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Solvency Funding Relief Regulations, 2009 (SOR/2009-182)

Regulations are current to 2020-09-09 and last amended on 2015-04-01. Previous Versions

PART 3 10-year Funding with Letters of Credit (continued)

General Funding Rules (continued)

  •  (1) Despite subsection 9(4) of the Pension Benefits Standards Regulations, 1985 and section 13 of the Air Canada Pension Plan Solvency Deficiency Funding Regulations, if the actuarial report that values a plan as at the end of the 2008 plan year indicates that there is a 2008 solvency deficiency and that there is a solvency deficiency, as defined in subsection 9(1) of the Pension Benefits Standards Regulations, 1985, the 2008 solvency deficiency may be funded by special payments sufficient to liquidate that deficiency by equal annual payments over a period not exceeding 10 years from the day on which the 2008 solvency deficiency emerged.

  • (2) If the actuarial report that values the plan as at the end of the 2008 plan year indicates that there is no 2008 solvency deficiency but that there is a solvency deficiency as defined in subsection 9(1) of the Pension Benefits Standards Regulations, 1985, the solvency deficiency may be funded by special payments sufficient to liquidate the solvency shortfall of the plan over a period not exceeding 10 years from the day on which that solvency shortfall was calculated.

  • (3) The deficiency may be funded in accordance with this Part if the employer

    • (a) obtains letters of credit up to the end of the fifth plan year of funding under this Part, for the amount representing the difference between the present value, at the end of each plan year, of the remaining special payments that are required to be made to liquidate the 2008 solvency deficiency or solvency shortfall, as the case may be, under this Part and the present value of the remaining special payments that would have been required to be made to liquidate the corresponding 2008 solvency deficiency or solvency shortfall, as the case may be, as if it had been funded under section 9 of the Pension Benefits Standards Regulations, 1985; and

    • (b) maintains letters of credit for the sixth plan year of funding and for each plan year after that year, for the amount representing the present value at the beginning of each plan year of the remaining special payments under this Part.

  • (4) The present value of the remaining special payments shall be determined by using the interest rate that was assumed in valuing the liabilities of the plan for the purpose of calculating the deficiency.

Letter of Credit

  •  (1) A letter of credit required by this Part shall be an irrevocable, unconditional standby letter of credit that

    • (a) is in accordance with the rules of International Standby Practices 1998 (publication No. 590 of the International Chamber of Commerce), as amended from time to time;

    • (b) is payable only in Canadian currency;

    • (c) is issued or confirmed by an issuer who is a member of the Canadian Payments Association; and

    • (d) provides that

      • (i) the letter of credit is made out to the holder’s benefit,

      • (ii) the issuer will pay the face amount of the letter of credit on demand from the holder without inquiring whether the holder has a right to make the demand,

      • (iii) the bankruptcy of the employer shall have no effect on the rights and obligations of the issuer and the holder set out in the letter of credit,

      • (iv) the letter of credit will expire on the day on which the plan’s year ends,

      • (v) the letter of credit will automatically be renewed for the full face amount for further one-year periods on the expiry date referred to in subparagraph (iv) unless the issuer notifies the holder, in writing, of the non-renewal not less than 90 days before the expiry date, and

      • (vi) the letter of credit may not be amended, except to increase the face amount, during the term of the letter of credit and may not be assigned except to another holder.

  • (2) The initial letter of credit for funding under this Part shall be obtained by the end of the 2009 plan year and each subsequent letter of credit shall be obtained at least 30 days before the beginning of each subsequent plan year that is covered by it.

  • (3) The letter of credit shall immediately be provided to the holder.

  • (4) Subsection 5(4) shall not apply in respect of a plan if the letters of credit are obtained in accordance with this Part.

  • SOR/2015-60, s. 46(F)

 If separate letters of credit have been obtained for each plan year, a letter of credit is not required to be automatically renewed after the fifth year following the plan year for which it was obtained.

