Pension update - November 20, 2024
In this Pension eBlast
New processes, updates and reminders
- Pension Awareness Day 2025 update!
- FSRA’s Principles-Based Regulation Guidance
- Implementing a Permanent Target Benefit Framework
- FSRA seeks public input on its 2025-26 Statement of Priorities and Budget
- Feature: Meet the PSSM Team! Prudential Supervision, SEPPs, MEPPs Team
Welcome message
Thanks to your continued collaboration we have made steady progress on several of FSRA’s key initiatives. Together, we’ve made strides in areas like principles-based regulation and supporting the government’s permanent target benefit framework for multi-employer pension plans.
In this newsletter, you’ll find updates on key regulatory initiatives, insights into industry trends, and practical guidance to help you navigate the complexities of pension administration. I am pleased to share the Q3 2024 Solvency Report and provide a spotlight on the Prudential Supervision, Single Employer Pension Plans (SEPPs) and Multi-Employer Pension Plans (MEPPs) team.
It's also time to mark your calendars! Pension Awareness Day 2025 is quickly approaching, on February 20th, and our 2025 FSRA Exchange will be held on March 3rd.
Thank you once again for your continued trust and collaboration as we continue to work together to shape a stronger future for pensions in Ontario.
- Andrew Fung, Executive Vice President, Pensions
FSRA reports
Q3 2024 Solvency Report: Defined Benefit Pension Plans remain strong despite slight drop in funding levels
FSRA released its Q3 2024 Solvency Report for Defined Benefit Pension Plans, revealing that the overall funded position is still strong at 121 per cent. However, a two-percentage point decrease from last quarter breaks a steady upward trend of seven consecutive quarters.
To learn more, access the report.
New processes, updates and reminders
Encouraging participation in Pension Awareness Day 2025!
The third annual Pension Awareness Day will take place on Thursday, February 20, 2025, and we encourage everyone to get involved. This year’s campaign development is underway, and we are working diligently to create impactful materials that resonate with our stakeholders and the broader public.
As part of our ongoing engagement, we will host the next Communications Stakeholder Meeting on November 26 from 1 – 2 p.m. EST to share updates and gather feedback. Additionally, we expect to officially launch the Pension Awareness Toolkit in the coming months, providing essential resources to support your communications efforts.
If you would like to be added to our communications stakeholder list or have any questions, please contact Andy Tran, Communications Officer, at [email protected].
FSRA’s new Principles-Based Regulation Guidance
On September 5, 2024, FSRA released its final Guidance on Principles-Based Regulation. This multi-sectoral Approach guidance aims to help all regulated sectors better understand and engage with FSRA on principles-based regulation. FSRA also hosted a webinar on this Guidance on October 7, 2024.
FSRA’s Guidance on Principles-Based Regulation replaces its previous Pension Sector Guiding Principles Guidance, which has been inactive since September 5, 2024. The new Guidance harmonizes our principles-based approach across all sectors FSRA supervises and will be used going forward to support stakeholder engagements and supervision activities. Until further updates are made, please refer to FSRA’s Guidance on Principles-Based Regulation in current guidance that references Pension Sector Guiding Principles.
Implementing a permanent target benefit framework
On October 17, the Government of Ontario announced the creation of a permanent target benefit pension plan framework effective January 1, 2025. This framework will help support the sustainability of multi-employer pension plans, and pave the way for more employers to offer these plans. In turn, it will empower more workers to plan effectively for a secure retirement.
Consultation on a Supervisory Approach
FSRA is continuing to develop its Supervisory Approach and expects to publish Guidance in the coming months. During this time, FSRA will consult with the standing Multi-Employer Pension Plans Technical Advisory Committee and other stakeholders on a targeted basis.
Beginning in 2025, administrators of eligible multi-employer pension plans that wish to convert their benefits to target benefits can apply to the CEO of FSRA for consent. The target benefit conversion application process is described below.
Target benefits conversion application timeline
Administrators of eligible MEPPs may apply to the CEO of FSRA for consent to convert all of the MEPP’s defined benefits to target benefits for purposes of the Pension Benefit Act (PBA) between January 1, 2025, and December 31, 2029.
However, pension plans established on or after January 1, 2025, whose benefits are target benefits at the time of registration, will not have to convert benefits to target benefits.
