December 22, 2020
Province Announces Changes to Protect Employers with Defined Benefit Pension Plans
– – –Moratorium on Certain Payments for Remainder of 2020 and 2021: Fielding
The Manitoba government will temporarily waive certain payments businesses and charities are required to put into pension plans, freeing up funds to help protect employees and prevent layoffs or shutdown, Finance Minister Scott Fielding announced today.
“Many businesses are facing challenges due to the current economic environment and lost revenue due to COVID-19. This is another step by the government to protect Manitoba businesses through the pandemic,” said Fielding. “A moratorium on certain pension payments is a temporary change we can make to support businesses and their employees that will allow businesses to reinvest these funds to keep their employees at work.”
The province is permitting pension plans to elect a moratorium on payments to pension plans that employers are required to make under defined benefit pension plans for the remainder of 2020 and all of 2021.
The Pension Benefits Act requires a regular checkup on the financial health of defined benefit pension plans. The moratorium on unfunded liability and solvency deficiency payments will provide funding relief to employers who are facing challenges in meeting their pension plan funding obligations.
“As the actuary for a number of the pension plans registered in Manitoba, the Ellement Consulting Group has seen first hand the challenges that plan sponsors have faced since the start of the COVID-19 pandemic,” said Tim McGorman, principal at Ellement Consulting Group, and former chairperson of the Manitoba Pension Commission. “One of the major concerns for plan sponsors, who are not exempt from solvency funding, is the impact and uncertainty of the historically low interest rates on their special payments for the new year. This temporary measure will assist these businesses to manage their staffing and business operations in 2021 without the additional stress and uncertainty that additional pension funding requirements would have on their business operations.”
“This is a very important and well-appreciated announcement for charities like ours and many others in Manitoba,” said Marcy Sullivan, chief financial officer of Ducks Unlimited Canada. “Given the uncertainty of COVID-19 on organizational revenues and expenses, budgeting for 2021 was an extra challenge. Having cost certainty in our pension plan for a year provides confidence that we can maintain our staffing levels and planned business operations for 2021. This temporary moratorium will provide short-term funding relief and still allow us to meet our long-term financial obligations to pension plan members once the pandemic eases its grip on the economy.”
“The security and sustainability of our employee pension plan is at the top of our list of corporate responsibilities to our people,” said Ann Evans, chief financial and operating officer, Canadian Kraft Paper. “As an employer operating in a very competitive business environment, this relief will put us on equal footing with employers in other provinces while still enabling us to meet our long-term commitments to our employees.”
These changes will also level the field with public pension plans that do not need to meet solvency requirements, noted the minister. In October 2020, the government reintroduced the Pension Benefits Amendment Act, which once passed, would provide private pension funds with greater flexibility on an ongoing basis coming out of the pandemic to deal with solvency deficiencies, he added.
Under the protection of the moratorium, businesses will be exempt from making unfunded liability and solvency deficiency payments until the end of 2021.
For more information, visit www.gov.mb.ca/finance/pension/industry/ind-info.html.
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