The Ontario government has approved the Trustees of the General Synod Pension Plan’s request for a three-year window to improve the plan’s funding level and avoid immediate pension reductions of 20 to 30 per cent.
Last September, the plan’s membership had voted “overwhelmingly in favour” of such funding relief, said Bishop Philip Poole, chair of the pension committee, in a letter sent to plan members. Ninety-nine per cent of active and inactive members and 99 per cent of retired members voted in favour of funding relief.
The government had indicated it would grant the request only if two-thirds (about 67 per cent) of all members voted in favour of the funding relief proposal. The plan has 2,356 non-retired active and inactive members, and 2,683 pensioners.
“We are grateful that the provincial government has taken the time to understand the special circumstances of the General Synod Pension Plan,” said Poole.
“With this funding relief in place, the plan is exempt from solvency funding, from August 2011 to December 31, 2015, and will then have a ‘fresh start,’ ” he added. “Any shortfall it still faces when the exemption period ends will need to be addressed after December 31, 2016.”
The board of trustees is already taking steps to improve the plan’s funding level, including asking the federal government for a temporary increase in pension contribution limits, said Poole. “The increase is needed because Ontario law requires that contributions to the plan be high enough to cover benefits currently being earned, plus special funding shortfall payments,” said Poole. This would mean combined employer and employee contributions above the 18 per cent rate allowed under federal law, he added.
Poole said the board has also asked its actuary to explore ways of improving the plan’s solvency valuation results.
The health of a pension plan is measured based on going-concern valuation and solvency valuation. When measured on the basis of going-concern valuation (which assumes that the pension plan will continue in the long term), the General Synod Pension Plan has a surplus, said Poole. “The shortfall shows up only in the solvency valuation, which is required to check whether there is enough money in the pension fund to cover the total value of all pensions in the unlikely event that the plan suddenly shut down on the valuation date,” he said.