InfoPensions – Issue 18 – November 2017

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

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

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 available in May 2018.

Pension Plans Survey underway

As part of our ongoing commitment to be responsive to stakeholder input and to continually improve performance, OSFI periodically consults with administrators and professional advisors of federally regulated private pension plans through an online survey. The last survey was conducted in November 2014 and its results can be found on OSFI’s website.

This year’s survey is underway. It is being conducted primarily by means of an online questionnaire and is being administered by Phoenix Strategic Perspectives Inc., an independent third party. The results will help us better understand stakeholders’ perceptions of OSFI’s performance, including our effectiveness at supervising pension plans, and will help us examine topics specific to the pension plans sector.

We expect to share the results of the survey on OSFI’s website by the summer of 2018.

OSFI’s 6th Pension Industry Forum

On October 25, 2017, OSFI held a Pension Industry Forum in Toronto.

The forum provided an opportunity for administrators of federally regulated private pension plans and other pension stakeholders, including advisors, service providers, and representatives of federal pension plan members and retirees to hear from OSFI about current issues. Topics included updates on pension policy developments, OSFI’s supervision of pension plans, approvals and actuarial topics, recent pension litigation related to federally registered pension plans, and regulatory initiatives.

Thank you to those who attended and provided feedback. If you have suggestions for future forums, please contact us at information@osfi-bsif.gc.ca.

Updating contact information in the Regulatory Reporting System

OSFI would like to remind plan administrators of their responsibility to update their pension plan’s Organization Profile in the Regulatory Reporting System (RRS) as changes occur. The Organization Profile for each pension plan includes primary contact information for individuals or organizations responsible for the various roles associated with the pension plan (e.g. plan administrator, pension fund custodian, actuarial firm, etc.). Instructions on how to update the Organization Profile can be found in the Manage Corporate Returns User Guide on the RRS Training and Support for Private Pension Plans page of OSFI’s website.

As previously communicated in InfoPensions 16, it is important for RRS users to be aware that updating information in RRS in the Organization Profile does not have the effect of updating the RRS access and filing permissions for the plan. Information on how to create, edit and deactivate RRS Portal Users’ and Local Registration Authority’s accounts is available in the Documents section of RRS. For further assistance, please contact the Bank of Canada at 1-855-865-8636 and follow the instructions to reach RRS Support.

Basic Rate for Assessment of Pension Plans

The Assessment of Pension Plans Regulations require the Superintendent of Financial Institutions to publish annually in the Canada Gazette, Part I, a notice setting out the basic rate that will be applied to the assessment of pension plans in the upcoming fiscal year.

A notice was published in Part I of the Canada Gazette on September 30, 2017 setting out that the basic rate in effect for assessments that are due to be paid from April 1, 2018 to March 31, 2019 is $8. This is the same basic rate that is currently in effect.

Pension plan examinations conducted by OSFI

As part of our supervisory process, OSFI conducts examinations of a select number of pension plans each year. OSFI conducts approximately 9 to 12 examinations in a year. Until recently, most of these examinations were conducted on-site and included in-person meetings between OSFI, the plan administrator and other individuals involved in the administration of the plan. OSFI has also conducted examinations that do not have an on-site component and these examinations are referred to as desk reviews. Desk reviews generally require less participation from the plan administrator. OSFI’s focus has recently changed from primarily conducting on-site examinations to conducting a desk review and/or an on-site examination based on the scope of the examination or the issues affecting the pension plan.

Regardless of whether an on-site or a desk review is conducted, the process always begins by identifying the pension plans that will be examined. OSFI bases the selection of plans on several factors including risk indicators as well as occasionally focusing on specific plan characteristics that OSFI would like to assess. Each plan administrator is then advised that their plan has been selected for an examination followed by a letter requesting specific documentation. The requested documentation could include governance documents, frameworks and policies. Once received by OSFI, the material is reviewed and potential issues are identified. At this point, OSFI determines whether an on-site examination is warranted. An on-site examination typically lasts two to three days, and OSFI works with the plan administrator to schedule the examination to reduce disruption. If an on-site examination is not warranted, the examination will be conducted as a desk review and finalised by conference call(s) with the plan administrator to discuss any issues identified. Following the completion of a desk review or an on-site examination, an internal report is produced and a letter documenting any recommendations or areas of concern and timelines for implementation, if required, is sent to the plan administrator. OSFI aims to provide reasonable timelines for plan administrators to implement the recommendations made.

