Pension update - September 9, 2024

Welcome message

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Welcome to September! With autumn just around the corner, I hope this message finds you well and in high spirits. I am excited to connect with you through our quarterly newsletter to share updates, insights, and progress that’s underway at FSRA.

In this eblast I am pleased to share the much-anticipated Defined Benefit (DB) Multi-Employer Pension Plans (MEPPs) Leading Practices Benchmarking Summary Report, the Pension Benefits Guarantee Fund (PBGF) Annual Report, the 2023 Report on the Funding of Defined Benefit (DB) Pension Plans, and the Q2 2024 Solvency Report along with other timely updates. I hope you will take some time to read the highlights of our work over the last few months and that you will find it informative, conveying the depth and breadth of the work underway at FSRA, and which you, as our sector partners are contributing to.

As always, if you have any questions, please don’t hesitate to reach out to me at any time.

- Andrew Fung, Executive Vice President, Pensions

FSRA reports

Q2 2024 Solvency Report

At the end of the second quarter, the median projected solvency ratio of Ontario's pension plans reached a new high, increasing by 1% from the previous quarter. The median solvency ratio now stands at 123% as of June 30, 2024, up from 122% as of March 31, 2024. This marks a significant milestone in the financial health of pension plans across the province.

To learn more, access the report.

2023 Report on the funding of Defined Benefit (DB) Pension plans

Overall, compared to the 2022 Report, the pension plans' funded position (as at their last filed valuation dates) has remained the same on a going-concern basis and improved substantially on a solvency basis. The report includes investment and actuarial information and trend analysis.

Learn more in our 2023 DB Funding Report.

Defined Benefit (DB) Multi-Employer Pension Plans (MEPPs) Leading Practices Benchmarking Summary Report

In 2020, and with the support of a representative group of DB MEPP stakeholders in Ontario, FSRA embarked on a multi-year review of the DB MEPP sector. The first activity conducted by FSRA with plan administrators was a thematic review of a representative sample group of 21 Ontario-registered DB MEPPs. The information gathered from that thematic review led to the publication of DB MEPP Leading Practices Information Guidance in March of 2021. That guidance encourages DB MEPP Trustees and their advisors to consider their governance, risk management and communication practices, and to compare them to the eight identified leading practices.

Between 2022-2024, FSRA collaborated with DB MEPP Trustees and their advisors on a benchmarking initiative, covering 67 Ontario registered MEPPs, in which Trustees identified to what extent they were demonstrating each of the eight Leading Practices.

FSRA is now pleased to release its summary report of this benchmarking initiative. The outcomes of this review are aligned with the Ontario Ministry of Finance proposal for a permanent framework for target benefit pension plans and FSRA’s objectives.

This summary report is intended to allow Trustees to understand how their respective pension plan compares to the peer group with respect to leading practices on the areas of plan governance, risk management and communications strategies.

Pension Benefits Guarantee Fund (PBGF) Report

On June 25, 2024, the investment management of the PBGF assets was transferred to the Investment Management Corporation of Ontario (IMCO) and a new strategic asset allocation strategy is being deployed.

To provide insights and transparency into the financial status of the PBGF, FSRA is pleased to release its annual PBGF report, which sets out key information relating to the PBGF as at March 31, 2024.

New processes, updates and reminders

Supervisory Guidance in support of the target benefit framework

FSRA has begun drafting a Supervisory Framework in support of the proposed Ministry of Finance regulations necessary for implementing a permanent target benefit framework in Ontario.

FSRA will consult with the standing Multi-Employer Technical Advisory Committee and other stakeholders on a targeted basis in the Fall and release the guidance for public consultation in Winter. Timing of guidance consultation is pending the Ministry of Finance finalizing PBA regulations relating to the Target Benefit Framework and proclaiming related legislative provisions effective Jan 1, 2025.

New examination program for Pension Plan Administrators

On May 16, 2024, FSRA hosted a webinar on the newly revamped Examinations Program. Attendees had the opportunity to learn more about the revised program that builds on FSRA’s risk-based, outcomes-focused supervisory approach to protect pension benefits and ensure good administration of plans.

Over 330 attendees participated in the webinar and had the opportunity to ask questions directly to the FSRA team. The webinar recording, the presentation deck and Q&As are now available on FSRA’s website.

FSRA has also launched a new landing webpage with more information about the examination process: Examinations for Single and Multi-employer DB and DC Plans (SEPPs and MEPPs)

Pension Plan Administrator Roles & Responsibilities Guidance and Pension Plan Amendments Guidance

FSRA hosted a pension webinar on July 17, 2024, featuring the two recently released Guidance documents on Pension Plan Administrator Roles & Responsibilities, and Pension Plan Amendments. Over 900 attendees joined the webinar and the webinar recording, the presentation deck and Q&As are now available on the FSRA website.

