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Approche 

No PE0205APP

 

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1. Purpose and Scope

1.1. The Pension Benefits Act (the “PBA”) requires FSRA’s1 prior consent to asset transfers2. This Guidance outlines FSRA’s approach to reviewing applications for FSRA’s consent to the transfer of defined benefit (DB) entitlements3 under sections 80, 81 and 80.4 of the PBA and the corresponding regulations (the “Transfer Regulations”)4. The term “asset transfer transaction” is used throughout this guidance to describe the asset transfer or transfers included in an application for FSRA’s consent.

1.2. To support predictability and transparency for plan administrators, sponsors and members and to ensure protection of the rights of pension plan members, this Guidance sets out how FSRA will exercise its discretion5 and provide consent6 for the purposes of an asset transfer transaction under the PBA.

1.3. Generally, the information7 provided in this Approach Guidance, modified as needed, will also apply to a conversion under section 81.0.1 of the PBA. A conversion of a pension plan occurs when the employer proposes to convert a single employer pension plan (SEPP) that provides DB benefits into a jointly sponsored pension plan (JSPP). Prospective applicants under 81.0.1 should approach FSRA before proceeding.

2. Rationale and Context

2.1. This guidance applies when an asset transfer transaction requires FSRA’s consent. These transactions occur where a plan sponsor decides to transfer all or some of the defined benefit assets of one pension plan to another. This could happen when two businesses merge or one business acquires another and the pension plans are to be partially or fully merged. It could also happen if a single employer pension plan merges into a jointly sponsored pension plan. In some cases, a pension plan sponsor may merge all or portions of different pension plans they sponsor into a single plan. Regardless of the underlying reason for the asset transfer transaction, this Guidance is meant to support pension plan administrators’ understanding of how to seek FSRA’s consent to the transfer and when and how FSRA will use its discretion. 

2.2. As a prudential and outcome-focused pension regulator, FSRA has created this Approach Guidance for the purposes of administering the framework under the PBA and the Transfer Regulations to facilitate an expeditious review process for asset transfer transaction applications. FSRA’s asset transfer supervisory framework as set out in this Approach Guidance strives to achieve the following principles and outcomes within the framework established by the Financial Services Regulatory Authority Act, 2016 PBA and Transfer Regulations:

  • Provide for the protection of beneficiaries accrued entitlements;
  • Ensure that beneficiaries are provided with the information required to understand the impact of the asset transfer transaction on their past and future benefits, and where applicable, consent to the transaction
  • Support the stability of the original and successor plans and their ability to deliver pension promises over the long-term.

2.3. FSRA’s approach to administering the asset transfer framework under the PBA and the Transfer Regulations includes: 

  • The completion and submission to FSRA of an Application Summary and an Actuary’s Certification (together, the “Information Disclosure”)8;
  • FSRA’s exercise of discretion on the content and timing of notices under the PBA;
  • FSRA’s risk-based and outcomes-focused review process; and
  • FSRA’s consent or refusal to consent to the proposed asset transfer transaction.  

3. Principles

3.1. FSRA will strive to be reasonable, facilitative and risk-based in administering this approach, and act consistent with our statutory objects9 to promote good administration of pension plans and protect and safeguard the pension benefits and rights of pension plan beneficiaries.

3.2. Where a proposed asset transfer transaction may be potentially inconsistent with the underlying regulatory principles outlined in Section 2.2 of this Guidance or may raise concerns regarding the security of benefits or the administration of the plan, FSRA may undertake a more detailed review of the application and, if not satisfied after such detailed review, withhold its consent. FSRA may have concerns in about an application on the basis of an application’s nature, size, complexity or impact on beneficiaries or bargaining agents or compliance with the PBA.  Such inconsistency or concerns may include, but are not limited to:

  • Complaints by members, including with respect to unclear or misleading communications.
  • Changes to benefits – for example where past-accrued benefits are not being replicated for active members, there may be a concern that as to whether the commuted value has been maintained.
  • Consents and objections – including the consents obtained, the role of the union, where applicable, or where administrators are aware of objections focused on compliance matters within FSRA’s jurisdiction.
  • Complexity – where a transfer affects benefits subject to pension legislation of another jurisdiction or where an application includes multiple pension plans.
  • Impact on the financial position of the plans – including where transfers affect the funded level of original or successor plans.
  • Sustainability of the plan – including the sustainability of the pension plan in relation to the financial stability of the plan sponsors.

