Pension update - February 14, 2023

In this Pension eBlast

FSRA Reports

New processes, updates and reminders

Good administrative practices

Quick links

On the horizon

FSRA Reports

Q4 2022 Solvency Report

Most pension plans in Ontario have been resilient through a year filled with challenges and market volatility.

According to FSRA’s Q4 2022 Solvency Report, pension fund investment returns for the quarter were just under three percent while pension plan liabilities continued to benefit from a rising interest rate environment. The majority of plans remained fully funded on a solvency basis at December 31, 2022. In fact, the median solvency ratio at the end of 2022 returned to the all-time high level it reached earlier in 2022.

Read more: Majority of Ontario Pension Plans Remained Strong in 2022

New processes, updates and reminders

Pension Awareness Day

Save the date for Ontario’s first annual Pension Awareness Day on February 16! Consumers will learn about the value of a pension. We’ve also launched our own podcast series leading up to the day, hosted by FSRA’s Caroline Blouin! To learn more, visit our campaign landing page and join us on social media with the hashtag #PensionAwareness23.

New member guide: You terminated employment. What is a commuted value?

FSRA has released a new member guide to provide defined benefit pension plan members with information about commuted values. The guide is written in a question-and-answer format. Our aim is to help members understand terms like “unlocking” and “annuity” and what taking a commuted value means for them. It also provides tips on what to ask a financial planner or financial advisor before choosing to transfer a commuted value out of a pension plan.

Read the Guide: Member Guide: You terminated employment. What is a Commuted Value?

New employer guide (Information Guidance): Communicating the value of your Pension plan

FSRA has released a new guide to help employers and plan administrators communicate the value of their pension plan. A pension plan is an important and valuable component of employees’ total rewards package. It is an integral part of the employment value proposition. With this Guide, we want to help support plan administrators and employers convey in impactful ways the full value of the retirement savings and pension benefits.

Read the Guide: A guide for employers - Communicating the value of your pension plan

New process:

Defined contribution plan 2-pager and graphic visual

FSRA has published two brief documents for employers who offer DC pension plans to employees, which:

  • highlight the employer’s role as the administrator of the plan
  • list basic responsibilities that the employer and/or the service provider they hire must address

The ultimate responsibility is with the plan administrator, which in most cases is the employer. We encourage the pension sector to provide these documents to clients/others involved in administering DC plans or to share them publicly. FSRA is happy to discuss these documents at any time.

Filing compliance and administrative monetary penalties

At the end of 2022, FSRA imposed its first round of Summary Administrative Monetary Penalties (AMPs), all relating to filings that were significantly overdue. While FSRA employs a phased approach to compliance with legislative filing requirements we will continue to use Summary AMPs, as appropriate.

FSRA observed that many late filings were concentrated in DC pension plans. In addition to our usual filing compliance processes, FSRA assembled a small team to engage directly with approximately 250 pension plans with significantly overdue filings. The engagements are intended to educate the sector where required, enhance FSRA’s understanding of issues preventing compliance with the PBA and ensuring future compliance. Once the engagements have been completed, FSRA will share its findings and insights with the sector.

Update: Pension plan examinations

FSRA has revamped its plan examination framework and will be piloting the new approach throughout 2023. This new framework will build on FSRA’s risk-based, outcomes-focused supervisory approach and engagements with plan administrators to protect benefits rights and ensure good administration of plans.

The pilot of the new plan examination framework aims to evaluate the effectiveness of FSRA’s risk-based process for selecting plans, its ability to identify governance and compliance issues, and ultimately deliver a report back to the pension administrator that will be insightful, actionable, and consider the unique aspects of each plan type examined.

FSRA expects to complete its pilot project of plan examinations by the end of 2023 and implement its final examination process in 2024. FSRA will continue to provide updates to the sector throughout the year.

Reminder: Contribution holidays

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.
  • 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 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: Call for new members for Pensions standing Technical Advisory Committees

We are seeking new members for our standing Technical Advisory Committees. These committees advise FSRA on proposed pension regulatory guidance 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, plan members and retirees. If you are interested in joining a committee, please send your biography or CV to David Bartucci. Please indicate which committee you would like to join. Terms for new members may begin in the fall or winter – selected individuals will be notified of their appointment term.

Reminder: Mandatory portal use for submissions began January 1, 2023

As previously announced, effective January 1, 2023, FSRA moved to mandatory use of the Pension Services Portal (PSP) for all applications available on the PSP.

Good administrative practices

Take action: Update your plan administrator contact information on the pension services portal

To ensure a plan administrator continues to receive communications from us and can respond to any outstanding FSRA requests, both the following two actions must be completed:

Pension plan documentation best practices

Plan administrators juggle a wide variety of responsibilities. As fiduciaries, plan administrators are responsible for the day-to-day administration and investment of the pension plan and fund. It is those responsibilities coupled with the long-term nature of the pension promise, that makes good document management practices critical to ensuring plan beneficiaries receive their pension entitlement. It is equally important to retain plan documents required under the Pension Benefits Act (PBA), for example trust agreements, plan texts and amendments, funding and investment documents (including those for any predecessor plan from which members’ benefits may have been transferred in the past).

On the horizon

  • February 16, 2023: Pension Awareness Day
  • Member Guide on Bankruptcy
  • Final Guidance – Pension Plan Amendments
  • Missing Members – Preliminary Findings
Pension update