be relevant to the plan and the plan sponsor in establishing a framework include: benefit security, the financial position of the plan sponsor and competing organizational demands for resources, and legislative and