REGULATORY UPDATE
NEW OSFI WEBSITE
The Office of the Superintendent of Financial Institutions (OSFI) has updated its website, changed its various page addresses, and established redirects to help guide users to new content. OSFI will also maintain the current Financial Data section for the next six months. Users should refresh their email subscribers list, and must re-subscribe if they wish to continue receiving automatic alerts or updates from OSFI.
FURTHER INFORMATION ON OSFI’s NEW SUPERVISORY FRAMEWORK
The Office of the Superintendent of Financial Institutions (OSFI) has released additional information on the new Supervisory Framework, effective April 2024. OSFI’s degree of supervision will increase if risks could affect the safety and soundness of the financial system or pension-related rights and benefits. The Framework will also help OSFI respond quickly to address concerns and changes in risk. It may make decisions based on imperfect information, but accepts “the risk of engaging too early”. OSFI reiterates that its approach will be principles based, with minimal prescriptive requirements. It intends to be open and transparent when communicating with regulated entities, and will protect confidentiality.
OSFI Q&As ON UNLOCKING
On February 1, 2024, the Office of the Superintendent of Financial Institutions posted a new Q&A Document on Unlocking funds from a pension plan or from a locked-in retirement savings plan.
OSFI AIS UPDATES
The Office of the Superintendent of Financial Institutions has updated the Actuarial Information Summary (AIS) and related Guide.
FSRA AIR UPDATES
The Financial Services Regulatory Authority of Ontario has updated the Annual Information Return (AIR or Form 2) and User Guide. Substantive changes include the following:
- Adjustments to how federally regulated members are counted under the “Active Membership Information at the End of the Reporting Period” section (members are also divided by “sex” instead of “gender” (though this still means “Male” and “Female”)
- Addition of a new section for “Active Membership by Benefit/Status Type” (DC only, DB only, and DB and DC)
NEW FSRA GUIDANCE ON GENERAL ADMINISTRATIVE MONETARY PENALTIES
The Financial Services Regulatory Authority of Ontario (FSRA) has released GR0013APP – General Administrative Monetary Penalties (AMP) Guidance, effective March 11, 2024. It applies to all regulated sectors. When deciding whether to impose a General AMP, FSRA will consider the need for deterrence (specific and general) and to further compliance with statutory requirements, as well as prevention of economic benefits from non-compliance (monetary and non-monetary).
In determining AMP amounts, FSRA will treat intentional non-compliance more severely than recklessness, and recklessness more severely than negligence. Ignorance of statutory requirements will be considered reckless or negligent, and repeated non-compliance will indicate intentional misconduct. Mitigation of harm could reduce the amount of a General AMP, but cooperating with a FSRA investigation will not, as doing so is a statutory requirement. General AMPs will be greater than the actual economic benefit derived from non-compliance, and will increase if there has been a history of non-compliance. Reductions could be applied to ensure AMPs are not punitive, or as part of a settlement.
Later this year, FSRA plans to release separate guidance on Summary AMPs.
FSRA INFORMATION GUIDANCE ON DECUMULATION PRODUCTS
The Financial Services Regulatory Authority of Ontario (FSRA) has released new Information Guidance on Understanding Decumulation Products for consumers and the general public. As such, it does not set out any requirements or obligations for plan sponsors or administrators. The Guidance addresses uninsured decumulation products, such as mutual funds, in which the consumer bears the investment risk. These products are not annuities, pensions or insured tontines, and are therefore not protected under the Pension Benefits Act or regulated by FSRA. The Guidance sets out some questions consumers should consider before purchasing decumulation products.
FSRA SERVICE STANDARDS SCORECARD FOR Q3 2023-2024
The Financial Services Regulatory Authority of Ontario (FSRA) has released its Service Standards Scorecard for the third quarter of fiscal 2023-2024. In the Pensions sector, FSRA met its performance target in all five categories:
- 97.9% of inquiries responded to within 45 business days, above the 90% target (96.3% during previous quarter)
- 100% of defined benefit (DB) wind-up applications finalized within 120 business days, above the 80% target (90.9% during previous quarter)
- 100% of defined contribution plan (DC) wind-up applications finalized within 90 business days, above the 90% target (unchanged)
- 100% of DB asset transfer applications finalized within 120 business days, above the 80% target (66.7% during the previous quarter)
- 83.3% of DC asset transfer applications finalized within 90 business days, above the 80% target (unchanged)
FSRA RELEASES Q4 2023 SOLVENCY REPORT
The Solvency Report sets out the projected solvency position of Ontario registered defined benefit plans (compared to the previous quarter). As of December 31, 2023:
FSRA PENSION AWARENESS DAY – FEBRUARY 15, 2024
To mark its second annual Pension Awareness Day on February 15, 2024, the Financial Services Regulatory Authority of Ontario offered the following tips to enable retirees to keep track of their retirement funding:
- Review and understand your annual pension statement
- Update key information – such as your spousal status, beneficiaries and contact information
- Learn about any decisions you must make, such as how much to contribute or what investment options you have
- Get financial advice or use projection tools to find out if your retirement planning is on track
- Ask questions – your employer, union or plan administrator can help
FSRA PENSION UPDATE
The Financial Services Regulatory Authority of Ontario (FSRA) has released its latest Pension Update. Items of interest include the following:
