1. Purpose and Scope
1.1. The Pension Benefits Act (the “PBA”) requires FSRA’s1 prior consent 2to asset transfers.3This Guidance outlines FSRA’s approach to reviewing applications for FSRA’s consent to the transfer of defined benefit (DB) entitlements4 under sections 80, 81 and 80.4 of the PBA and the corresponding regulations (the “Transfer Regulations”)5.This guidance uses the phrase “asset transfer transaction” to describe such asset transfers. Section 2.1 describes how these transactions arise.
1.2. To support predictability and transparency for plan administrators, sponsors and members and to protect of the rights of pension plan members, this Guidance sets out how FSRA will exercise its discretion6 and may provide its consent for the purposes of an asset transfer transaction under the PBA.
1.3. The information7 provided in this Approach Guidance, modified as needed, will also apply to a conversion8 under section 81.0.1 of the PBA. Prospective applicants under section 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 defined benefit assets of one pension plan to another. This may occur 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 plans into a single plan. Regardless of the underlying reason for the asset transfer transaction, this Approach Guidance supports pension plan administrators’ understanding of how to seek FSRA’s consent to the transfer and when and how FSRA will exercise 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 the value of beneficiaries’ entitlements;
- Ensure that beneficiaries are informed and understand the impact of the asset transfer transaction on their past and future benefit entitlements, and where applicable, consent to the transaction; and
- Support the stability of the original and successor plans and their ability to deliver pension promises over the long-term; and
- Facilitate efficient pension plan management for plan sponsors and administrators.
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”)9;
- 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.
3.1. FSRA will strive to be risk-based, transparent and consistent in administering this approach. FSRA will act consistent with our statutory objects10 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. If FSRA is still not satisfied after such detailed review that the requirements of this Approach Guidance are satisfied, FSRA may withhold its consent and ask questions. FSRA may have questions about an application on the basis of an asset transfer transaction’s nature, size, complexity, impact on beneficiaries or bargaining agents, or compliance with the PBA. Questions may focus on the following:
- 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 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 asset transfer application includes multiple pension plans.
- Impact on the financial position of the plans – where transfers affect the funded level of original or successor plans.
- Sustainability of the plan – including the implications on the financial stability of the plan sponsors.
3.3. Pension plans must be administered, and their assets invested, with the care, diligence and skill required of a fiduciary in accordance with the standard of care prescribed by the PBA, the common law and equity. Administrators are fiduciaries, and, as such, they are responsible for prudently managing risks in their pension plans and making decisions in the best interest of plan beneficiaries.
4. Processes and Practices
4.1. Applications should reflect that administrators and their advisors are familiar with and comply with applicable fiduciary duties and regulatory requirements for asset transfer transactions and related professional obligations for advisors.
4.2. FSRA will engage with applicants throughout the application review and decision process. We will be transparent and seek additional information or clarification where required.
4.3. It should be clear in applications that administrators and their advisors have performed sufficient due diligence as they prepare for an asset transfer transaction. This identifies potential gaps and issues that may need remediation or consideration. For example:
- the plan may require certain amendments to plan documentation;
- some plan investments may require special treatment;
- the plan may require additional funding contributions; and
- the administrator should identify and address unresolved regulatory issues where necessary.
4.4. Asset Transfer Process
4.4.1. The process of applying for FSRA’s consent to an asset transfer transaction includes the following components:
- Preparing for an Application
- Distributing notices
- Preparing and filing amendments or proposed amendments (as applicable)
- Considering treatment of any outstanding letters of credit
- Submitting the application
- Reviewing the application for compliance
- Consenting to the application
- Filing of documents / reports after FSRA’s consent
The following subsections describe relevant supervisory practices and FSRA’s approach for each component of the asset transfer process.
4.4.2. Preparing for an Application
22.214.171.124. For larger or complex transactions, applicants should engage proactively with FSRA’s Advisory Services team. The purpose of the engagement is to explain the transaction, its unique features and / or the rationale for variances or waiver of specific asset transfer requirements, if applicable.
