RE: Proposed Changes to Solvency Funding Regulations in Ontario
I am a salaried retiree of FCA Canada Inc.(formerly Chrysler Canada). During my __ years with the company I earned a reasonable salary and am now receiving a Defined Benefit (“DB”) Pension to which I contributed along with the company. By contributing to this plan, I have always understood that my pension was an integral but deferred part of my total compensation package which would be paid to me as promised in full.
Pensioners like me rely on the Solvency Funding regulation implemented by The Financial Services Commission of Ontario (“FSCO”), which provides that funding deficits (shortfall below 100% funded) be made up by the company within a reasonable time frame (typically the following 5 years), to ensure that sufficient funds will be available to pay the pension, as promised.
So you can understand why I am very concerned that on May 19th the Wynne government proposed changes to the solvency funding rules for DB plans which would lower the solvency funding requirement to only 85% from 100%. While this proposal was announced as a means to make the DB plans more affordable for the plan sponsors, it would be done on the backs of pensioners, as it would weaken the protection enjoyed by many retirees across Ontario. It virtually guarantees pensioners like me that our DB pension plans would always be at least 15% underfunded!
The recent news of Sears Canada filing for restructuring under CCAA highlights why retaining the 100% funding requirement is so important. Under CCAA, there is no protection for pension deficits. A pension deficit would only be funded if there were any funds remaining after secured creditors, like the banks, are paid, which is unlikely. As in the case of Sears Canada, upon wind-up of an underfunded DB plan, retirees will take a significant reduction in their pension with no recourse to get the shortfall back. This is not right; there has to be better protection for retirees.
In summary, pensioners like me are facing increased risk in our retirement years due to the combination of the proposed reduction in the solvency funding requirement, the lack of protection for pension deficits under CCAC, and the economic pressures facing many plan sponsors. Since the federal government has refused to consider changes that would protect pensioners by putting them on the same super priority as active employees,(ahead of other creditors),100% funding requirement or a reduced figure with a guaranteed fund to offset fully any reduction is necessary to protect our pensions.
I am requesting you, as my MPP, to do whatever is necessary to retain the solvency funding requirement of 100% or a reduced with a guaranteed fund as above and to advocate for accountability rules which provide the greatest level of financial security of all pensioners.