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Pension Update - February 14, 2022

In this Pension eBlast

Consultations and refreshed guidance

FSRA Reports

New processes and reminders

Quick links

On the horizon

Consultations and refreshed guidance

Consultation: Interpretation Guidance on Pension Benefits Guarantee Fund (PBGF) Assessment Deadlines and Calculations

FSRA is now consulting on proposed Pension Benefits Guarantee Fund Assessment Deadlines and Calculations Guidance which is designed to assist plan administrators in maintaining compliance with the Pension Benefits Act.

Read more: Consultation on Proposed Guidance: Pension Benefits Guarantee Fund assessment calculations and deadlines

FSRA Reports

Q4 2021 Solvency Report

The financial health of Ontario’s defined benefit pension plans improved steadily in 2021. The latest quarterly solvency report published by FSRA finds that the majority of pensions plans, 81%, were more than 100% fully funded, the highest level since December 2009.

Read more: The financial health of Ontario's Defined Benefit pensions plans improved steadily in 2021

Inflation: is your plan prepared?

The start of 2022 sees continuation of an inflationary trend arising mainly from Covid-related global supply chain disruptions amid the context of recent stimulative fiscal and monetary policies. Monthly year-over-year CPI increases during much of 2021 exceeded the Bank of Canada’s target inflation range of 1 to 3%. October, November, and December increases were 4.7%, 4.7% and 4.8% respectively. While the Bank of Canada and other central banks expect the increases in inflation to be transitory, it is not clear whether the recent increases are a prelude to a period of sustained inflation. In this context, prudent pension plan administrators will want to consider the impact of inflation on their pension plans (e.g., investments, liabilities and funding) and, if warranted, take appropriate action.

Read more: Inflation: is your plan prepared?

2021 FSRA Pensions team accomplishments

During the 2021 calendar year, FSRA’s Pensions team continued to streamline processes and better leverage the use of technology to ensure timely and effective engagement with the sector. Last year, we reviewed and answered 7,797 inquiries and received ~38,000 submissions, including annual prescribed filings. Learn more about our accomplishments in 2021.

Total submissions

During the 2021 calendar year, FSRA's Pensions team received:

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~38,000 submissions (including annual prescribed filings)

The TOP 5 submissions were:

  1. Plan Specific Industry Inquiries
  2. General Inquiries (Non Plan Specific) 
  3. Individual Pension Plans / Designated Plans Elections to opt out of the Ontario pensions legislative framework 
  4. Variance and Non Remittance Reporting
  5. Plan Amendment Applications 

Applications

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Applications
  • 234 wind up applications were reviewed (all wind up types, including surplus). Of this, 203 wind up applications were approved.
  • 104 asset transfers were approved. Defined Contribution transfers made up ~75%.
  • 111 applications to register pension plans were approved.
  • ~1,450 amendment applications were received.
  • ~1,500 amendments were approved, including those filed prior to 2021.
  • 1,986 elections from Individual Pension Plans / Designated Plans opting out of the Ontario pensions regulatory framework. Of these, 1,974 have been reviewed.

Inquiries

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7,797 inquiries reviewed and answered

Total inquiries were broken down as follows:

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Inquiries broken down into categories

New processes and reminders

Reducing regulatory burden for defined contribution plans

The Government of Ontario has made regulatory amendments to remove the requirement for the administrators of member-directed Defined Contribution pension plans to prepare a statement of investment policies and procedures.

The government has also made regulatory amendments to remove the requirement for administrators of pension plans providing only defined contribution benefits to file an auditor’s report on the plan’s annual financial statements. Instead, FSRA is able to require audited financial statements in certain circumstances.

You can view the regulatory amendment here. If you have questions, please reach out to us at  pensioninquiries@fsrao.ca .

Outstanding filings

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.

New approach and transition for summary of contributions (Form 7) processes

As previously announced, FSRA is updating its Form 7 and related processes. The changes took effect on a voluntary basis January 1, 2022 and will become mandatory March 31, 2022. These changes include releasing updates of all relevant forms.

