According to Mercer, Canadian defined benefit plans remain strong leading to the continued protection of benefits and an increase in contribution holidays 

TORONTO, April 2, 2026 – Mercer, a business of Marsh and a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people, today shares that Canadian defined benefit (DB) pension plans continued to maintain a strong solvency position, despite a volatile quarter for capital markets due to geopolitical tensions.

New data from Mercer also reveals that employers are increasingly leveraging plan surpluses to take contribution holidays, which refers to a temporary pause or reduction in employer contributions to a pension plan, typically allowed and sometimes required when there are surpluses above legislative thresholds.

The Mercer Pension Health Pulse (MPHP), a measure that tracks the median solvency ratio of the DB pension plans in Mercer’s pension database, shows the median solvency ratio was 123% as of March 31, 2026. The solvency ratio is one measure of a pension plan's financial health.

Recent valuation results, captured in Mercer’s database, along with the use of contribution holidays by employers, has resulted in a lower solvency ratio this quarter. Compared to the end of 2025, market fluctuations did not impact the decrease in median solvency ratio. 

“As companies navigate a very challenging economic landscape, pension plan surpluses may allow employers a certain level of cashflow stability. At the same time, solvency financial positions remain elevated, providing pension plan members protection against potential turbulences,” said Samantha Allen, a Mercer Principal in Toronto.

The contribution holiday trend is likely to continue in 2026, given available surpluses. Employers should continue to exercise caution when setting such surplus strategies since geopolitical risks continue and the financial health of some pension plans has deteriorated quickly during past crises. In addition, new mortality research released in March¹ may lead to future adjustments to pension liabilities. Plans with surplus will be better positioned if this eventually leads to an increase in their liabilities.

During the quarter, the Bank of Canada² held its overnight rate steady, after four decreases of 0.25% in 2025, a prudent approach in a hard to predict environment. While the Canadian economy shows signs of slowing, geopolitical threats may drive short-term inflation due to rising oil prices, which has a compounding effect on all global economies.

As a result, plan sponsors should continue to monitor economic volatility in 2026. Pension plans with significant surpluses may be better positioned to handle economic challenges. Surpluses can be a sign to consider changes to plan designs or investment strategies to mitigate risk. Current surplus levels allow plan sponsors to reassess their strategies, ensuring their plans remain resilient in various potential economic environments.

¹ Canadian Institute of Actuaries, 2026
² Bank of Canada, 2026 

Pension Health Pulse tracks the median ratio of solvency assets to solvency liabilities of the pension plans in the Mercer pension database, a database of the financial, demographic and other information of the pension plans of Mercer clients in Canada. The database contains information on 435 pension plans across Canada, in every industry, including public, private and not-for-profit sectors. The information for each pension plan in the database is updated every time a new actuarial funding valuation is performed for the plan.

The financial position of each plan is projected from its most recent valuation date, reflecting the estimated accrual of benefits by active members, estimated payments of benefits to pensioners and beneficiaries, an allowance for interest, an estimate of the impact of interest rate changes, estimates of employer and employee contributions (where applicable), and expected investment returns based on the individual plan’s target investment mix, where the target mix for each plan is assumed to be unchanged during the projection period. The investment returns used in the projections are based on index returns of the asset classes specified as (or closely matching) the target asset classes of the individual plans.   

Mercer is a business of Marsh (NYSE: MRSH), a global leader in risk, reinsurance and capital, people and investments, and management consulting, advising clients in 130 countries. With annual revenue of $27 billion and more than 95,000 colleagues, Marsh helps build the confidence to thrive through the power of perspective. For more information about Mercer, visit mercer.com, or follow us on LinkedIn and X.

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