126.96.36.199. Prior to submitting an application, administrators should contact FSRA to discuss unresolved regulatory issues (e.g., outstanding complaints or pending 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 the administrator will resolve each issue and how the proposed asset transfer and treatment of benefits will be impacted and addressed.
188.8.131.52. Applicants are responsible for identifying and including in their application any agreements or consents required under the PBA or Transfer Regulations. Examples include, but are not limited to, employers’ agreements, agreements between administrators and / or sponsors of the original and successor plans (e.g. purchase and sale agreements), or the consent or deemed consent of beneficiaries.
4.4.3. Distributing Notices
184.108.40.206. Applicants and their advisors must prepare and issue required notices such that affected individuals are properly informed. The notice should be within prescribed timelines, inform affected individuals about the transaction, their rights and how those rights or their benefits will be impacted by the transaction, decisions they need to make (if applicable), and where to obtain additional information or clarification.
220.127.116.11. Each Notice should indicate which plan administrator(s) it is from.
4.4.4. Preparing and Filing Amendments or Proposed Amendments (as applicable)
18.104.22.168. The applicant must file any actual amendments to support the asset transfer 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 which require a draft amendment, it should also be filed with the application.
22.214.171.124. Any amendments to cease benefit accruals and contributions in the original pension plan are adverse amendments.11 Therefore they must, to the satisfaction of FSRA, comply with the requirements for such amendments under the PBA. Administrators must file those amendments and evidence of required compliance with FSRA. Members should be notified of such amendments prior to their effective date and administrators should ensure they comply with all applicable member notification requirements.
4.4.5. Considering the Treatment of any Outstanding Letters of Credit
126.96.36.199. The determination of the amount of assets transferred must include the value of any letters of credit (LOC). Pension plan sponsor(s) may need to make additional contributions 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 for an employer. Administrators should describe these implications, and how they will be addressed in their application to FSRA.
4.4.6. Submitting the Application
188.8.131.52. 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. FSRA may extend the time limit for further periods if satisfied there are extraordinary grounds and that no person will be unduly prejudiced.12 To support transparency and predictability, FSRA will publish, at least annually, the circumstances when discretionary extensions are granted.
184.108.40.206. To ease regulatory burden and facilitate an efficient regulatory review, FSRA developed the Information Disclosure. The Information Disclosure is not a regulatory requirement but rather, a helpful tool for the applicant and FSRA.
220.127.116.11. The Information Disclosure identifies key requirements in the asset transfer process and is intended to facilitate FSRA’s review. The Information Disclosure includes:
- the Application Summary, certified by the plan administrator; and
- the Actuary’s Certification, signed by the plan actuary.
18.104.22.168. Applications may be submitted without the Information Disclosure, but applicants should expect much longer review times.
22.214.171.124. If an application includes DC and DB assets, 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 same application can address the transfer of both DB and DC assets, or DC assets may be addressed in a separate filing.
126.96.36.199. A separate Information Disclosure should be completed for each original pension plan in an application.
4.4.7. Reviewing the Application for Compliance
188.8.131.52. 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.
184.108.40.206. 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, approval or rejection letter (where appropriate) unless it has advised that more information is required. Incomplete applications or applications where FSRA requires additional information may result in delays.
4.4.8. Consenting to the Application
220.127.116.11. FSRA may exercise its discretion and chose to issue a NOID in advance of consenting to an asset transfer transaction.
18.104.22.168. When FSRA issues a NOID, the plan administrators of each original plan and the successor plan are required to post the NOID electronically. Members should be able to easily access it. If electronic posting is not possible, administrators should use other means the employer would typically use to communicate to their employees. Administrators may also contact FSRA to discuss potential options.
