Pension update - June 6, 2024

Welcome message

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Welcome to our latest edition of the Pensions Quarterly Newsletter. As we reflect on our last quarter, two big initiatives come to mind that highlight the remarkable strides we’ve taken together to advance our commitment to innovation, engagement, and excellence in financial services regulation.

First, February 15, 2024, marked FSRA’s second annual Pension Awareness Day, illuminating the value of workplace pensions and the importance of saving for retirement. The PA Day was framed within a three-week campaign, which included multi-cultural engagement through digital and social media, newspaper articles, and radio and television interviews. With the sector’s involvement and enthusiasm, this year we saw an increase in online engagement during the campaign, demonstrating the impact we can achieve when we unite our efforts towards a common goal. With your continued support and dedication, I am confident the campaign will reach even greater heights in years to come.

Second, on March 4, 2024, FSRA hosted its annual cross-sectoral event, FSRA Exchange. The morning featured panel discussions about how AI and climate change are impacting financial services regulation. The afternoon featured a breakout session about principles-based regulation (PBR) and risk management in Ontario’s pension sector. Recordings of the session and additional resources are posted on the FSRA Exchange web page. We anticipate the launch of FSRA’s cross-sectoral PBR Guidance this summer, further formalizing our regulatory approach. We have also started to introduce PBR internally by launching staff training, demonstrating our commitment to foster a shared understanding of PBR across all facets of our operations.

The Pensions team has made some organizational changes at leadership positions. Tim Thomson has assumed the Director of Pension Plan Operations role responsible for pension plan transactions such as plan amendments, inquiries and most applications. In addition to continuing as the Deputy Chief Actuary, Trevor Cartlidge has stepped into the Director of Operations, Special Transactions role. This position, formerly held by Tim, is responsible for DB asset transfers including SEPP to JSPP conversions, DB wind ups and surplus applications. The pension operations portfolio continues to report to David Bartucci, Head, Pension Plan Operations and Regulatory Effectiveness.

Sylvie Charest has taken on a new expanded role as the Head of Pension Strategic Initiatives. This portfolio includes responsibility of the PBGF, insolvencies, the pension automation and transformation unit responsible for pension systems and data. As part of this portfolio, the planning and stakeholder relations team, led by Rhea Tubigan, Director, Planning and Stakeholder Relations now reports to Sylvie. Take a look at the Pensions Leadership Team chart.

As we dive into this quarter, I am delighted to share our latest newsletter, featuring the Q1 2024 Solvency Report, Final Plan Amendments Guidance, Final Pension Plan Administrator Roles and Responsibilities Guidance and essential updates and reminders. I trust that you will find this information timely and informative. Here's to a quarter filled with success, growth, and meaningful impact!

- Andrew Fung, Executive Vice President, Pensions

FSRA reports

Q1 2024 Solvency Report
Defined benefit pension plans remain resilient amid economic challenges

FSRA released its Q1 2024 Solvency Report, highlighting the resilience of Ontario’s defined benefit pension plans despite global economic challenges, with 90% of pension plans fully funded, and median solvency ratio reaching 122%, a new all-time high. This marks the third consecutive quarter of impressive performance within a year. FSRA encourages plans to be prepared for future changes, proactively managing risks and reassessing investment strategies to protect plan members and their families.

Read more

New processes, updates and reminders

Release of final Guidance on Pension Plan Amendments

The final Pension Plan Amendments Guidance is now live and in effect. Following two consultations and consideration of stakeholder feedback, FSRA revised the Guidance to provide clarity on how certain provisions of the Pension Benefits Act (PBA) regarding plan amendments are interpreted and administered. FSRA will host an information webinar on July 17, where stakeholders can learn more and ask questions about the Guidance. Look out for the invitation and registration instructions.

Read more

Release of final Guidance on Pension Plan Administrator Roles and Responsibilities

Pension plan administrators are responsible for managing risks, prioritizing the interests of beneficiaries, and ensuring legal compliance. FSRA has released final guidance to support administrators in fulfilling their obligations under the PBA. The final Guidance on Pension Plan Administrator Roles and Responsibilities provides FSRA’s Interpretation in three important areas:

• managing and retaining records
• responding to complaints and inquiries
• communicating information to plan members clearly, accurately, and in a timely manner

FSRA will be hosting an information webinar on July 17, providing stakeholders with the opportunity to learn more about the obligations of plan administrators and ask questions. Keep an eye out for the invitation and registration details.

Read more

Tips for section 32 reporting during plan wind up

Section 31 of the Regulation requires deficits be funded within 5 years from the effective wind up date, with annual in advance payments starting immediately. Section 32 of the Regulation requires that annual actuarial reports be filed with FSRA until a report is filed certifying that there are no further amounts to be funded pursuant to section 75 of the Pension Benefits Act (PBA).

Until that final report is submitted, section 29(8) of the Regulation restricts use of assets to purchase life annuities and pay out commuted values.

