Issue 10 - November 2013

InfoPensions is the Office of the Superintendent of Financial Institutions’ (OSFI) electronic newsletter on pension issues.  InfoPensions includes announcements and reminders on issues relevant to federally regulated private pension plans as well as descriptions of how OSFI applies selected provisions of the Pension Benefits Standards Act, 1985, Pooled Registered Pension Plans Act, their regulations, directives and OSFI guidance.  Plan administrators should obtain appropriate legal and actuarial advice on how the legislation and guidelines affect their particular pension plan.

InfoPensions is available under the Pensions Plans link of OSFI’s website.  Plan administrators may also find information on various topics on OSFI’s website under Defined Benefit Plans, Defined Contribution Plans and Pooled Registered Pension Plans. To automatically receive new issues of this newsletter and other OSFI pension-related documents by email, please subscribe under the Email Notifications link of OSFI’s website. 

If you have any questions about the articles you read in InfoPensions or if you have suggestions for future articles, please contact OSFI at information@osfi-bsif.gc.ca.  The next issue of InfoPensions will be posted in May 2014.

 

Update on the new Regulatory Reporting System

As communicated in InfoPensions 9, the current software system used by OSFI for the filing of regulatory returns by federally regulated deposit-taking institutions, private pension plans and insurance companies is undergoing a modernization. The renewed system will be known as the Regulatory Reporting System (RRS) and is targeted for completion and use in early 2014 (late February / March).  Any returns due before the move to the new system will continue to be filed using the current approach.

The RRS will allow registered users to view their submissions and return history. Web-based forms will allow a registered user to bring up a view of the return and enter data directly. 

Regulatory returns submitted using the RRS will be immediately validated to confirm their accuracy and completeness before being accepted.  A registered user will also be able to file documents such as valuation reports and auditor’s reports by uploading them into the RRS.  There is no fee to use RRS.  Pension plans that currently rely on a software vendor may choose to continue to do so, and the RRS will continue to support the uploading of electronic files.

More detailed communications will be provided to pension plans throughout the fall and winter.  These communications will explain key dates and transition steps, including how to register to access the new system.  A readiness checklist will also be included to help plan administrators keep track of the steps required to prepare for the change.  OSFI will also provide web-based training videos to explain how to use the new system, as well as answers to Frequently Asked Questions and other supporting documentation. All RRS material will be posted under the Pension Plans link on the OSFI website.

A special e-mail address has been created to receive all enquiries related to the implementation of the RRS.  If you have any questions, please contact OSFI at ReturnsAdmin@osfi-bsif.gc.ca.

 

Draft Policy Advisory - Longevity Insurance and Longevity Swaps

On August 29, 2013 OSFI issued for consultation a draft Policy Advisory on Longevity Insurance and Longevity Swaps. The draft Policy Advisory provides information and OSFI’s expectations to plan administrators of ongoing federally regulated defined benefit pension plans that are considering entering into a longevity insurance or longevity swap contract as a way of reducing their pension plan’s exposure to longevity risk. Comments on the draft Policy Advisory can be made by December 6, 2013.

 

2014 Pension Industry Webinars

Since 2010, OSFI has held annual Pension Industry Forums in Toronto for plan administrators and pension plan professionals.  These Industry Forums covered such topics as the current pension environment, recent legislative and regulatory reforms and their impact on plan administration, as well as OSFI’s supervisory activities and expectations related to private pension plans.  In order to reach a greater number of stakeholders across the country, OSFI is planning to instead host two web conferences or “webinars” in 2014. 

The topics for these webinars have not yet been determined.  If you have any suggestions on what you would like to see discussed at either of these webinars, please send them to information@osfi-bsif.gc.ca.

 

First Nations Pension Plans – Supreme Court of Canada Decision

InfoPensions 5 & 7 provided information on the potential implications of the Supreme Court of Canada (SCC) decision in NIL/TU, O Child and Family Services Society v. B.C. Government and Service Employees Union for some pension plans established by employers that provide services to First Nations.  In addition, InfoPensions 8 provided an update of OSFI’s process for identifying and transferring to the appropriate province some pension plans that, as a result of the SCC decision, were not subject to federal jurisdiction. 

OSFI’s process for identifying pension plans that were potentially affected by the SCC decision has now been completed.  We are currently in the process of finalizing a handful of remaining transfers to the appropriate provinces.  OSFI would like to thank everyone involved in this process for their assistance and cooperation.

Estimated Solvency Ratio

OSFI decided to forego the June 2013 estimated solvency ratio (ESR) calculation for individual defined benefit pension plans operating under federal jurisdiction.  The principal reason for this decision is OSFI’s expectation that the more frequent filing of actuarial reports along with improved financial conditions for most plans has reduced the need for OSFI interventions based on a June ESR.  Accordingly, the aggregated results usually presented in chart form in InfoPensions are unavailable.  We intend to calculate the ESR at December 2013 and those results will be presented in the May 2014 issue of InfoPensions.

 

Retiree and Survivor Audits

OSFI recognizes that conducting retiree and survivor audits is a good governance practice to keep records up to date and to confirm that pension benefit payments being paid from the pension fund continue to be paid to the appropriate party. 

