Mar 23, 2023
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The government of Ontario has released a consultation paper titled “A Permanent Framework for Target Benefits,” intended to replace the temporary funding exemptions for Multi-Employer Pension Plans (or MEPPs) which expires at the end of 2023. A previous consultation held in 2007 received extremely negative feedback from MEPP stakeholders in relation to the Provision for Adverse Deviation (or PfAD) which was perceived as onerous.  And it may be that the PfAD proposed in the current consultation faces the same reaction.

As expected, MEPPs converting to the permanent target benefit approach would need to develop governance and funding policies, with key details required in these policies.  Communications to members about the potential reduction of benefits would be required.

Commuted values (lump sums representing the defined benefits of an individual) paid out of MEPPs would be valued based on a going concern discount rate, and this value would carry over to the calculations that occur on marriage breakdown.

Funding would be based on a going concern valuation, with solvency funding valuations only for information purposes.  The going concern funding valuation would involve a PfAD and, as with many pension issues, the devil will be in the detail in assessing how this PfAD would affect the funding levels.  However, given the approach of most MEPPs, a PfAD is likely a concern, in some cases a significant concern.

The current consultation paper seeks comments by June 30, 2023.  Stakeholders that would be affected by the proposed framework should review in detail and consider providing comments.

This blog provides some of the highlights of the consultation, not a full review.  If you wish to discuss the consultation in more detail in relation to a particular pension plan or circumstance, please contact one of Cavalluzzo’s experienced pension lawyers, listed below.

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