The examination process has broadened OSFI’s understanding of pension plan risks and operations as well as risk management and best practices. Examinations have led to the identification of issues within pension plans, some of which OSFI has previously communicated in newsletter articles (PBSA Update 28 and InfoPensions 2). Additionally, examinations have contributed to guidance issued by OSFI. For example, examinations showed that member statements often did not include certain required information, which OSFI addressed by adding checklists to the Pension Members’ Guide so that a member or former member can review their annual statement and confirm that it contains all of the information required by the legislation and regulations. The recommendations made by OSFI following an examination aim to improve risk mitigation strategies by plan administrators. 

Recently posted to the OSFI website

• The frequently asked questions (FAQs) on OSFI’s website were updated in November, 2017 to clarify and streamline the answers provided. The FAQs were also revised to reflect recent amendments made to the Pensions Benefits Standards Regulations, 1985 (PBSR).

• An updated Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans was posted in October 2017. The guide updates the previous version published in October 2016 to:
• Reflect recent amendments to the PBSR that changed the maximum allowable amount of letters of credit
• Clarify OSFI’s disclosure expectations with respect to plans with a defined contribution component, the mortality assumption, termination expenses, and the calculation of the average solvency ratio.

• OSFI posted revised guidance regarding the annual filing process for federally regulated private pension plan returns in September 2017. The revisions followed a regular review of these documents and do not include any additional reporting requirements, but do include changes that streamline the information and make it more user-friendly.

• A Draft Guideline for Derivatives Sound Practices for Federally Regulated Private Pension Plans was posted for comment in July 2017. The draft guideline outlines the factors that OSFI expects plan administrators to consider when developing policies and procedures for the sound risk management of derivative activities.  The comment period ended on September 29, 2017. Thank you to those who provided comments, which OSFI is reviewing.

• A new guidance note, Eligible default investment options for Pooled Registered Pension Plans was posted in July 2017. The guidance note sets out OSFI’s interpretation and expectations related to the requirements for the investment option selected by the administrator of a pooled registered pension plan as the default investment option.

• A revised Instruction Guide to Completing the OSFI 49 Annual Information Return and OSFI 49A Schedule A – Canada Revenue Agency Information Requirements was posted in June 2017. The accompanying forms were also revised and re-issued. The revisions followed a regular review of these documents and included changes for consistency with the Regulatory Reporting System and to address other editorial and formatting issues.

Using OSFI’s pensions email account

As communicated in a previous InfoPensions article, Electronic Filing of Documents with OSFI, for documents that are required to be filed with OSFI but not through the Regulatory Reporting System, such as plan amendments, we continue to encourage plan administrators, custodians, service providers and other pension plan professionals to submit these documents electronically to the email address pensions@osfi-bsif.gc.ca. If the document is submitted electronically there is no need to send a hardcopy.

Amendments to regulations

Regulations amending the Pension Benefits Standards Regulations, 1985 and the Pooled Registered Pension Plans Regulations came into force on June 23, 2017. These Regulations were published in Part II of the Canada Gazette on July 12, 2017.

The significant changes include:

• A change to the maximum allowable amount of letters of credit that an employer may use under the Pensions Benefits Standards Regulations, 1985 (PBSR). The maximum allowable total face value of all letters of credit used to reduce solvency special payments has been changed from 15% of the market value of plan assets to 15% of solvency liabilities of the plan as determined at the valuation date.

• The unlocking of small balances from a locked-in registered retirement savings plan is now permitted under the PBSR and the Pooled Registered Pension Plans Regulations (PRPP Regulations). Previously, the unlocking of small balances was only available from a life income fund, a restricted life income fund and a restricted locked-in savings plan.

• New provisions that clarify that, like funds in a pension plan, funds in the various prescribed retirement savings plans under the PBSR and the PRPP Regulations may be withdrawn if the fund holder has ceased to be a resident of Canada for at least two years.

• Amendments to the PBSR that clarify that funds held in a locked-in registered retirement savings plan or a restricted locked-in savings plan, as well as the amount to which a survivor is entitled from a deferred life annuity, can be transferred to a provincially registered pension plan or a pooled registered pension plan.