Updated forms are now available on FSRA’s website in two formats, fillable PDF and Excel. FSRA will be archiving its Form 7 User Guide on March 31, 2022. Pertinent information has been included in the updated forms. Please ensure you read the updated forms thoroughly.

Under the revised process:

  • Summary of Contributions (Form 7) - Plan administrators will continue to complete and submit their annual Summary of Contributions / Revised Summary of Contributions (Form 7) to the trustee(s) of the pension fund in accordance with the legislative framework. Please contact your custodian to confirm whether they require you to use the fillable pdf or Excel format of this form.
  • Non-remittance Reporting (Form 7.1) - Trustee(s) will continue to report failures to remit any contribution(s) to FSRA. Non-remittance reporting must be made to FSRA within 60 days following the contribution due date. This reporting remains on a monthly basis. In addition, any variance in special payments shall be included in this monthly reporting.
  • Variance Reporting (Form 7.1) - The threshold for reporting variances in expected contributions will be increased from 10% to 25%. Special payments to DB plans are an exception. Any variance in special payments will be treated as non-remittances as per the paragraph above. The reporting period for informing FSRA of variances will change from monthly to quarterly, similar to Alberta and British Columbia. Trustees will be required to report any variances of 25% or more to FSRA within 60 days after the end of each quarter. There continues to be no requirement to report variances that are “over-contributions”.

If you have any questions about the updated approach or updated forms please contact us at pensioninquiries@fsrao.ca.

Climate related financial disclosure developments

Among the commitments in the federal Deputy Prime Minister and Minister of Finance Mandate Letter of December 16, 2021, two specific commitments are noteworthy for Ontario pension stakeholders. The letter commits the Minister to work with the provinces and territories to move toward mandatary climate-related financial disclosures based on the Task Force on Climate-related Financial Disclosures  framework. The letter also commits the Minister to require federally regulated institutions, including financial institutions, pension funds and government agencies, to issue climate-related financial disclosures and net-zero plans. The Minister will be supported by the federal Minister of Environment and Climate Change. Separately, FSRA continues to work on Guidance on environmental, social and governance (ESG) considerations for the pension sector through the Canadian Association of Pension Supervisory Authorities ESG Committee.

Contribution holidays

Plan administrators are required to advise the pension fund trustees of the expected contributions to the pension plan at the beginning of each plan fiscal year using Form 7. FSRA has received inquiries regarding contribution holidays that indicate potential misunderstandings of when they may be taken. For plans that are considering a contribution holiday, here is a quick reminder of the regulatory requirements.

A prescribed cost certificate must be filed within the first 90 days of the fiscal year to support a contribution holiday. The cost certificate should be prepared in accordance with section 7.1 of Regulation 909 (Regulation) to demonstrate that the plan has sufficient available actuarial surplus (AAS), as prescribed, to meet the funding requirements of the current fiscal year. For this purpose, the AAS must be reassessed as of the first day of the current fiscal year, but cannot be greater than the AAS disclosed in the last filed actuarial valuation report, adjusted to reflect any amounts funded from AAS since the date of the last valuation.

Please note the following:

  • A plan with an “excess surplus” as described in paragraph 147.2(2)(d) of the Income Tax Act (Canada) is not exempted from filing the above cost certificate within the prescribed timeline. Furthermore, a contribution holiday cannot be taken based solely on the existence of an excess surplus if the other requirements under the Regulation have not been met.
  • Section 8 of the Regulation requires that notice of a reduction of contributions must be given to all plan beneficiaries and other prescribed parties within the first six months of the plan fiscal year.

If you have further questions, please contact us at pensioninquiries@fsrao.ca.

Reminder: PBGF assessment remittances

As a reminder, 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. 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.

Effective May 2021 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: could you be taking advantage of FSRA’s guidance on group annuity purchases?

In October 2019, FSRA released Approach Guidance on requirements after certain annuity purchases for defined benefit plans. The Guidance outlines, as an example, a set of circumstances where FSRA may consider burden relief from certain PBA filing requirements that would otherwise apply on a go-forward basis. Plan administrators for plans must first contact FSRA to determine if this Approach Guidance applies to their plan.

Quick links

On the horizon

  • Q1 2022 Solvency Report
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