In response to the increasing volume of inquiries received related to the section 32 reporting, we are providing the following tips on the section 32 reporting process:

• Section 32 reports should be prepared as of the anniversary date of the wind up, with the final section 32 report due on the fourth annual anniversary of the wind up effective date. For example:

  Wind Up Date	Valuation Date of Next Section 32 Report if Benefits not Fully Settled Prior to this Date	Due Date
  October 1, 2023	October 1, 2024	April 1, 2025
  October 1, 2023	October 1, 2025	April 1, 2026
  October 1, 2023	October 1, 2026	April 1, 2027
  October 1, 2023	October 1, 2027 (final section 32 report)	April 1, 2028

• Any deficit identified in the final section 32 report must be immediately funded.
• If a plan is fully funded prior to the next section 32 report’s due date, FSRA accepts a final report prepared as of the date when the cost of fully settling the benefits is known.
• The final section 32 report certifying full plan funding cannot be prepared based on annuity cost assumptions; it must be prepared after the cost of fully settling the benefits is known and any additional required contributions are made.
• A section 32 report with a valuation date earlier than the anniversary date is accepted only if the remaining deficit is fully funded prior to the valuation date of the report, and benefits can be settled before the next anniversary section 32 report’s due date.
• Once a section 32 report confirms full funding of the plan, no further reports are required. FSRA will not issue any additional approval for basic benefits settlement, as such approval was provided in the initial approval letter. The plan administrators should settle all benefits as soon as possible, after filing the final section 32 report.
• A section 32 report is not required if a plan goes from surplus to deficit after the wind up date. However, the employer must contribute to fund the deficit to fully settle the benefits. The written notice to FSRA post-final asset distribution should include a gain/loss analysis and asset reconciliation from the wind up date to the settlement date to demonstrate that no surplus remains.
• Excess funds from deficit contributions can be reclaimed by completing a section 62.1 application. However, any funds unrelated to deficit payments should be treated as surplus per the requirements under the PBA on plan wind up.

Within 30 days after final distribution of assets, the administrator must provide FSRA a written notice that all the assets of the plan have been distributed (section 29.1 (4) of the Regulation), and include a copy of the plan’s financial statement to show that no assets remain.

Pension awareness day leaves its mark

The 2024 Pension Awareness Day campaign was FSRA’s most successful consumer education campaign to date, and we owe this tremendous success to our stakeholders!

Thanks to the overwhelming support and commitment, we were able to reach more Ontarians than ever before, surpassing our achievements from the previous year and setting a new benchmark for excellence.

Here are some of the remarkable highlights from the campaign as of April 12:

• we reached an aggregated reach of an astonishing 363 million impressions across multiple media platforms
• Andrew Fung, our EVP of Pensions, conducted an impressive total of 17 interviews with prominent media outlets across Ontario

Your active participation and support on these platforms significantly contributed to this remarkable success.

Thank you again to everyone for your support and for doing your part in driving meaningful change in the lives of Ontarians as they plan to secure a more financially rewarding future.

Don’t miss being a part of the buzz in 2025! To stay in the loop and receive updates and information about the next Pensions Awareness Day, please reach out to Dan Miles at [email protected] or Stephanie Babb at [email protected] and get on our communications stakeholder list today!

Attention Pension Administrators: Annual filings coming due

We’d like to remind plan administrators and agents to submit their annual filings for the last fiscal year before the deadline on June 30, 2024, using the Pension Services Portal (PSP).

To avoid processing delays, please ensure:

1. your PSP accounts are fully activated
2. all Pension Plan Contact information is up to date

Pension plans whose fiscal year end is not December 31, should also note their filing deadlines:

Late filing submissions can be subject to Administrative Penalties.

For directions on using the PSP, please visit: Instructions for Using the Pension Services Portal. If you have any questions or concerns, please contact [email protected].

Feature: Meet our Pension policy team

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FSRA’s Pension Policy Team is a dedicated group of experts committed to shaping pension policy and ensuring a secure future for all Ontarians. With a wealth of experience and a passion for financial security, they lead the development of FSRA Guidance and Rules, analyzing policies, engaging stakeholders, and facilitating public consultations to support the Pensions regulatory area.

Additionally, the team collaborates with the Ministry of Finance and other stakeholders, ensuring alignment and effective communication. They also manage corporate reporting, consumer advocacy and innovation initiatives.

Get to know the faces behind the policies FSRA develops!

Looking for people to help make a difference

We are seeking new members for our four Standing Technical Advisory Committees. These committees advise FSRA on proposed pension regulatory guidance, FSRA initiatives, and identify issues arising out of existing pension legislation. Committee members will be selected based on their pension knowledge, areas of expertise and level of experience, ensuring that each committee has diverse perspectives and representation from unions, employers, plan administrators, plan members and retirees. If you are interested in joining a committee, please send your biography or CV to Jennifer Mullen. Please indicate which committee you would like to join. Terms for new members may begin throughout the year – selected individuals will be notified of their appointment term.

Quick links

• FSRA Exchange Session Recordings, including Pensions breakout session