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Pension Update - April 29, 2022

In this Pension eBlast

A new fiscal year

FSRA Reports

New processes and reminders

Quick links

On the horizon

A new fiscal year

On April 1, 2022, we kicked-off a new fiscal year at FSRA. We’re looking ahead with excitement and are thrilled to be on this journey with you - our sector partners. FSRA’s FY2022-23 Statement of Priorities continue to focus on ensuring principles-based and outcome-focused implementation of our regulatory framework while supporting the good administration in Ontario’s pension sector. What will this look like? Here are a few highlights:

  • we will consult and engage on a thought leadership piece about leading practices for pension plan member communication and engagement strategies
  • we will begin developing new rules on Family Law in response to the findings of the special purpose Technical Advisory Committee in F2020-2021
  • later in the year, we will launch a Pension Awareness Day!

FSRA Reports

Q1 2022 Solvency Report

FSRA’s latest quarterly solvency report finds that the majority of Ontario pensions plans (85 per cent) were more than 100 per cent fully funded for the fifth consecutive quarter and are at the highest level since December 2009.

While this is an encouraging sign, plan sponsors and administrators are expected to have an effective governance framework in place and a good understanding of the risks facing the plan. This will enhance a pension plan’s ability to withstand periodic stresses.

Solvency monitoring is one supervisory tool FSRA uses to improve outcomes for pension plan beneficiaries and to proactively engage in a dialogue with plan sponsors.

FSRA has released its Q1 2022 update on the estimated solvency ratios of Ontario’s Defined Benefit pension plans.

Q1 2022 update on the estimated solvency ratios of Ontario's Defined Benefit pension plans

New processes and reminders

New amendment process on the Pension Services Portal (Form 1.1)

We have updated the Form 1.1 and enhanced the Pension Services Portal (PSP) process for filing amendments. The new Form 1.1 on the PSP will allow us to continue to streamline our processes and register some amendments more efficiently. As with many applications, we strongly encourage the sector to submit this form electronically through the PSP.

While we will continue to accept submissions by mail and email, FSRA is moving towards making submissions through the PSP mandatory in the future. Read the Instructions for submitting an application for the registration of a Pension Plan Amendment on the PSP.

Note that the new Form 1.1. is also available on FSRA’s website. Pension plan administrators may continue to use the old Form 1.1 until June 30, 2022.

Introducing FSRA’s New Whistle-blower Program

FSRA is introducing a new Whistle-blower Program to more effectively identify misconduct in Ontario’s non-securities financial services sectors and better protect consumers.

Whistle-blowers are a valuable source of information and this program and new guidance will assist individuals and entities who want to come forward by helping determine who qualifies as a Whistle-blower and who will receive protection.

For more details, please visit the FSRA Whistle-blower section of our website and read the FSRA Whistle-blower Guidance.

Coming soon: streamlined Annual Information Return for defined contribution pension plans

A key recommendation from the Technical Advisory Committee on Defined Contribution Plans was to simplify regulatory filings and reduce data collection. As a result, FSRA is currently preparing revisions to the Annual Information Return (AIR) to eliminate some questions that defined contribution (DC) pension plans must complete on the AIR. FSRA intends to implement these revisions in early June, for use ahead of the June 30 AIR filing deadlines for most DC plans.

Once the revisions are implemented DC plans will also answer a small number of new questions on the AIR:

  • does the plan provide auto-enrollment to eligible DC members?
  • does the plan provide for auto-escalation of DC member contributions?
  • does the plan permit variable benefit payments in retirement, and if so, how many retired members have variable benefit accounts?
  • how many investment fund options are offered to DC members, and what type of default investment fund is provided (e.g., target date, target risk, money market, etc.)?
  • what is the average asset based fee across all investment funds (as a percentage, without weighting), and what is the lowest and highest asset based fees charged for any investment fund offered (as a percentage)? The fees we are referring to are all-in fees. This would typically include investment management, custodial and plan administration fees.
  • do any of the DC investment funds offered indicate they consider environmental, social and governance factors?

Reminder: Pension Benefits Guarantee Fund assessment remittance

As a reminder, Pension Benefits Guarantee Fund (PBGF) assessment certificates must be filed nine months after the fiscal year of a pension plan. The payment due date for PBGF assessments is the same as the due date for filing the PBGF assessment certificate. Note that extensions granted on PBGF Assessment Certificate filings do not apply to your PBGF payments.

Late payments will be subject to the legislated 20% penalty and interest charges. Unpaid balances may also be pursued by a third-party collection agency on behalf of FSRA.

Plans can remit PBGF assessments electronically, using the same electronic payment program used for paying FSRA assessments.

Please contact finance@fsrao.ca if you require assistance using the e-payment option.

If you are remitting payment by cheque please make your cheque payable to “Pension Benefits Guarantee Fund” and have it mailed to the address indicated on your PBGF Assessment Certificate.

Reminder: Pension Benefits Guarantee Fund exposure data collection

On September 1, 2021, regulatory changes took effect requiring pension plan administrators with Pension Benefits Guarantee Fund (PBGF) liabilities of $10 million or greater to report:

  1. data related to the plan’s PBGF’s claim exposure; and
  2. information regarding the distribution of its pension benefits

Note: This requirement only applies to defined benefit pension plans that are PBGF eligible. The new data is to be submitted through the Pension Services Portal as part of the existing valuation report that a plan administrator is required to file routinely with FSRA and applies to valuations filed on or after September 1, 2021. When filing your valuation report please be ready to provide the required PBGF exposure data. You will not be able to submit your valuation report without it. If you have questions, please reach out to us at pensioninquiries@fsrao.ca.

