FSRA regulates all pension plans registered in Ontario and as Canada’s largest pension regulator, is a trusted source for the pension industry. As part of FSRA’s efforts to deliver on our mandate to promote good administration of pension plans, and to protect and safeguard the pension benefits and rights of pension plan beneficiaries, this report provides pension stakeholders with funding, investment and actuarial information on the registered defined benefit (DB) pension plans we regulate.
Highlights of the report include:
- the estimated median going-concern funded ratio has improved to 116% as at December 31, 2021 compared to 114% as at December 31, 2020
- the estimated median solvency ratio increased to 109% as at December 31, 2021 versus 96% as at December 31, 2020
- the average assumed going-concern discount rate decreased significantly from 5.09% (for valuations between July 1, 2017 to June 30, 2018) to 4.20% (for valuations between July 1, 2020 to June 30, 2021)
- This is the first report in which all of the plans analyzed have filed an actuarial valuation report subject to the current funding regime introduced in 2018. There are 1,010 plans which are required by the regulations to have a Provision for Adverse Deviations (PfAD). The data shows that:
- the number of plans identifying themselves as closed and open for purposes of determining the PfAD are 778 and 232 respectively. The median PfAD for all these plans is 9.6%
- Plans with the prescribed PfAD have largely eliminated the use of an explicit margin that they previously had. It should be noted, however, that they are not mutually exclusive. The prescribed PfAD is a component of the minimum funding target. An explicit margin, however, can be used for other purposes as part of the funding and investment policies – for example it may be used to establish a reserve to moderate the effect of gains and losses on funding levels and contribution requirements
- The typical asset allocation of pension funds between fixed income and non-fixed income did not change significantly for single employer pension plans (SEPPs) and multiemployer pension plans (MEPPs). However, jointly sponsored pension plans in subsection 1.3.1(3) of Regulation 909 (Listed JSPPs) saw a reduction to their fixed income allocation by 6.0% and an increase to their cash and alternative investments by 3.6% and 2.6% respectively. Listed JSPPs also have substantially higher allocations to alternative investments (average of 31% vs average of 9% for SEPP and MEPPs).
- Larger plans generally have higher investment returns and lower reported investment fees than smaller plans. Average net investment return for plans (other than the Listed JSPPs) that have assets of less than $10 million is 7.64% vs. 11.24% for those with assets of over $1 billion.
- The number of SEPPs has decreased by 69 compared to the 2020 Report, mainly due to plan windups and asset transfers (e.g., plan mergers). There continues to be a trend of decreasing membership in SEPPs and increasing membership in Listed JSPPs and MEPPs.
Note that because the 2021 Report is based on factual information from valuation reports filed with valuation dates up to June 30, 2021, the impact of more recent events, such as the high inflation environment, the Russia-Ukraine conflict, new developments in the COVID-19 pandemic, etc. are not reflected in the analysis shown in this report. However, FSRA does monitor the estimated solvency funded position of pension plans on a quarterly basis which reflects plans’ up-to-date experience – these can be viewed at Estimated Quarterly Solvency Funded Status. These updates reveal that the estimated median solvency ratio of pension plans steadily increased from a low of 85% as at March 31, 2020 (near the beginning of the pandemic) to 110% at June 30, 2022.
At FSRA, we remain vigilant in monitoring the situation as it develops. For pension plan administrators, it is paramount to understand the risks their plans are exposed to and to adjust as appropriate to manage those risks. FSRA is committed to continue engaging with plan sponsors and fiduciaries to collaboratively improve plan administration and benefit security for beneficiaries.