Update on Temporary Portability Freeze

  • Type of Publication: Letter
  • Date: August 31, 2020
  • To: Federally Regulated Private Pension Plans

On March 27, OSFI announced regulatory adjustments to protect the interests of pension plan members and beneficiaries, and to allow administrators of federally regulated private pension plans to focus their efforts on addressing the many challenges posed by COVID-19.

Given the potential negative impact that uncertain market conditions could have had on solvency ratios of pension plans, the Superintendent was of the opinion that all portability transfers or annuity purchases would impair the solvency of the pension fund. As a result, one of the measures taken was a temporary portability freeze that prohibited all portability transfers and annuity purchases relating to defined benefit plan provisions.

OSFI lifts freeze on portability transfers

Since then, OSFI has been closely monitoring market conditions and the estimated solvency ratio of federally registered pension plans. While market volatility remains elevated, the recovery of the market lows of mid-March has generally been sustained and solvency ratios have improved. OSFI also introduced conditions designed to mitigate the risk that such transfers and purchases could disadvantage remaining plan members.

As a result, the Superintendent has determined it is appropriate to lift the portability freeze, subject to certain conditions.

The Directives of the Superintendent have been adjusted to include conditions on portability transfers and buy-out annuity purchases similar to those in place prior to the portability freeze. OSFI has determined that these conditions are sufficient to protect the rights and interests of plan members and beneficiaries.

OSFI is monitoring the impacts of COVID-19 on pension plans and is prepared to reintroduce a freeze or adjust the Directives further if necessary.

Further information on the conditions currently applicable to portability transfers and annuity purchases can be found in our updated FAQs.

Restarting consultation initiatives and policy development

On July 13, OSFI announced the resumption of some consultations and policy development work related to new or revised guidance this fall.

Accordingly, OSFI’s Private Pension Plans Division expects to resume work on pension-related guidance that was suspended, including actuarial, benefit reduction, registration and termination guides.