Target Benefit Multi-Employer Pension Plan Framework
The government is implementing a new framework for target benefit multi-employer pension plans (MEPPs) to help ensure these plans are healthy and sustainable over the long term. This framework will replace the time-limited funding regulations currently in place for specified Ontario multi-employer pension plans (SOMEPPs), whose members are unionized.
Unlike defined benefit plans, target benefit plans have fixed contributions and can address funding deficits by reducing accrued benefits, including pension benefits being paid to retirees.
To best manage the risks associated with MEPPs, the new funding framework for target benefit MEPPs would include:
- A permanent exemption from solvency funding
- An obligation for plans to satisfy going concern funding requirements with any deficiencies amortized over 15 years, rather than the current 12 years
- A new basis for calculating benefits paid when a member terminates participation in a plan or when a plan is wound up
- New funding rules that would include a reserve called a Provision for Adverse Deviation (PfAD) to help manage future risk and help ensure benefits are secure
- Rules to ensure that plan benefits are appropriately reduced when funding requirements are not met
Consistent with Ontario's 2015 consultation paper, the target benefit MEPP framework would also include the following measures to help protect plan beneficiaries:
- A requirement to develop policies on funding and governance
- Opportunities for retirees to participate in plan governance
- Enhanced disclosure to plan beneficiaries on the status of their pension plan
To allow time for the development of the necessary legislative and regulatory amendments, the government is extending the temporary exemption from solvency funding requirements currently in place for SOMEPPs to August 2018 from August 2017. The government will continue to explore options for a framework for non-collectively bargained MEPPs.