- FSRA will host a webinar in April 2024 to introduce its revised examination program
- Invoices will be sent out by April 2024 reflecting FRSA’s new Assessments and Fees Rule (effective December 1, 2023)
- Plan administrators should inform the relevant parties where they can find nformation relating to marriage breakdown questions (a link to FRSA’s Pensions and marriage breakdown webpage is also provided)
- Proposed Interpretation Guidance No. PE0299INT – Pension Benefits Guarantee Fund Assessment Calculations and Deadlines Guidance is not in effect, but FSRA may reconsider the need for guidance relating to PBGF assessment rules
- Plan administrators considering a contribution holiday are reminded that:
- a cost certificate must be filed within the first 90 days of the fiscal year, even if the plan has “excess surplus” as defined under the Income Tax Act
- available actuarial surplus (AAS) must be reassessed as of the first day of the current fiscal year but cannot be greater than what was disclosed in the last filed valuation, adjusted to reflect any amounts funded from AAS since the date of the last valuation
- 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
- FSRA is seeking new members for its four pension Standing Technical Advisory Committees
FSRA FINANCIAL ADVISORS CREDENTIALS TOOL
The Financial Services Regulatory Authority of Ontario (FSRA) has created a credentials tool to help consumers verify the credentials of Financial Planners and Financial Advisors they are working with. Information displayed in the tool is sourced directly from FSRA-approved credentialing bodies. If an individual is on this list, they are allowed to use the appropriate title in Ontario, have met minimum education standards, are supervised, and must abide by a code of conduct.
FSRA EXCHANGE MARCH 4, 2024
The Financial Services Regulatory Authority of Ontario held its third annual FSRA Exchange event on March 4, 2024. Morning sessions featured expert panel discussions on the impact of climate change in financial services and regulation, and evolving regulatory challenges surrounding Artificial Intelligence. Tailored afternoon sessions addressed all of FSRA’s regulated sectors, including pensions and Financial Planners and Financial Planners title protection.
ONTARIO PENSIONS SECTOR OVERVIEW AND ACTIVITIES REPORT
The Financial Services Regulatory Authority of Ontario (FSRA) has released its first Ontario Pensions Sector Overview and Activities Report. Its sets out, as of December 31, 2023, Annual Information Return (AIR) data, and information on statutory filings, service standards, administrative monetary penalties (AMPs) and missing members (previously reported information is not included):
- There were approximately 4,350 plans (1,000 DB, 2,800 DC and 550 combination DB and DC) with approximately 4.6 million members (3 million DB, 630,000 DC and 930,000 combination)
- Plans held approximately $834 billion in total assets ($688 billion DB, $33 billion DC and $113 billion combination)
- FSRA has imposed nine Summary AMP Orders related to 2020 and 2021 late filings (six against DC plans, two against DB plans and one against a hybrid plan)
- 14 out of 17 Summary AMP Orders related to late AIRs or Financial Statements (an order may cover multiple late filings)
- FSRA is currently engaging with plans that have delinquent 2022 and 2023 filings
- 1,912 plans reported a total of 196,750 missing members with assets valued at approximately 3.6 billion
- A majority of missing members (53%) were members of a multi-employer pension plan, while the highest percentage value of missing member assets (45%) was held in single employer plans
CASELAW
RECTIFICATION ORDERED TO CORRECT ERROR IN PLAN TEXT
Citibank was the sponsor and administrator of the Citibank Pension Plan. When the Plan text was restated in 2002, it mistakenly changed how benefits for Deferred Vested Members who elect to receive benefits before their normal retirement date (NRD) were calculated. The mistake would have, generally, resulted in an enhanced benefit for these members when compared to Early Retirement Members who can also elect to receive benefits before NRD – an “extremely unusual” and “illogical” outcome. In Citibank Canada, the Ontario Superior Court of Justice exercised its discretion to rectify the Plan text and remove the drafting error, for the following reasons:
- The error was due to an incorrect reference to another Plan provision and was clearly inadvertent (the 2002 restatement was intended to address issues unrelated to benefit calculations – i.e., to add a new DC provision for service on or after January 1, 2002, and to reflect certain administrative practices)
- Citibank did not change its administrative practices to account for the change, with benefits for Deferred Vested Members who took early retirement calculated as they had been before the restatement
- All actuarial reports, annual and biennial pension statements, and pension option statements since 2002 did not account for the change
- Citibank took prompt action once the error was brought to its attention
- Neither FSRA nor any affected plan members, who were provided notice, opposed the application
PENSION TRANSFER NOT AVAILABLE TO SATISFY COSTS ORDER
In Malone v. Cappon, the wife was ordered to pay $120,000 in costs following a lengthy trial. She had limited funds, was on disability and requested that the order be satisfied by way of pension transfer. Her request was denied by the Ontario Superior Court of Justice. There was no caselaw on whether a pension transfer was possible without another form of monetary obligation being attached to the order – equalization (of pension or otherwise), interest, or support; and the clear language of s. 10.1 of the Family Law Act and s. 67.3 of the Pension Benefits Act did not permit the Court to order payment of a costs award in and of itself by way of a pension transfer.
Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.