3.3. FSRA recognizes that administrators and other plan fiduciaries are responsible for prudently managing risks in their pension plans and making decisions in the best interest of plan beneficiaries (in both the original and successor plans). 

4. Processes and Practices

4.1. FSRA will consider whether administrators are acting consistently with their fiduciary duties when proposing and entering into asset transfers and seeking FSRA’s consent and use of discretion10. Applications should reflect that administrators and their advisors are familiar with and in compliance with all applicable regulatory requirements for asset transfer applications and their professional obligations.

4.2. FSRA will engage with applicants throughout the application review and decision process. We will be proactive and seek additional information or clarification where required. In return, applicants should propose appropriate communication intervals throughout the process to “check-in” with their Pension Officer, particularly with respect to more complex asset transfer transactions. 

4.3. It should be evident in applications that administrators and their advisors have performed sufficient due diligence in preparation for an asset transfer transaction to identify potential gaps and issues that may need remediation or consideration. For example, certain amendments to plan documentation may be required; some plan investments may require special treatment, additional funding contributions may be required, and unresolved regulatory issues should be identified and where necessary, addressed.

4.4. Asset Transfer Process

4.4.1. The process for applying for FSRA consent to an asset transfer transaction includes the following components:

  • Preparing for an Application
  • Notices
  • Amendments or Proposed Amendments (as applicable)
  • Letters of Credit
  • Application
  • Review Process / Compliance
  • FSRA Consent
  • Post FSRA Consent Filings

This section describes relevant supervisory practices and FSRA’s approach for each component of the asset transfer process.

4.4.2. Preparing for an Application

4.4.2.1. For larger or complex transactions, applicants should engage proactively with FSRA’s Advisory Services team to explain the transaction, its unique features and/or the rationale for variances or waiver of specified asset transfer requirements, if applicable.

4.4.2.2. Prior to submitting an application, administrators should contact FSRA to discuss unresolved regulatory issues (e.g. outstanding complaints or Financial Services Tribunal hearings, irregular filings, inquiries, etc.). If not resolved before the application is filed, such issues should be identified in the application with an explanation as to how each issue will be resolved and how the proposed asset transfer and treatment of benefits will be impacted and addressed.

4.4.2.3. Certain agreements or consents may be required under the PBA or Transfer Regulations prior to FSRA providing consent. Examples of these agreements or consents include, but are not limited to, employers’ agreements, agreements between administrators and / or sponsors of original and successor plans, or the consent or deemed consent of beneficiaries. Applicants are responsible for identifying and satisfying such requirements and describing them in their application.

4.4.3. Notices

4.4.3.1. Required notices must be prepared and issued by applicants and their advisors in a manner that enables the affected individuals to be well informed about the transaction, their rights and how those rights or their benefits will be affected by the transaction, decisions to be made (if applicable), and where to obtain additional information or clarification. 

4.4.3.2. Each Notice should clearly indicate which plan administrator(s) it is from.

4.4.4. Amendments or Proposed Amendments (as applicable)

4.4.4.1. Any actual amendments to support the asset transfer must be filed by the applicant along with a completed Form 1.1. If the amendments have been filed through FSRA’s Pension Services Portal, the application must indicate this. In situations where a draft amendment is required, it should also be provided to FSRA.

4.4.4.2. Amendments to cease benefit accruals and contributions in the original pension plan are adverse amendments11 and therefore must, to the satisfaction of FSRA, comply with the requirements for such amendments under the PBA. Such amendments and evidence of such compliance must be filed with FSRA. Generally members must be notified of such amendments prior to their effective date.

4.4.5. Letters of Credit

4.4.5.1. The value of letters of credit (LOC) are to be included in the determination of the amount of assets to be transferred. Additional contributions may be required by the pension plan sponsor(s) to replace assets covered by the LOC. Administrators should carefully consider the implications of LOCs on original and successor plans, given LOCs are uniquely written based on the employer’s balance sheet and other factors, and describe these implications, and how they will be addressed, in their application to FSRA.

4.4.6. Application

4.4.6.1. In appropriate circumstances, FSRA may exercise its discretion to extend the deadline for applications for a maximum of 60 days if the administrator demonstrates there are reasonable grounds for the extension. FSRA may extend the time limit for further periods if it is satisfied that extraordinary grounds exist for the additional extension and that no person will be unduly prejudiced12. To support transparency and predictability, FSRA will publish, on at least an annual basis, information outlining the circumstances under which it granted discretionary extensions for asset transfer applications.