In accordance with the Pension Benefits Standards Act, 1985, the payment of a pension continues until the death of the retiree or their survivor.  To clarify OSFI’s message communicated in InfoPensions 6, before stopping a payment of pension benefits to a retiree or survivor, plan administrators are expected to obtain sufficient evidence or a reasonable basis to conclude that the retiree or survivor is deceased. 

It has come to OSFI’s attention that some pension plans may be stopping pension benefit payments without performing due diligence to conclude that the retiree or survivor is deceased. A retiree’s or survivor’s failure to complete a form requested by the plan administrator, or respond to a series of letters, should not be considered sufficient evidence or reasonable basis to conclude that the retiree or survivor is deceased.

Plan administrators must administer the plan as a trustee for the employer, plan members, former members and any other persons entitled to pension benefits under the plan. It is the plan administrator’s responsibility to establish a sufficient or reasonable basis on which to conclude that a retiree or survivor is deceased.  For this reason, we encourage pension plans to review their administrative processes and procedures for retiree and survivor audits.  When attempts to contact the retiree or survivor by phone, mail or e-mail have failed, the following measures may aid in establishing sufficient evidence or reasonable basis to conclude that the retiree or survivor is deceased:

• Send a registered letter to the retiree or survivor
• Contact the member’s family or in-case-of emergency contact to obtain written confirmation that the member is deceased
• Contact the appropriate union to request that they search their records for the retiree’s last known address and contact information
• Search online white pages
• Review obituary announcements in local newspapers and/or funeral homes
• Contact the financial institution where the pension cheques are deposited or cashed
• Contact the Vital Statistics Records office in each province and territory
• Contact the National Search Unit with Service Canada. *This service is no longer available.
• Hire a search firm or agency to search public records to assist in finding the retiree(s) and/or survivor(s) or evidence of their death
• If the retiree or survivor is receiving their pension benefit by way of direct deposit, if possible, mail a cheque to the retiree or survivor instead

When contacting retirees and survivors, plan administrators should be sure that their communications and expectations are clear.  A plan administrator’s notice of the decision to stop a payment of a pension should be sent by registered mail to the retiree’s or survivor’s last known address.  

 

Incomplete Member Statements

OSFI’s on-site examinations of pension plans continue to find that some member statements (i.e. personalized annual statements and statements on death, termination and retirement):

• do not contain all the information required by the Pension Benefits Standards Regulations, 1985 (PBSR) or
• do not accurately reflect the provisions of the plan documents.  

For example, where a plan provides a benefit (such as subsidized early retirement) that is subject to the consent of the plan administrator, some member statements fail to indicate that receipt of this benefit is subject to the consent of the plan administrator. 

Member statements should clearly outline the members’ rights and benefits provided under the terms of the plan.  Incorrect disclosure to plan members may result in potential claims for increased benefits based on the assertion that they were not provided with appropriate, timely and adequate information. 

When OSFI assesses a plan’s risks regarding their communication to members, incorrect member statements may increase the plan’s assessed level of legal and regulatory risk (please refer to OSFI’s Risk Assessment Framework, specifically the Guidance Note on Communication to Members).  Plan administrators should have the appropriate measures and controls in place to ensure communication to members complies with the Pension Benefits Standards Act, 1985, PBSR and the plan documents.

 

Unlocking due to Shortened Life Expectancy – Physician’s Certification

Under the Pension Benefits Standards Act, 1985 (PBSA), and the Pension Benefits Standards Regulations, 1985 (PBSR), a pension plan or a prescribed retirement savings plan (RSP) may provide that funds may be paid in a lump sum to a member, former member or holder of an RSP in instances where a physician certifies that a mental or physical condition (or disability) is likely to shorten considerably the life expectancy of the member, former member or holder of an RSP. 

There is no requirement under the PBSA or PBSR for a plan administrator or financial institution to verify a physician’s certification.  A physician’s certification must state that a mental or physical condition (or disability) is likely to shorten considerably the life expectancy of the member, former member or holder of an RSP.  If a physician’s certification does not contain such a statement, then administrators or financial institutions should not unlock the funds.

If the administrator or financial institution has concerns regarding the validity of physician certifications that they are receiving, they should consider referring the matter to the regulatory body overseeing physicians in that province.

Under the new Pooled Registered Pension Plans Act and the Pooled Registered Pension Plans Regulations, a Pooled Registered Pension Plan may also provide that a member may withdraw the funds in their account due to disability if a physician’s certification is obtained.

 

Important Dates

Action or Required Filing under the Pension Benefits Standards Act, 1985	Deadline under the Pension Benefits Standards Act, 1985
Actuarial Reports and Actuarial Information Summary (T-1200)	6 months after plan year end
Annual Information Returns (OSFI-49)	6 months after plan year end
Certified Financial Statements (OSFI-60) and Auditor’s Report (if required)	6 months after plan year end
Solvency Information Return (OSFI-575)	The later of 45 days after the plan year end or February 15
Annual Member Statements	6 months after plan year end

Plan administrators are reminded to use the most up-to-date forms when completing the required filings. 

Action or Required Information under the Pooled Registered Pension Plans Act	Deadline under the Pooled Registered Pension Plans Act
Annual Member Statements	45 days after the end of the year
Annual Information Return	3 months after the end of the year
Financial Statements	3 months after the end of the year

Please note that forms are not yet available for submitting the required information under the Pooled Registered Pension Plans Act.  OSFI will communicate directly with any Pooled Registered Pension Plan regarding OSFI’s expectations for the required information.