Summary
The Province of Ontario implemented a new "Funding Framework" for
defined benefit pension plans. The Funding Framework, which
generally took effect on May 1, 2018, is a fundamental change.
Whereas the old funding regime focused on solvency funding, the new
regime emphasizes going concern funding which includes a new
funding reserve.
Background
Implementation of the Funding Framework completes a review
process that has been ongoing since 2016. Defined benefit pension
plans are funded by ongoing normal cost contributions as well as
special payments to pay for funding deficiencies identified in
periodic actuarial valuations. These valuations measure the
plan's value on both a solvency and going concern basis and if
the valuations indicate shortfalls special payments will be
required. The existing solvency funding regime had become
increasingly difficult for employers as low interest rates helped
create unpredictable and often severe funding requirements.