4.4.6.2. The Information Disclosure identifies key requirements in the asset transfer process and is intended to facilitate FSRA’s review. Applicants must include the:

  • the Application Summary, certified by the plan administrator; and 
  • the Actuary’s Certification, signed by the plan actuary.

4.4.6.3. If DC and DB assets are being transferred, the application should identify both components. However, the Actuary’s Certification should only address DB plans or the DB component of a pension plan. The transfer of DC assets can be addressed in the same application as the DB component or in a separate filing.

4.4.6.4. If there is more than one original pension plan involved in the application, an Information Disclosure must be completed for each original pension plan.

4.4.7. Review Process – Compliance

4.4.7.1. FSRA will periodically conduct in depth checks of portions of applications to enhance compliance. FSRA may, at its discretion and as noted above in section 3.2, undertake a more detailed review of an application. FSRA will notify the applicant if this occurs. FSRA may determine that applications from administrators and / or their advisors will be reviewed in detail where FSRA finds instances of incomplete or inaccurate information in the Information Disclosure or application.

4.4.8. FSRA Consent

4.4.8.1. Following the successful review of an application under section 80.4, FSRA will issue a Notice of Intended Decision prior to consenting to the transfer. FSRA will not issue a NOID for applications under sections 80 and 81.

4.4.8.2. The plan administrators of each original plan and the successor plan are required to post the NOID electronically, allowing members to easily access it.

4.4.8.3. When a NOID is issued, there will be a 30 day period in which impacted persons or entities may raise concerns. When that happens, FSRA will consider the feedback and may issue consent within 10 days or seek further information from the applicants, or may proceed to the Financial Services Tribunal for a decision.

4.4.8.4. FSRA will provide applicants an opportunity to address any issues identified through the review of their application. If those issues are not or cannot be addressed, or an application does not conform to the principles outlined in this Guidance or the requirements of the PBA or Transfer Regulations, FSRA will not consent to the transfer.

4.4.9. Post-FSRA-Consent Filing

4.4.9.1. Until assets have been transferred to the successor plan, the original plan and the successor plan continue to operate as separate plans and continue to each be required to fund on a separate basis, to pay out benefits separately and to separately make all required filings. 

4.4.9.2. Where a full asset transfer is in process and the actual transfer of assets has not yet occurred, all filings are required as long as there are assets in the plan at the end of the plan’s fiscal year. For example, for a plan with a fiscal year end of December 31, if an asset transfer application received FSRA’s consent in October 2019 and the assets were actually transferred in January 2020, all filings with respect to the 2019 fiscal year are required to be filed for the original plan by the applicable deadline (in 2020) including the payment of any applicable fees or assessments (e.g. PBGF assessment). 

5.  Variance from Notice Timing and Content Requirements under Section 80.4 and 81.0.1

5.1. The PBA13 allows FSRA to vary or waive some of the requirements for assets transfers, including the requirements for the content and timing of notices to members and FSRA.

5.2.  Applicants should inform FSRA of their intended requests for waiver or variance early in the asset transfer process and detail the requests in the Information Disclosure, including with supporting documentation, as appropriate.

5.3. FSRA’s review of these requests will include, among other things, consideration of compliance with the PBA and the Transfer Regulations, and overall alignment with the underlying regulatory principles set out in Section 2 and this Guidance. Where FSRA is satisfied that the terms of a proposed asset transfer transaction adheres to such requirements and principles, FSRA will provide the requested variance or waiver after confirming the facts of each case and such adherence.

5.4. The following are examples of requests to waive or vary requirements for asset transfer transactions which FSRA will accept, subject to the requirements of the PBA and Transfer Regulations, this Guidance and, considering the principles outlined in this Guidance, the specific circumstances of each request:

  • Use of the most recently distributed annual pension statement rather than duplicating information in the asset transfer notice, where the information is the same or substantially similar.
  • Use of an existing summary of benefits or employee booklet where the transferred benefits are not being changed rather than reproducing the information in the notice.
  • Provision of summary information to members with a reference to where they may receive further detailed information, if desired (for example upon request, or on an administrator’s website).
  • An extension of time, where the timing requirement of notices may be logistically challenging, such as the requirement to send all notices on the same day.
  • Where permitted, variation in notice content, where the content of a notice is technically non-compliant, but where the non-compliance is not material to the transfer and could not reasonably be expected to affect a member’s decision to consent to the transfer.

