December 19, 2014 Richard Cann NL Deputy Superintendent of Pensions richardcann@gov.nl.ca Michael Delaney Superintendent of Pensions, Service Newfoundland and Labrador gsinfo@gov.nl.ca Mark Prefontaine Superintendent of Insurance, Financial Institutions and Pensions, Alberta Mark.Prefontaine@gov.ab.ca Paul Owens Deputy Superintendent of Pensions, Alberta paul.owens@gov.ab.ca Michael Peters Deputy Superintendent of Pensions, Financial Institutions Commission of British Columbia Michael.Peters@ficombc.ca Michael Grist Deputy Superintendent of Insurance, Financial Institutions Commission of British Columbia C.Michael.Grist@ficombc.ca Carolyn Rogers CEO and Superintendent, Financial Institutions Commission, BC FICOM@ficombc.ca Brian Mills Interim CEO and Superintendent of Financial Services of Ontario brian.mills@fsco.gov.on.ca Andrew Schrumm Policy Manager CAPSA capsa-acor@fsco.gov.on.ca 20 Carlton Street, Suite123, Toronto, Ontario M5B 2H5 Tel 1-416-640-0264 Fax 1-416-585-3005 info@piacweb.org www.piacweb.org
2 Bruce Macnaughton Director, Pension and Income Security Policy Branch, Ontario Ministry of Finance Bruce.Macnaughton@ontario.ca Jim Scalena Superintendent of Financial Institutions, Dept of Finance, Manitoba jscalena@gov.mb.ca Debbie Lyon Superintendent of Pensions, Manitoba Pension Commission pensions@gov.mb.ca Doug Murphy Superintendent of Insurance, Credit Unions and Trust and Loan Companies, NS Department of Environment and Labour fininst@gov.ns.ca Nancy MacNeil Smith Superintendent of Pensions, NS Department of Environment and Labour macneiln@gov.ns.ca Angela Mazerolle Superintendent of Pensions, NB Financial and Consumer Services Commission angela.mazerollestephens@gnb.ca David Wild Chief Executive Officer and Superintendent of Pensions, Financial and Consumer Affairs Authority of Saskatchewan dave.wild@gov.sk.ca Tamara DeMos Managing Director, Private Pension Plans Division, OSFI tamara.demos@osfi-bsif.gc.ca Marc Sauvé Manager, Private Pension Plans Division, OSFI marc.sauve@osfi-bsif.gc.ca Jean-Claude Ménard Chief Actuary, OSFI jean-claude.menard@osfi-bsif.gc.ca Michael Godwin Director General, Registered Pension Plans Directorate, Canada Revenue Agency rpd/dre@cra-arc.gc.ca 20 Carlton Street, Suite 123 Toronto, Ontario M5B 2H5 Tel 1-416-640-0264 Fax 1-416-585-3005 info@piacweb.org www.piacweb.org
3 Michel Montour Directeur des régimes de retraite, Régie des rentes du Québec michel.montour@rrq.gouv.qc.ca Re: CIA Consultation with Regulators on Solvency Funding This submission is made by the Pension Investment Association of Canada (PIAC) in support of a letter submitted by the Canadian Institute of Actuaries (CIA) to Canadian federal and provincial regulators on October 30, 2014 (attached). The CIA submission was developed based on the understanding that several Canadian jurisdictions are contemplating a review of pension funding regulation and calculation of transfer values. PIAC has been the national voice for Canadian private and public pension funds since 1977 in matters related to pension investment and governance. Senior investment professionals employed by PIAC s member funds are responsible for the oversight and management of over $1.3 trillion in assets on behalf of millions of Canadians. PIAC s mission is to promote sound investment practices and good governance for the benefit of pension plan sponsors and beneficiaries. PIAC supports the CIA in its proactive engagement on the issues related to pension reform, and generally supports the stated views and suggestions in its letter. Canadian governments have the ability to alter the policy underpinnings of the pension regime and thereby alleviate some of the funding and regulatory challenges that plan sponsors and administrators are facing. It is clear to PIAC that the current minimum funding rules utilized across Canada are simply not working. Our observations are: Minimum solvency funding rules are having an ongoing detrimental effect on the viability of defined benefit pension plans. Sponsors of plans not being wound up are struggling with their commitment to their business and pension plan sustainability, necessitating repeated rounds of temporary regulatory solvency relief. As defined benefit pension plans mature in a low interest rate environment, plan sponsors are still struggling with the large financial burden solvency funding creates; a burden that is clearly worse than expected due to the extraordinary economic circumstances. Clearly, the repeated temporary relief measures that have been implemented by numerous jurisdictions over the last several years represent an acknowledgement that the minimum solvency funding requirements are not working. PIAC believes Canada needs a more fundamental solution to defined benefit pension plan funding rather than serial temporary relief programs. We need to seek a better long-term funding model and we need to come up with a new and more effective valuation and funding methodology. 20 Carlton Street, Suite 123 Toronto, Ontario M5B 2H5 Tel 1-416-640-0264 Fax 1-416-585-3005 info@piacweb.org www.piacweb.org
4 PIAC is convinced that now is the time for the reform of long-term, minimum funding rules. We believe Canadian pension jurisdictions need one funding rule, as opposed to one going-concern funding rule and one plan termination funding rule. This one funding rule can be properly designed to meet the needs of beneficiaries and plan sponsors to balance the need for benefit security and plan sustainability. It is our hope that new rules can be developed with jurisdictions across Canada to promote the efficiencies of harmonization. We strongly encourage Canadian federal and provincial regulators to pursue the ideas and initiatives, and to accept the CIA s offer of assistance in the review and creation of a revised regulatory framework for pension funding and transfer values. PIAC s membership has considerable experience with many of the intricacies and challenges associated with these issues, and we would be very pleased to provide assistance on this important initiative. Respectfully submitted on behalf of the members of the Pension Investment Association of Canada. Yours sincerely, Michael Keenan Chair enclosure: cc. CIA October 30, 2014 letter to regulators Canadian Institute of Actuaries 20 Carlton Street, Suite 123 Toronto, Ontario M5B 2H5 Tel 1-416-640-0264 Fax 1-416-585-3005 info@piacweb.org www.piacweb.org