Once the 5-year conversion application window expires, MEPPs registered with FSRA can no longer apply to convert their benefits from defined benefits to target benefits.
New MEPPs established on or after January 1, 2030, who wish to be a TB MEPP, should apply to register as a TB MEPP when they submit their new plan registration application with FSRA.
The above timeline does not apply to MEPPs whose registrations are transferred to FSRA from another designated Canadian jurisdiction after January 1, 2025. When published, FSRA’s Guidance on its Supervisory Approach will provide details of the process for plans in this situation.
Process for converting defined benefits to target benefits
The process to convert defined benefits to target benefits includes the following steps:
- Application
- FSRA's consent
- Amendment
1) Application
A plan administrator must apply for consent to convert benefits from defined benefits to target benefits. The application must be submitted via FSRA’s Pension Services Portal (PSP) by answering the required questions, providing the requested documentation and certifying that all prescribed conversion requirements have been met.
As detailed in section 4 of Ontario Regulation 388/24, the Application requires:
- the certification of the plan administrator that all the criteria set out in section 81.0.2. of the PBA have been satisfied
- the certification of the plan administrator that all benefits provided by the plan that are not defined contribution benefits, including in respect of employment in Ontario and in any designated jurisdictions, are proposed to be converted
- a copy of the proposed amendment(s) to the pension plan relating to the proposed conversion
- a certification of good faith consultation with applicable trade unions and / or associations (as applicable)
2) FSRA’s process for consenting to target benefit conversion applications
The plan administrator’s certification that the application has fulfilled all the requirements under section 81.0.2 of the PBA is an important part of the application.
Certification must be made by an authorized person who has signing authority on behalf of the plan administrator. Consent will be provided once the plan administrator has appropriately certified the application and provided a copy of the proposed amendment(s) to the plan relating to the proposed conversion via the PSP. Applicants will be notified of such consent via the PSP.
3) Amendment
Once a plan administrator has been notified via the PSP of FSRA’s consent to convert defined benefits to target benefits, an amendment must be filed with FSRA. The final amendment, when filed, will be reviewed for compliance prior to registration.
The effective date of the amendment for the conversion to target benefits must be no later than 12 months after the date of CEO’s consent, and the final amendment(s) for the conversion must be filed no later than 60 days after the effective date of the conversion to target benefits.
FSRA may review draft amendments and provide feedback to applicants. The absence of a review and feedback should not be taken as an indication that the final amendment, when filed, would be registered.
FSRA seeks public input on its 2025-26 Statement of Priorities and Budget
FSRA launched a public consultation on its proposed 2025-26 Statement of Priorities and Budget. Through this process, stakeholders will have the opportunity to help set the future direction of financial services regulation in Ontario.
FSRA’s overarching objective is to protect consumers in the most cost-effective ways possible. To achieve that objective, the Statement of Priorities sets out key sector initiatives along with a budget that is responsible.
The consultation period is now open and will close on December 6, 2024 at 11:59 p.m. EST. FSRA invites stakeholders to review the proposed 2025-26 priorities and submit feedback.
Feature: FSRA’s Pension Officials are Here to Support You
The Prudential Supervision of Single and Multi-Employer Pension Plans (PSSM) team, pictured above, is led by Paul Martiniello. The team takes a principles-based, outcomes-focused approach to overseeing pension plans, ensuring risks are properly assessed, supervision is targeted, and engagement is effective.
Working closely with FSRA’s other pension teams the PSSM team brings expertise in all areas of pension plan management, including actuarial, investment, administration, and governance. The team also works on building strong relationships with stakeholders to better understand and address the unique challenges facing single and multi-employer pension plans.
Over the past five years, the PSSM team has introduced several initiatives designed to improve supervision and benefit stakeholders like you. Some of these key initiatives include:
- Developing and implementing a risk-based prudential supervisory approach for PBGF-eligible single employer defined benefit plans, which marked FSRA Pensions’ first principles-based initiative.
- Revamping the examinations of single and multi-employer defined benefit and defined contribution pension plans to focus more on risk management and governance.
- Publishing DB MEPP Leading Practices Information Guidance and completing a multi-year review of each plan’s governance and communications structure. A summary report of this review was published in August 2024.
- Supporting the government's new target benefit framework coming into effect on January 1, 2025.
If you have any questions or would like to learn more about how the PSSM team can assist you, don’t hesitate to contact Paul Martiniello at [email protected].