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Pension commuted values under review; temporary solvency funding relief introduced in Ontario

Jul 12, 2017

An in-depth look at these and other subjects are covered in the current issue of the Morneau Shepell News & Views

TORONTO, July 12, 2017 /CNW/ - Morneau Shepell released the July 2017 issue of its monthly newsletter, News & Views, in which the company looked at a number of topics including the following: the updated Commuted Value Standard, interim solvency funding relief in Ontario, a new framework for collectively bargained multi-employer pension plans (MEPPs) and the approval of Bill 127 in Ontario.

  • Updated Commuted Value Standard under review – A revised version of the Commuted Value Standard, which is used to determine the lump sum value of pension benefits payable from Registered Pension Plans, is currently under review by the Canadian Institute of Actuaries and is expected to be implemented in the spring of 2018. Among the proposed changes, the new standard would reduce the lump sums paid to members of a typical defined benefit pension plan by as much as five per cent under current market conditions.
  • Interim solvency funding relief in Ontario – As of July 1, 2017, the Government of Ontario fulfilled its promise to provide interim funding relief measures on solvency deficiencies with a valuation date on or after December 31, 2016 and before December 31, 2017. The details of the permanent solvency reform measures are expected to be announced in the fall of 2017.
  • Ontario announces framework for collectively bargained MEPPs – A new target benefit framework has been introduced by the Government of Ontario for collectively bargained MEPPs, allowing the following: a permanent exemption from solvency funding, a requirement to fund a Provision for Adverse Deviation to help manage future risk, going concern funding deficiencies to be amortized over 15 years, and more.
  • Bill 127 passed in Ontario – As a result of Ontario Bill 127 being passed, the Superintendent of Financial Services has extended its ability to instruct pension plan administrators to participate in meetings with the Superintendent and provide information to members. Additionally, legislation that establishes the Financial Services Regulatory Authority is now partly in force.
  • New disclosure requirements – The Financial Account Standards Board issued an update to "Account Standards Codification 715 – Compensation – Retirement Benefits (ASC-715)" that requires the "service cost" component of pension and other postretirement benefits to be reported separately from the other components of the net benefit cost in the income statement.   
  • Tracking the funded status of pension plans as at June 30, 2017 – Morneau Shepell shared the changes in the financial position of a typical defined benefit pension plan since December 31, 2016. The graph in the newsletter shows the impact of three typical portfolios on plan assets and the effect of interest rate changes on solvency liabilities of medium duration.
  • Impact on pension expense under international accounting as at June 30, 2017 – Morneau Shepell shows the expense impact for a typical pension plan that starts the year at an arbitrary value of 100 (expense index). Since the beginning of the year, the pension expense has increased by 14 per cent (for a contributory plan) due to the decrease in the discount rates despite the good returns (relative to the discount rate).

About Morneau Shepell

Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, as well as the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

SOURCE Morneau Shepell - Pension/Retirement

For further information: Heather MacDonald, Morneau Shepell, 416.390.2625, hmacdonald@morneaushepell.com


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