Policy Reflection: Letter of Credit Usage by Defined Benefit Pension Plans in Canada
By Norma L. Nielson & Peggy L. Hedges (University of Calgary) There is an argument to be made for letting corporations hold off on contributing to their employees’ defined benefit pension plans, as long as there is a guarantee the cash will come eventually. That is the reason that provincial governments began allowing creditworthy companies to instead provide a letter of credit, backed by a Canadian bank, guaranteeing the cash deposit, and secured by the company’s line of credit or...