5.5. To support transparency, predictability, effective plan administration and ensure consistent treatment of similar applications, FSRA will publish approved variances and waivers on at least an annual basis.

6. Multi-Jurisdictional Asset Transfers

6.1. The transfer provisions of the PBA and the Transfer Regulations apply to asset transfers affecting Ontario members of pension plans registered in Ontario and other jurisdictions in Canada. They do not apply to an asset transfer if none of the assets to be transferred are with respect to benefits accrued by Ontario regulated beneficiaries, regardless of whether assets are transferred to or from a FSRA-registered pension plan.

6.2. Transfers that include members from other jurisdiction(s) will be subject to the transfer notice and benefit calculation rules of the jurisdiction(s) associated with those members. The asset transfer application will generally be filed with the regulator of the jurisdiction in which the original pension plan is registered; that regulator will review the transfer with respect to the requirements in all affected jurisdictions. Applications must comply with and should confirm compliance with the relevant laws in each applicable jurisdiction.

6.3. In an asset transfer where assets related to non-Ontario members are transferred into a JSPP registered with Ontario, the administrator of the Original plan is expected to ensure that the legislation of jurisdiction(s) of the non-Ontario members does not prohibit the participation of those non-Ontario members in the JSPP. 

6.4. For partial multi-jurisdictional transfers the asset allocation should clearly be outlined in the actuarial report that supports the asset transfer and must be determined in accordance with the 2020 Agreement Respecting Multi-jurisdictional Pension Plans and / or the 1968 Memorandum of Reciprocal Agreement, as applicable.

7. Effective Date and Future Review

FSRA will collect and publish metrics associated with asset transfer applications, how it applied its discretion and consents provided. This data will inform FSRA’s review of this Guidance and its internal processes to reduce regulatory burden and improve regulatory effectiveness. By [date which is at least 6 months after this guidance is finalized following public consultation], FSRA will strive to respond to  completed applications within 150 days of receipt of the Information Disclosure with a Notice of Intended Decision unless it has advised, as noted above, that more information is required. Incomplete applications or applications where FSRA requires additional information to make a well-informed decision to protect the plans (original or successor) and plan beneficiaries may result in delays.

This Guidance is effective [TBD]. FSRA will review the Guidance within three years of the effective date based on its experience meeting performance targets and input from pension sector stakeholders.

Once this Approach is effective, the following FSCO FAQs and Policy are no further effect:

  • Asset Transfer - Frequently Asked Questions (s. 80, 81) including:
    • Frequently Asked Questions - Plan Administrators
    • Frequently Asked Questions - Member
    • Frequently Asked Questions - Actuarial
  • Frequently Asked Questions - Single Employer Pension Plans to Jointly Sponsored Pension Plans
  • Types of Asset Transfers (FSCO Policy A700-154)

8. About this Guidance 

This document is consistent with FSRA’s Guidance Framework. As an Approach, it describes FSRA’s internal principles, processes and practices for supervisory action and application of FSRA’s discretion.

9. Appendices and References

Appendices

References

Effective Date: [TBD}


1 Pursuant to the provisions of the PBA, the Chief Executive Officer of FSRA (“CEO”) is granted the regulatory authority to provide the consent. However, for the purposes of this Approach Guidance, the reference will be to FSRA providing the consent because this power is exercised on behalf of FSRA and the CEO delegates these powers within FSRA. This reference also applies to the use of discretion.
2 PBA section 79.1.
3 For clarity, this Guidance applies to the DB portion of transfers that involve both DB and Defined Contribution (DC) assets. Transfers involving only DC assets will be addressed under separate FSRA guidance.
4 See Regulation 310/13 and Regulation 311/15.
5 PBA section 80.4 (12.1).
6 PBA sections 80(13), 80.4(13), and 81(6).
7 PBA section 81.0.1(13.1) and 81.0.1(14).
8 See Appendices A and B.
9Financial Services Regulatory Authority of Ontario Act, 2016 sections 3(1) and 3(3).
10 PBA section 22.
11 PBA section 26(1).
12 PBA section 105.
13 PBA sections 80.4(12.1) and 81.0.1(13.1).