2021 Ontario Pension Recap

The Financial Services Regulatory Authority of Ontario (FSRA) has recently released its annual report, which outlines its many activities in the past year, primarily aimed at supporting pension plan evolution, consulting on a prudential supervision framework, and refocusing pension regulation on regulatory effectiveness and efficiency. This bulletin summarizes FSRA’s main activities as well as notable pension-related legislative changes in 2021.

FSRA delivered on all its planned priorities in 2021. With regard to its objectives to support pension plan evolution and reduce unnecessary regulatory burden, various Technical Advisory Committees (TACs) were established to help reflect on potential solutions (defined contribution (DC) plans, asset transfers, the identification of ways to foster a vibrant employment-based pension pillar in Ontario, etc.).

From a legislative point of view, FSRA conducted several consultations to gather comments from various stakeholders to release updated pension guidelines. These pension guidelines include, among other things, guidance on:

• Missing members;
• Asset transfers with a more efficient review process;
• Leading practices for Defined Benefit (DB) Multi-Employer Pension Plans;
• Roles and responsibilities for plan administrators; and
• Administration of pension benefits upon marriage breakdown.

FSRA has also published its Proposed 2022-2023 Statement of Priorities, with objectives focusing on the improvement of communication to plan beneficiaries and the protection of pension benefits.

FSRA reported that, despite the pandemic, the median Defined Benefit (DB) plan was 114% funded on a going-concern basis and 96% solvent as at December 31, 2020. Furthermore, they have recently noted that the median solvency ratio has improved to 106% as at September 30, 2021.

An additional burden was recently placed on administrators of DB pension plans with Pension Benefit Guaranteed Fund (PBGF) liabilities of $10 million or above, which they will now be required to calculate and report in their plan’s PBGF claim exposure and information regarding the distribution of benefits. This new measure was introduced to address issues related to data availability, which were raised following a recent review of the PBGF and are applicable to valuations filed on or after September 1, 2021. The numerous additional required disclosures are detailed in our bulletin entitled Ontario’s Pension Benefits Guarantee Fund (PBGF) and Other News.

FSRA has implemented the following main administrative changes, including:

• Threshold for reporting variances in expected current service contributions disclosed in Form 7 will increase from 10% to 25% on January 1, 2022;
• End of the temporary measures related to the COVID pandemic;
• It is worth noting that no plan sponsors took advantage of the contribution deferral relief measure;
• Proposed amendments to reduce the regulatory burden of DC plan administration:
  • Elimination of the requirement for administrators of member-directed DC plans to establish a Statement of Investment Policies and Procedures (SIPP);
  • Elimination of the requirement for administrators of most DC plans to file audited annual financial statements;
• Confirmation that automatic features in DC pension plans are not prohibited by law, such as auto-enrolment, auto-escalation of member contributions and default funds.

Normandin Beaudry consultants will continue to monitor Ontario pension sector news and developments with FSRA’s activities and will keep you informed. Feel free to contact us if you have any questions.