Pension Update - February 14, 2022
In this Pension eBlast
Consultations and refreshed guidance
- Consultation: Interpretation Guidance on Pension Benefits Guarantee Fund (PBGF) assessment deadlines and calculations
New processes and reminders
- Reducing regulatory burden for defined contribution plans
- Outstanding filings
- New approach and transition for summary of contributions (Form 7) processes
- Climate related financial disclosure developments
- Contribution holidays
- Reminder: PBGF assessment remittance
- Reminder: could you be taking advantage of FSRA’s Guidance on group annuity purchases?
Reducing regulatory burden for defined contribution plans
The Government of Ontario has made regulatory amendments to remove the requirement for the administrators of member-directed Defined Contribution pension plans to prepare a statement of investment policies and procedures.
The government has also made regulatory amendments to remove the requirement for administrators of pension plans providing only defined contribution benefits to file an auditor’s report on the plan’s annual financial statements. Instead, FSRA is able to require audited financial statements in certain circumstances.
As previously communicated, FSRA has recommenced its processes for following-up on outstanding filings. These processes include levying administrative monetary penalties, where appropriate. FSRA will employ a phased approach to compliance with legislative filing requirements.
To avoid the risk of regulatory action please ensure your processes and filings are up to date. Starting early spring 2022, plan administrators that fail to comply with FSRA’s compliance requests for outstanding filings may be charged an administrative monetary penalty.
New approach and transition for summary of contributions (Form 7) processes
As previously announced, FSRA is updating its Form 7 and related processes. The changes took effect on a voluntary basis January 1, 2022 and will become mandatory March 31, 2022. These changes include releasing updates of all relevant forms.
Updated forms are now available on FSRA’s website in two formats, fillable PDF and Excel. FSRA will be archiving its Form 7 User Guide on March 31, 2022. Pertinent information has been included in the updated forms. Please ensure you read the updated forms thoroughly.
Under the revised process:
- Summary of Contributions (Form 7) - Plan administrators will continue to complete and submit their annual Summary of Contributions / Revised Summary of Contributions (Form 7) to the trustee(s) of the pension fund in accordance with the legislative framework. Please contact your custodian to confirm whether they require you to use the fillable pdf or Excel format of this form.
- Non-remittance Reporting (Form 7.1) - Trustee(s) will continue to report failures to remit any contribution(s) to FSRA. Non-remittance reporting must be made to FSRA within 60 days following the contribution due date. This reporting remains on a monthly basis. In addition, any variance in special payments shall be included in this monthly reporting.
- Variance Reporting (Form 7.1) - The threshold for reporting variances in expected contributions will be increased from 10% to 25%. Special payments to DB plans are an exception. Any variance in special payments will be treated as non-remittances as per the paragraph above. The reporting period for informing FSRA of variances will change from monthly to quarterly, similar to Alberta and British Columbia. Trustees will be required to report any variances of 25% or more to FSRA within 60 days after the end of each quarter. There continues to be no requirement to report variances that are “over-contributions”.
If you have any questions about the updated approach or updated forms please contact us at [email protected].
Climate related financial disclosure developments
Among the commitments in the federal Deputy Prime Minister and Minister of Finance Mandate Letter of December 16, 2021, two specific commitments are noteworthy for Ontario pension stakeholders. The letter commits the Minister to work with the provinces and territories to move toward mandatary climate-related financial disclosures based on the Task Force on Climate-related Financial Disclosures framework. The letter also commits the Minister to require federally regulated institutions, including financial institutions, pension funds and government agencies, to issue climate-related financial disclosures and net-zero plans. The Minister will be supported by the federal Minister of Environment and Climate Change. Separately, FSRA continues to work on Guidance on environmental, social and governance (ESG) considerations for the pension sector through the Canadian Association of Pension Supervisory Authorities ESG Committee.
Plan administrators are required to advise the pension fund trustees of the expected contributions to the pension plan at the beginning of each plan fiscal year using Form 7. FSRA has received inquiries regarding contribution holidays that indicate potential misunderstandings of when they may be taken. For plans that are considering a contribution holiday, here is a quick reminder of the regulatory requirements.
A prescribed cost certificate must be filed within the first 90 days of the fiscal year to support a contribution holiday. The cost certificate should be prepared in accordance with section 7.1 of Regulation 909 (Regulation) to demonstrate that the plan has sufficient available actuarial surplus (AAS), as prescribed, to meet the funding requirements of the current fiscal year. For this purpose, the AAS must be reassessed as of the first day of the current fiscal year, but cannot be greater than the AAS disclosed in the last filed actuarial valuation report, adjusted to reflect any amounts funded from AAS since the date of the last valuation.
Please note the following:
- A plan with an “excess surplus” as described in paragraph 147.2(2)(d) of the Income Tax Act (Canada) is not exempted from filing the above cost certificate within the prescribed timeline. Furthermore, a contribution holiday cannot be taken based solely on the existence of an excess surplus if the other requirements under the Regulation have not been met.
- Section 8 of the Regulation requires that notice of a reduction of contributions must be given to all plan beneficiaries and other prescribed parties within the first six months of the plan fiscal year.
If you have further questions, please contact us at [email protected].
Reminder: PBGF assessment remittances
As a reminder, PBGF assessment certificates must be filed nine months after the fiscal year of a pension plan. The payment due date for PBGF assessments is the same as the due date for filing the PBGF assessment certificate. Late payments will be subject to the legislated 20% penalty and interest charges. Unpaid balances may also be pursued by a third-party collection agency on behalf of FSRA.
Effective May 2021 plans can remit PBGF assessments electronically, using the same electronic payment program used for paying FSRA assessments.
Please contact [email protected] if you require assistance using the e-payment option.
If you are remitting payment by cheque please make your cheque payable to “Pension Benefits Guarantee Fund” and have it mailed to the address indicated on your PBGF Assessment Certificate.
Reminder: could you be taking advantage of FSRA’s guidance on group annuity purchases?
In October 2019, FSRA released Approach Guidance on requirements after certain annuity purchases for defined benefit plans. The Guidance outlines, as an example, a set of circumstances where FSRA may consider burden relief from certain PBA filing requirements that would otherwise apply on a go-forward basis. Plan administrators for plans must first contact FSRA to determine if this Approach Guidance applies to their plan.
- Summary of outcomes of the Vibrant Employment-Based Pension Pillar in Ontario Technical Advisory Committee
- Family Law webinar video, transcript and Q &A are now available
- FSRA & OSFI webinar - A Regulator’s Perspective on Defined Contribution Pension Plans: video, transcript and Q&A are now available
- FSRA Exchange video and transcript are now available
- Pension Sector Calendar: Standing Technical Advisory Committee meetings will now be held quarterly. The Retiree Advisory Panel has been dissolved and will merge into FSRA’s Consumer Advisory Panel.