• Prescribed retirement savings plans under the PBSR and the PRPP Regulations must now allow funds to be paid out in a lump sum in the event of shortened life expectancy of the holder, as certified by a physician. Previously, the language in the PBSR and the PRPP Regulations permitted this form of unlocking but did not require that it be available to holders.

The final PBSR and PRPP Regulations published on July 12 did not include amendments that were in the Regulations published for public comment in Part 1 of the Canada Gazette on April 29, 2017, that would have allowed survivors to surrender, to a dependent, the death benefit payable from the various prescribed retirement savings plans.

Bill C-27 – An Act to amend the Pension Benefits Standards Act, 1985

On October 19, 2016, the Minister of Finance introduced Bill C-27 – An Act to amend the Pension Benefits Standards Act, 1985, in Parliament.

Bill C-27 contains proposed amendments to the Pension Benefits Standards Act, 1985 to provide a framework for the establishment and regulation of target benefit plans. It also includes proposed amendments that would, subject to certain conditions, permit administrators of defined benefit pension plans to satisfy their obligation to provide pension benefits to a former member or survivor by purchasing a deferred or immediate life annuity. The conditions are expected to be prescribed in regulations.

Update on the future agreement respecting multi-jurisdictional pension plans

As communicated in InfoPensions 16, representatives of the governments of British Colombia, Nova Scotia, Ontario, Quebec and Saskatchewan signed the 2016 Agreement Respecting Multi-Jurisdictional Pension Plans (2016 Agreement) that came into effect on July 1, 2016. The 2016 Agreement was negotiated as an interim measure while the Canadian Association of Pension Supervisory Authorities (CAPSA) completes the development of a future agreement intended to be signed by all governments in Canada with pension legislation. The future agreement is also intended to address the issue of changing funding regimes across jurisdictions.

CAPSA recently conducted public consultations on key aspects of the future agreement, releasing a Consultation Paper on Proposed Changes to Funding and Asset Allocation Rules Under a Future Agreement Respecting Multi-jurisdictional Pension Plans in early July for comment by August 31, 2017. All submissions received by CAPSA on the consultation paper can be found on CAPSA’s website. CAPSA is currently considering the comments received as they continue their work on the future agreement.

The current bilateral federal-provincial agreements respecting multi-jurisdictional pension plans will remain in effect until the Government of Canada becomes a signatory to the future multilateral agreement that will replace these bilateral agreements.

Important dates

Plan administrators are reminded that required filings must be filed using the Regulatory Reporting System. Documents filed in support of an application that requires the Superintendent’s authorization should be filed electronically at pensions@osfi-bsif.gc.ca.

Under the Pension Benefits Standards Act, 1985:

Action or Required Filing	Deadline
All Plans:
Annual Information Return (OSFI 49)	6 months after plan year end
Pension Plan Annual Corporate Certification (PPACC)	6 months after plan year end
Certified Financial Statements (OSFI 60) and, if required, an Auditor’s Report	6 months after plan year end
Plan Assessments Plan administrators are reminded that the number of members and other beneficiaries used to determine the annual pension assessment is the “Grand Total” number reported in the plan’s OSFI 49 for the preceding plan year end.	6 months after plan year end
Annual Statements to members and former members and spouses or common-law partners	6 months after plan year end
Defined Benefit Plans Only:
Actuarial Report and Actuarial Information Summary and, if required, Replicating Portfolio Information Summary	6 months after plan year end
Solvency Information Return (OSFI 575)	The later of 45 days after the plan year end or February 15

Under the Pooled Registered Pension Plans Act:

Action or Required Filing	Deadline
Pooled Registered Pension Plan Annual Information Return (includes financial statements)	April 30 (4 months after the end of the year to which the document relates)
Pension Plan Annual Corporate Certification (PPACC)	April 30 (4 months after the end of the year)
Plan Assessments OSFI sends plan assessment invoices to all pooled registered pension plans (PRPP) registered with OSFI based on the total number of members (including survivors that hold an account) of the PRPP as at the end of the preceding year.	March 31 (3 months after the end of the year)
Annual Statements to members and their spouses or common-law partners	February 14 (45 days after the end of the year)