Ottawa targets pension reform ahead of key talks

Tue Dec 14, 2010 12:16pm EST
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OTTAWA (Reuters) - The Canadian government proposed changes on Tuesday to rules governing federally supervised private pension plans to make them less sensitive to financial market volatility.

Finance Minister Jim Flaherty said the regulatory amendments would provide more tools to sponsors of federally regulated private pension plans to "better manage their funding obligations while providing additional protection to plan members and retirees."

The announcement comes just ahead of a meeting next Monday between Flaherty and provincial finance ministers to try to lay out a plan for broader pension reform in the country.

The changes proposed on Tuesday would only affect about 7 percent of all private pension plans in Canada, as most are regulated by provincial authorities.

The suggested amendments are:

* allow plan sponsors to secure letters of credit in lieu of making solvency payments to pension funds, up to a limit of 15 percent of plan assets.

* require the plan sponsor to fully fund pension benefits on plan termination

* void any amendments to a plan that would reduce the solvency ration of the pension plan if the plan's solvency ration would be below a ratio set out in regulations

* permit plan sponsors, members and retirees of a distressed pension plan to negotiate their own funding arrangements to facilitate a plan restructuring.   Continued...

<p>Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa December 13, 2010. REUTERS/Blair Gable</p>