February 24, 2009
The Honourable Dwight Duncan
Minister of Finance
Attention: Comments on Report of the Expert Commission on Pensions
c/o Pension and Income Security Policy Branch
5th Floor, Frost Building South
7 Queen's Park Crescent Toronto, ON M7A 1Y7
Dear Mr. Duncan:
Re: Comments on the Ontario Expert Commission on Pension Report
We commend the Ontario Expert Commission on its report. The report is comprehensive and contains a number of significant, insightful and innovative recommendations. We are concerned; however, that the report does not do enough to support and protect single-employer plans (SEPPs).
Specifically, we believe that to maintain SEPP viability, consideration should be given to eliminating solvency valuations entirely, at least for plan sponsors such as The Presbyterian Church in Canada who share many of the characteristics of Multi Employer Pension Plans (MEPPs) and Jointly Sponsored Pension Plans (JSPPs) such as having a negligible chance of ceasing operations, and having plenty of assets outside of their (DB) pension plan in the very unlikely event that they do decide to cease operations. Why require organizations such as our own to fund solvency deficiencies that will never materialize, and also require us to contribute to a Pension Benefits Guarantee Fund that we will never use? Surely the full disclosure of the wind-up position of our (DB) pension plan would be sufficient, as recommended for MEPPs and JSPPs.
As a minimum, there should be a moratorium on the funding of solvency deficiencies for at least 5 years. Based on recent market performance, allowing us to amortize our solvency deficiency over 10 years instead of 5 years would not be sufficient. Our actuaries have estimated that the solvency deficiency it) our (DB) pension plan has increased from approximately S 10M to approximately $40M in 2008, and that it would be even higher today. It makes little sense at this time to divert Church funds that should be directed towards our mission, to fund a solvency deficiency. If, in fact, we do have to fund our current solvency deficiency over 5 or even 10 years, in all likelihood we will have to completely cease all future (DB) pension plan accruals, and wind-up our (DB) pension plan, which would have a drastic impact on over 800 ministers and staff across Canada.
We do support responsible ongoing funding rules, including the ongoing funding of future (DB) pension plan improvements over 5 years (or for the period of a collective agreement, if shorter), and prohibiting (DB) pension plan improvements if the funded ratio is under 85%.
As a very minimum consideration for not-for-profit plan sponsors, we ask that you permit them to defer increases in contributions to fund deficiencies for up to 12 months, as is currently permitted for JSPPs, given the difficulties that not-for-profits can experience when required to retroactively apply contribution increases.
Thanks you for your consideration.
Original signed by
Stephen P. Roche, CA
Chief Financial Officer and Treasurer