Newfoundland and Labrador amends solvency funding requirements for MEPPs
On July 29, 2021, amendments to the Newfoundland and Labrador (“NL”) Pension Benefits Regulations were filed. Regulations NLR 44/21 amends the solvency funding requirement for multi-employer pension plans (“MEPPs”).
Previously, an administrator of a MEPP could make an election for solvency funding exemption, however this was only a temporary relief. The amendments to the Regulations permanently exempt MEPPs from the requirement to be funded on a solvency basis, retroactive to December 31, 2020, when the previous temporary exemption ended. In addition, MEPPs will now be required to fund going concern unfunded liabilities over 10 years instead of the previous 12-years under the prior temporary exemption, but will be allowed to apply actuarial gains to reduce the balance of going concern unfunded liabilities and to combine special payments required to eliminate such going concern unfunded liabilities.
Furthermore, as of July 29, 2021, MEPPs are no longer subject to commuted value transfer restrictions which could impair the solvency of the pension plan (i.e., transfer deficiency holdbacks). Administrators of MEPPs will therefore be able to transfer the full commuted value entitlement to former members.
Temporary solvency funding exemptions for MEPPs have been in place in NL since 2008 and this permanent solvency funding exemption will be welcomed by sponsors of NL MEPPs.