Canada plans new rules for private pension funds

Tue Oct 27, 2009 6:35pm EDT
 
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By Randall Palmer

OTTAWA (Reuters) - Canada unveiled new rules for private pension plans on Tuesday, promising increased protection for members and reduced volatility in funding corporate obligations.

Finance Minister Jim Flaherty said in a statement that the government plans to restrict an employer's ability to take a holiday on contributions to federally regulated pension plans unless they keep a 5 percent funding cushion.

Companies must base their funding requirements on a three-year average to reduce volatility, and they must fund pension benefits fully if a plan is terminated.

The government will also increase the pension surplus threshold for federally and provincially regulated defined benefit pension plans to 25 per cent from 10 per cent.

"While some of the proposed changes can be introduced by changes to regulation, others will be implemented by legislation, which is expected to be introduced in Parliament," the statement said.

Flaherty later told reporters that Ottawa and the provinces also plan to examine the question of whether employee pension plans should have priority in the case of bankruptcies.

Telecoms equipment maker Nortel, for example, is under bankruptcy protection and its former employees have complained loudly that their pensions were not protected.

"This is not simple, because when you're dealing with bankruptcy law you're dealing with priorities, and priorities of creditors, and that can affect the ability of companies to borrow and carry on their businesses," Flaherty said.   Continued...