22.214.171.124. When FSRA issues a NOID, there will be a 30-day period in which impacted persons or entities may contest the NOID by requesting a hearing before the Financial Services Tribunal (FST). If no request for an FST hearing is made within the 30-day period, FSRA may issue a final order consenting to the application. Where an FST hearing is requested during the 30-day period, no final order in respect of the NOID will be issued until a final decision has been issued by the FST or any court hearing an appeal of the FST’s decision.
126.96.36.199. 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. Filing Documents / Reports After FSRA’s Consent
188.8.131.52. Until assets have been substantially transferred to the successor plan, the original plan and the successor plan continue to operate as separate plans. They continue to fund on a separate basis, pay benefits separately and to separately make all required filings.
184.108.40.206. Where a full asset transfer is in process and the actual transfer has not substantially occurred by the end of the plan’s fiscal year, all filings, fees and assessments are required with respect to that fiscal year. For example, consider 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 only transferred in February 2020, all filings, fees and assessments with respect to the 2019 fiscal year are generally required to be filed for the original plan by the applicable deadline (in 2020).
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. This includes the requirements for the content and timing of notices.
5.2. Applicants should inform FSRA of their intended requests for waiver or variance early in the asset transfer process (i.e., before notices are issued). The Information Disclosure should detail the request including 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 principles set out in 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.
5.4. The following are examples of requests to waive or vary requirements for asset transfer transactions which FSRA may accept:
- 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, including situations where the date of information in the annual pension statement may not align with the asset transfer notice timelines in the Transfer Regulations.
- 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).
- Extending 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 decision to consent to the transfer, if consent is required.
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. FSRA will determine, based on the circumstances, the level of detail that will be published in its report.
6. Multi-Jurisdictional Asset Transfers
6.1. The asset transfer provisions of the PBA and the Transfer Regulations apply to asset transfers affecting Ontario members of pension plans registered in Canada. They do not apply to an asset transfer if none of the assets to be transferred are in respect of 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 whose benefits are regulated by legislation in 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 and liabilities related to non-Ontario members are transferred into a JSPP registered in 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 either the participation of those non-Ontario members in a JSPP, or the transfer of assets and liabilities into 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 / 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 the consents provided. This data will inform FSRA’s review of this Guidance and its internal processes to reduce regulatory burden and improve regulatory effectiveness.
This Guidance is effective [date]. 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 Guidance is effective, the following FSCO FAQs and Policy have no further effect and should no longer be relied upon:
- 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
- Appendix A – Section 80 and 81 Information Disclosure (Application Summary and Actuary’s Certification)
- Appendix B – Section 80.4 Information Disclosure (Application Summary and Actuary’s Certification)
- See Pension Benefits Act sections 22, 26, and 79.2 through 81.0.1, 87, and 105.
- See Regulation 310/13 and Regulation 311/15 under the Pension Benefits Act.
- See Financial Services Regulatory Authority Act sections 3(1) and 3(3).
- See FSRA’s Pension Sector Guiding Principles.
- See FSRA’s Guidance Framework
- See the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans
- See FSCO Form 1.1, Application for Registration of a Pension Plan Amendment
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 sections 80(13), 80.4(13), and 81(6).
3 PBA section 79.1.
4 For clarity, this Guidance applies to the DB portion of a proposed transfer that involves both DB and Defined Contribution (DC) assets. Transfers of DC assets will be addressed under separate FSRA guidance. See Regulation 310/13 and Regulation 311/15.
5 See Regulation 310/13 and Regulation 311/15.
6 PBA section 80.4 (12.1).
7 PBA section 81.0.1(13.1) and 81.0.1(14).
8 A conversion occurs when the employer proposes to convert a single employer pension plan that provides DB benefits into a jointly sponsored pension plan.
9 See Appendices A and B.
10Financial Services Regulatory Authority of Ontario Act, 2016 sections 3(1) and 3(3).
11 PBA section 26(1).
12 PBA section 105.
13 PBA sections 80.4(12.1) and 81.0.1(13.1).