Reminder: outstanding filings and administrative penalties

As previously communicated, FSRA has recommenced its processes for following-up on outstanding filings. These processes include levying administrative monetary penalties, where appropriate. FSRA will employ a phased approach to compliance with legislative filing requirements.

To avoid the risk of regulatory action please ensure your processes and filings are up to date. Starting early spring 2022, plan administrators that fail to comply with FSRA’s compliance requests for outstanding filings may be charged an administrative monetary penalty.

Reminder: requests to make payments from a pension plan that is winding up

Plan administrators and their advisors are reminded that once notice of plan wind up has been given under section 68 or 69 of the Pension Benefits Act, sections 70(2) and (3) provide that no payments can be made from the plan until FSRA has approved the wind up report. Exceptions are:

  • pensions or other benefits already in pay before the wind up notice was given
  • payments that are prescribed by regulation or that are approved by FSRA

FSRA accepts that custodial fees as well as asset based administration and investment expenses will generally continue to be paid after a wind up notice is issued. However, the administrator is expected to request permission to do so (without ceasing such payments), pursuant to section 70(3). This request can be made at the same time that any other request is made to make payments pursuant to 70(3).

FSRA takes a risk-based approach in determining whether to approve a request to make payments under 70(3). Amongst other factors, FSRA will consider the likelihood that (1) the requested payments(s) could put remaining benefits at risk and (2) the benefit may not be correctly determined. FSRA will also consider whether the identified risks are outweighed by the advantage of permitting the requested payment to be made (i.e., the impact on any member for whom the request is being made and on administration costs, etc.).

For defined benefit (DB) plans,

  • generally, FSRA will approve requests for payment of fees and expenses, as well as pensions to members and former members who elect (after the wind up notice has been issued) to receive an immediate pension, regardless of the plan’s funded status.
    • that said, concern over the plan’s funded status and/or the sponsor’s financial stability could lead FSRA to an alternative conclusion
    • an employer commitment to fully fund any deficit once the wind up is approved (i.e., to not delay full funding and settlement over a longer period), will also be a factor that FSRA considers
  • with the exceptions noted below, FSRA will generally not approve requests to pay or transfer commuted values if the wind up report has not yet been approved.
  • requests to pay out death benefits, small benefits, and payments due to financial hardship and shortened life expectancy will be considered on a plan-by-plan and sometimes case-by-case basis. They will often be approved, but only up to the extent of the plan’s funded level as per the last filed actuarial valuation report or any subsequent updates, or to 100% on the condition the plan sponsor remits the balance of the funded ratio to the pension fund at the time of settlement.
  • plans where the employer is bankrupt or operating under the Companies' Creditors Arrangement Act are subject to additional considerations with respect to requests under 70(3).

For defined contribution (DC) plans,

  • payment requests for death benefits, small benefits, financial hardship, shortened life expectancy, commencement of an immediate pension (in one form or another) can also be approved for DC plans - but only if we have received written confirmation that all contributions have been remitted to the pension fund up with respect to the members’ employment to the wind up date.
  • other than the exceptions listed above, FSRA will generally not approve the distribution of DC accounts in the plan unless:
    • the wind up report has been filed and approved (either for the entire plan or just for the DC portion of a plan that has both DB and DC benefits (DB/DC plan), or
    • the DC portion of a DB/DC plan that is winding up is being transferred to another plan (i.e., immediately before the wind up) and a transferring member of the DC portion of the plan is eligible for a payout from the plan

An online DC wind up report is available for filing on FSRA’s Pension Services Portal (PSP). Amongst other benefits, this tool provides a streamlined approval process. We encourage plan administrators to file DC wind up reports through the PSP as soon as possible after the wind up date. For DB/ DC plans, there is no need to delay filing the online DC wind up report for the DC portion of the plan. The DC portion can be addressed with the online filing before the DB wind up report is filed with FSRA.

Update: missing members data collection

FSRA requires pension plans to provide missing members data when filing their Annual Information Return (AIR). To date, FSRA has collected missing members data from approximately 1,500 pension plans. FSRA expects remaining pension plans to submit their missing member data when they file their AIR this June. This data collection is intended to provide FSRA with the scope of the missing members issue in the sector. FSRA expects to be able to share preliminary insights from this data collection with you later this year.

Update: FSRA’s digital transformation

Since summer 2021, FSRA has been laying the foundation for a successful digital transformation. In parallel with our efforts to procure and build a new system, Pensions has made significant enhancements to our current pensions system, the Pension Services Portal. Pensions has also digitized almost all of our pension plan records.

What’s next for future state? Thentia Cloud has been awarded the contract for FSRA’s new core regulatory system.

This is an exciting multi-year initiative. While a new system for Pensions is not expected until FY2023-24, FSRA hopes to engage with stakeholders and the Pension Standing Technical Advisory Committees later this year. We look forward to your support as we continue this journey.

Update: Canadian Association of Pension Supervisory Authorities Risk Management Guideline Committee

The Canadian Association of Pension Supervisory Authorities established a Committee in January 2022 with a mandate to develop a Risk Management Guideline.

Good risk management is a key characteristic of a well-run pension plan and an important part of protecting members’ benefits. By having an adequate system for managing risks, plan administrators are better positioned to keep pension plan assets safe and protect the plan from adverse risks. We will keep you updated as this work progresses.

Did you know? The Pension Services Portal has troubleshooting resources

The Pension Services Portal (PSP) allows you to make direct submissions to FSRA. Instructions for using the PSP and FAQs for accessing/delegating access are available online. Learn how to activate your account; upload plan documents; file extension requests and much more.

Quick links

On the horizon

  • Q2 2022 Solvency Report
  • 2021 Report on the Funding of Defined Benefit Pension Plans in Ontario
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