Understanding DB pension plan contributions

Pension sponsors’ contributions to their defined benefit plans are driven by the results of plan solvency valuations.

Unfortunately, the common valuations used to calculate solvency liabilities aren’t always accurate, which means sponsors could be contributing too little or too much to their plans, says Brent Simmons of Sun Life Financial.

In an article for BenefitsCanada.com, he says he’s seen plans with solvency liabilities off by 5%-to-10%. That means these plans were underfunded or overfunded by millions of dollars. Read more on how DB pension plans work.

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