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Quebec rules on buy-out annuities; authorities to change funding of multi-province plans

Aug 15, 2017

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

TORONTO, Aug. 15, 2017 /CNW/ - Morneau Shepell released the August 2017 issue of its monthly newsletter, News & Viewsin which the company looked at a number of topics, including regulation on funding policies and annuity purchases in Quebec and the release of a consultation paper by the Canadian Association of Pension Supervisory Authorities about funding and asset allocation in multi-jurisdictional pension plans.

  • Draft to amend regulation respecting supplemental pension plans in Quebec – A draft regulation to amend the Supplemental Pension Plans (SPP) Regulation, which adds new elements regarding funding policies and annuity purchasing policies, was published on July 12, 2017. Among the new regulations, the draft makes changes to the content of the actuarial valuation report and to letters of credit. The regulation will come into force on the 15th day after final publication in the Gazette officielle du Québec.
  • Quebec amendments to the funding of municipal and university pension plans – A draft to amend the Regulation respecting the funding of pension plans of the municipal and university sectors was published on August 2, 2017. The purpose of the draft is to exclude the stabilization contributions paid by a member from the 50 per cent rule, yet states such stabilization contributions must be taken into account for the purposes of the 100 per cent rule. The regulation will come into force on the 15th day after final publication in the Gazette officielle du Québec. Provisions regarding actuarial valuation reports may be applied retroactively.
  • Economic assumptions for accounting – Morneau Shepell issued its 17th annual survey on the economic assumptions used by public companies to account for the costs of their defined benefit plans. Highlights of the survey include a decrease in discount rates when compared to the year prior, a 93 per cent ratio of pension assets to defined benefit obligation for accounting purposes, and more.
  • Funding and asset allocation in multi-jurisdictional pension plans – The Canadian Association of Pension Supervisory Authorities (CAPSA) released a consultation paper to address the move away from solvency funding in certain jurisdictions. The paper outlines two options for funding and asset allocation in defined benefit (DB) multi-jurisdictional pension plans.
  • Canada adopts regulations to amend PBSR – As of June 23, 2017, the federal government has adopted regulations to amend the Pension Benefits Standards Regulations 1985 (PBSR). Regulations change the maximum amount of a letter of credit for a federally regulated defined benefit (DB) pension plan from 15 per cent of assets to 15 per cent of solvency liabilities.
  • Tracking the funded status of pension plans as at July 31, 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 July 31, 2017 – Morneau Shepell shows the expense impact for a typical pension plan that starts the year at an arbitrary value of 100 (expense index). The discount rate has increased in the last month, resulting in a reduced expense, despite poor returns (relative to the discount rate). Since the beginning of the year, the slight increase in the discount rate combined with returns slightly above expectations (relative to the discount rate) has resulted in the pension expense returning almost to its level at the beginning of the year.

About Morneau Shepell

Morneau Shepell is the only human resources consulting and technology company that takes an integrated approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. As a leader in strategic HR consulting and innovative pension design, the Company helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions.  Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations. With more than 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 Inc.

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


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