 If the face amount of letters of credit obtained or maintained in accordance with this Part for a plan year is less than the amount required by subsection 21(3) for that plan year, the employer shall make up the difference either by increasing the amount of letters of credit or by making additional payments to the pension fund no later than on the day on which the next payment is made to the pension fund in accordance with subsection 9(14) of the Pension Benefits Standards Regulations, 1985.

  • SOR/2010-149, s. 23
  • SOR/2015-60, s. 47(F)

Trust Agreement

  •  (1) The employer and, if the employer is not the administrator of the plan, the administrator shall enter into a trust agreement or may amend any existing trust agreement they may have with the holder regarding the letters of credit referred to in this Part.

  • (2) The trust agreement shall provide that

    • (a) the holder shall hold the letters of credit in Canada in trust for the plan;

    • (b) the definition default in subsection 1(1) applies to the agreement;

    • (c) the employer shall immediately notify, in writing, the holder, the Superintendent and, if the employer is not the administrator of the plan, the administrator of a default;

    • (d) if not otherwise notified under paragraph (c), the administrator shall notify, in writing, the holder and the Superintendent of a default immediately after becoming aware of it;

    • (e) on receipt of the notice referred to in paragraph (c) or (d), the holder shall immediately make a demand for payment of the face amount of all of the letters of credit held in respect of the plan;

    • (f) on receipt of a written notice of default from any person other than the employer or the administrator, the holder shall

      • (i) immediately notify, in writing, the employer, the administrator and the Superintendent of the notice, and

      • (ii) make a demand for payment of the face amount of all of the letters of credit held in respect of the plan unless the administrator provides a written notice to the holder within 30 days after receipt of the notice that the default has not occurred;

    • (g) when a holder makes a demand for payment of a letter of credit held in respect of the plan, it shall notify, in writing, the employer, the administrator and the Superintendent that it has made the demand;

    • (h) the holder shall immediately notify, in writing, the employer, the administrator and the Superintendent if the issuer does not pay the face amount of a letter of credit after a demand for payment has been made;

    • (i) the holder shall not make a demand for payment if a letter of credit expires without being renewed, or the face amount is being reduced, in accordance with this Part;

    • (j) the administrator shall notify the holder of any circumstance in which a letter of credit may expire or the face amount of a letter of credit may be reduced in accordance with this Part; and

    • (k) the administrator shall provide the holder with a copy of the statements referred to in paragraph 26(1)(e) and subsection 26(2) and with a copy of the written notice referred to in paragraph 32(a).

  • SOR/2015-60, s. 48(F)

 [Repealed, SOR/2015-60, s. 49]

Statement to Members

 When the administrator provides the written statement under paragraph 28(1)(b) of the Act, the administrator shall also provide the following information:

  • (a) the amount of the 2008 solvency deficiency or the solvency deficiency calculated in accordance with the definition solvency deficiency in subsection 9(1) of the Pension Benefits Standards Regulations, 1985, as the case may be, that is being funded under this Part;

  • (b) the fact that the deficiency is to be funded in accordance with this Part by equal annual payments over a period not exceeding 10 years; and

  • (c) the aggregate face amount of all of the letters of credit that are held by the holder in respect of the plan.

  • SOR/2015-60, s. 50(E)

Reduction of the Face Amount of a Letter of Credit

  •  (1) The face amount of a letter of credit may be reduced, effective the beginning of a plan year, by

    • (a) the amount by which the aggregate amount of payments that the employer has made to the pension fund in the previous plan year exceeds the total of the annual special payments made in accordance with this Part and the normal cost of the plan for that year as shown in the actuarial report; or

    • (b) the amount by which the aggregate face amount of all of the letters of credit that are held by the holder in respect of the plan exceeds the amount referred to in paragraph 21(3)(a) or (b), as the case may be.

  • (2) The face amount of the letter of credit shall not be reduced following a default.

  • SOR/2011-85, s. 26
 
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