Issue

Solvency is a multifaceted issue which the ACPM’s Advocacy and Government Relations Committee (AGRC) addresses frequently. For example, it is addressed in the Model Pension Law and is affected by other issues such as "grow in". It is also an issue being considered by the AGRC Funding Task Force.

Two specific issues related to solvency in the past two-three years are:

1. Concern about the state and use of the Ontario Pension Benefits Guarantee Fund (PBGF);
2. The ability of pension plan sponsors to use a letter of credit to meet solvency deficit amortization contribution requirements.

Action to Date

1. In April 2003 the Chair of the AGRC sent a letter to the Ontario Minister of Finance requesting information about the PBGF. A reply with some explanation was received. The AGRC remains concerned however, particularly in light of well-publicized difficulties at STELCO and other companies that seek creditor protection.
2. At its November 2004 meeting the AGRC endorsed a recommendation from its Funding Task Force, that letters of credit be permissible to meet solvency deficiency contributions. The AGRC endorsed the concept, with details of implementation to be further addressed by the Funding Task Force.
3. The AGRC has contacted OSFI, which is currently reviewing the potential use of letters of credit, and Canadian Association of Pension Supervisory Authorities (CAPSA) to begin a dialogue around the use of letters of credit as a means to meet solvency deficiency contribution requirements.

Future Action

1. The AGRC continues to monitor the status of the Ontario PBGF and other potential, similar initiatives such as the Canadian Labour Congress’ (CLC) call for a national pension benefit guarantee fund.

Submissions/Publications

• 2003 letter to Ontario Minister of Finance
• 2003 response from Ontario Minister of Finance
• Letters of Credit appendix to funding paper