Update: CAPSA Capital Accumulation Plan & Risk Management Guideline final guideline update

In June 2024, the Canadian Association of Pension Supervisory Authorities (CAPSA) approved the release of two guidelines. Guideline No. 3 – Guidelines for Capital Accumulation Plans (CAP) and Guideline No. 10 – Guidelines for Risk Management for Plan Administrators representing CAPSA’s view of best practice in pension management. Both documents are expected to be by mid-September 2024 and will available on the CAPSA website.

Annual Information Return (AIR) filings

FSRA observed recent issues with Annual Information Returns (AIRs) not being completed correctly when plans use surplus or prior year credit balance (PYCB) to fund normal costs.

Plans should ensure that lines 103, 104, 107, and 108 are filled out with the amount of surplus or PYCB used to reduce the required normal cost contributions in these cases. Refer to the instructions for further details.

Behind the numbers: Meet the Actuarial team

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As you review the Pensions Leadership Team chart, you'll notice the Actuarial team, is a key pillar of our organization, led by Chief Actuary Lester Wong and Deputy Chief Actuary Trevor Cartlidge. The Actuarial team produces quarterly and annual pension reports and conducts in-depth analyses of plan funding risks. Their oversight helps to ensure all plans submit actuarial documents that align with the Pension Benefits Act’s (PBA) requirements and FSRA's objectives. Beyond their crucial roles, the Actuarial Team, under Lester’s guidance, actively manages, negotiates, and resolves significant, complex, and sensitive technical and compliance matters with stakeholders. Their focus on actuarial aspects encourages pension plan stakeholders to adopt best practices, fostering a culture of excellence and alignment with FSRA's vision. The Actuarial team and the Operations team regularly engage with plan administrators, advisors, and plan members, addressing a high volume of inquiries from these stakeholders. They are tasked with resolving issues not only through a rules-based approaches but also through collaborative, principles-based regulation (PBR), fostering meaningful engagement with pension plans. Essentially, these teams are at the forefront of PBR implementation, working to balance regulatory compliance with flexibility, encouraging innovation while ensuring the long-term sustainability and security of pension plans.

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.

Pensions Member Success Story

Navigating the complexities of benefit entitlements can be daunting, especially for those unfamiliar with the intricacies of their plans. For many retirees, their pension is more than just a number on paper—it's a lifeline that supports them in their golden years. The story of "Bill," a retired worker who found himself entangled in a pension dispute, is a testament to the vital role that organizations like the Financial Services Regulatory Authority (FSRA) play in safeguarding the rights of plan beneficiaries.

Back in 2018, Bill—a pseudonym to protect his privacy—discovered that his pension benefits were not aligned with what he believed he was entitled to. After a careful review of his plan documents, Bill suspected that he should be receiving additional benefits based on his nearly 14 years of service. Confident that an error had been made, he reached out to the Financial Services Commission of Ontario (FSCO), the predecessor to FSRA, seeking clarity and correction.

Initially, FSCO's review supported the plan sponsor’s position, which stated that Bill’s records did not substantiate his claim for additional benefits. Although Bill was encouraged to appeal the decision through the Financial Services Tribunal (FST), the prospect of a prolonged legal battle was daunting, especially for someone already facing the challenges of retirement.

Fast forward to 2023, with Bill’s pension plan nearing its wind-up, he reached out to the regulator—now FSRA—one last time. FSRA’s Pensions team took a fresh look at Bill’s case. Despite the time elapsed and the prior decision, they decided to reexamine the evidence in light of new documentation provided by Bill. This decision was pivotal, reflecting the FSRA’s commitment to ensuring fairness and accuracy in pension matters.

After a thorough review, FSRA determined that Bill’s pension benefits had indeed been miscalculated. The plan sponsor was instructed to recalculate Bill’s benefits to reflect the additional amounts he was rightly owed. This correction meant a significant increase in Bill’s retirement income, an outcome that would profoundly impact his financial security in the years to come.

The resolution of Bill’s case is a shining example of FSRA's dedication to protecting pension plan beneficiaries. The Pensions team’s perseverance and commitment to protecting pension plan beneficiaries ensured that Bill's benefits were adjusted in accordance with the plan’s provisions. Their collective effort underscores the crucial role regulatory bodies play in advocating for individuals who might otherwise be left to fend for themselves.

Quick links

• FSRA’s 2024-2027 Annual Business Plan
• Q2 2024 Solvency Report
• 2023 Report on the Funding of Defined Benefit (DB) Pension Plans
• Defined Benefit (DB) Multi-Employer Pension Plans (MEPPs) Leading Practices Benchmarking Summary Report
• Pension Benefits Guarantee Fund (PBGF) Annual Report
• Upcoming FSRA webinars