Frequently Asked Questions - Pensions

Pension FAQ

Ontario Northland Contributory Pension Plan
Reg. # 0355164
Pension Solvency Funding Relief

Frequently Asked Questions

  1. Can you explain what is meant by the change in governance?

    Pension plan governance refers to the system used to organize the roles and responsibilities involved in governing, managing and administrating a pension plan including the determination of:

    • benefits provided by the plan
    • the allocation of contribution rates among employers and employees
    • the investment policy of the plan and how it is executed
    • pension administration
    • the selection of the professional advisors to the plan

    A change in governance would therefore be a change in how and by whom this was done. Currently, the governance of the plan rests with the Commission while Ontario Northland backstops any funding requirements beyond employee contributions.

  2. Changing the governance of the plan to a jointly sponsored pension plan? What exactly does this mean?

    A jointly sponsored plan means that plan members and the Ontario Northland share responsibility for plan governance, plan administration and plan terms including the funding of the plan.

  3. If we become part of the MTO, would they be considered a partner for a jointly sponsored pension plan? And if so, how would that affect our plan?

    There is no plan to become a part of the MTO

  4. Why is Ontario Northland expected to contribute $29.1 million for 2011 as I thought employee and company contributions were matched?

    Ontario Northland is required to match employee contributions and additionally to contribute into the plan whatever additional funds are identified by the actuary, including the funding of any shortfall.

  5. What happens if the funding relief is accepted and Ontario Northland has its contributions reduced by $19.8 million? That will leave $9.3 million for the required company contribution. That is roughly 1/3 of what is payable in 2011. Does that mean that our current pension entitlement and projected pension income will be reduced accordingly, to a point where living will be difficult?

    The deferral of shortfall payments will mean that Ontario Northland will take longer to pay off the Plan’s funding shortfall. If the Plan remains ongoing during that period, your accrued pension benefits will not be affected. If, however, the Plan is wound up during that period, there will be less assets in the Plan than there would have been if Ontario Northland was paying the shortfall over the usual period of time. It is important to note that if the Plan is wound up, Ontario Northland is required to make further contributions to the Plan to ensure there are enough assets in the fund at that time to pay for all accrued benefits. In the event of a Plan wind up and Ontario Northland is unable to pay those additional contributions at that time, then benefits that are not covered by the Ontario Pension Benefits Guarantee Fund may be reduced.

  6. What will happen if the application for funding relief is not accepted?

    If the application is not accepted, current funding rules would continue to be in effect creating constrained cash flow pressure on Ontario Northland.

  7. Will any future changes affect pensioners current entitlements?

    No. There are clear rules that protect pension benefits.

  8. Are there other plans in similar situations to ours?

    Yes, According to the report produced by the Financial Services Commission of Ontario entitled: Funding of Defined Benefit Pension Plans in Ontario Seventh Annual Report 84% of pension plans in Ontario are less than fully funded on a solvency basis.

  9. Why does ONTC insist on blaming investment downturn on the state of our pension plan when the contribution holidays and the early pension retirement buy-outs taken from the pension fund also contributed to financial state of our plan?

    Pension plan enhancements such as early retirement windows, ad hoc pension increases and other pension plan design changes do impact the liabilities of the pension plan. However, these items do not have the very significant impact on the fund that the global economic downturn of 2008-09 did. The downturn resulted in the pension funds’ asset values dropping by approximately 20% while liabilities have increased by about 25% (year end 2011 estimate). The fund has recovered some of the value that existed prior to the economic downturn but still remains well below the level that existed prior to this event. Historically low interest rates, used to stimulate the economies of the world, continue to drive up the liabilities of pension plans. As noted in the application for solvency relief contained elsewhere on this site – a 1% move in interest rates impacts solvency liabilities by $71.4M. Due to the magnitude of these items the plan went from a pension surplus to a deficit.

  10. I am at this time able to retire as I have met all requirements, I do plan on working 1 more year. Will these changes to the plan reduce my pension or affect my ability to retire in 2013. Will it change the medical benefit part of the plan that is in place until 65, or the bridge amount of the plan?

    Please be assured that any changes to the plan will be communicated in advance and will be implemented with ample notice. The timeframe for this process requires us to have completed the recommended changes by the end of 2013 and have them fully implemented in another five years’ time. You will need to monitor these changes and make your decision based on the plan in effect at the time of your retirement. With regard to medical benefits, they are separate from the pension plan and will not be part of this process.