Defined Benefit Pensions – Is Yours Safe?
John Heinzl of the Globe and Mail discusses how you can determine the health of your private defined benefit (DB) pension plan, if you should have one. He explains that its health is a function of the financial condition of the company that employs you and the funding position of the plan itself. Retired employees should receive an annual pension statement showing the plan’s transfer ratio. A ratio of 100 per cent (or higher) indicates that the plan’s assets would cover all of the plan’s obligations if the plan were terminated (in the event of bankruptcy of the company for example). A ratio of less than 100 percent indicates there could be a shortfall if the plan were wound up.
If you haven’t received an annual statement, you can request one from your present or former employer’s HR department or contact the provincial or federal regulator who regulates your plan (the federal Office of the Superintendent of Financial Institutions or your provincial pension regulator such as the Financial Services Commission of Ontario or the British Columbia Financial Institutions Commission). Other documents and information that the plan administrator is likely required to provide (or, depending on the province, the regulator is likely required to provide) include financial statements for your pension fund and the statement of investment policies and procedures and actuarial reports.
In addition, Ontario is the only province that has a pension benefit guarantee fund. It covers portions of the obligations of pension plans that are wound up with deficiencies (for example, in the event of insolvency – as occurred at Nortel). The Pension Benefits Guarantee Fund may cover up to the first $1,000 a month of your private sector pension.