Pension Industry Forum - 2019

The 2019 OSFI Pension Industry Forum was held on May 28, 2019 at Vantage Venues in Toronto, Ontario, Canada. The seminar updated administrators of federally regulated private pension plans and other pension stakeholders, including their advisors, service providers, and representatives of plan members and retirees on OSFI’s supervision of pension plans, recent litigation related to federally-registered pension plans, and policy initiatives for the Pension Benefits Standards Act, 1985 and Pooled Registered Pension Plans Act.

Transcription prepared by Media Q Inc. exclusively for OSFI
  • Type of Publication: Transcript of 2019 OSFI Pension Industry Forum
  • Date: May 28, 2019
  • Location: Vantage Venues, 150 King Street West, Toronto, ON
  • PRINCIPALS: Tamara DeMos, Managing Director, Private Pension
    Plans Division, Office of the Superintendent of
    Financial Services (OSFI)
    Marc Sauvé, Senior Manager, Actuarial, OSFI
    Kim Page, Director, Policy, Approvals and Corporate
    Reporting, OSFI
    Sylvie Bartlett, Manager, Policy, OSFI
    Krista McAlister, Manager, Supervision, OSFI
    Paul Rozon, Manager, Supervision, OSFI
    Tara Berish, Senior Counsel, Legal Services Division,OSFI

SUBJECT: 2019 OSFI Pension Industry Forum was held at 9 a.m. on Tuesday, May 28, 2019 in the Garden Hall (16th Floor) of Vantage Venues, in the Sun Life Financial Tower, located in Toronto.

Tamara DeMos: Well, good morning. I'm Tamara DeMos. I'm the Managing Director of the Private Pension Plans Division at the Office of the Superintendent of Financial Institutions, or OSFI. I welcome you and thank you for attending OSFI's Pension Industry Forum. Before we get started, I want to acknowledge that we are on the traditional territory of the Anishinabewaki, Huron-Wendat, and Haudenosaunee people.

A little bit about logistics. So the washroom, you came in and when you registered there was a hallway right before that, and washrooms, men's are on the right and women's are on the left. You should have received hopefully an electronic copy of the presentation before today. And if you didn't receive the e-mail or whatever and you still want a copy, during the break or after the session this morning feel free to talk to Jessica Resch. She's at the back of the room – wave, Jessica – there at the reception desk, typically, and Stephanie Rochefort, who is also at the reception desk. One of those can take your name down and will make sure you get a copy of the presentation.

We're taping and video recording much of the presentation today, and it will eventually be posted on our website after it gets translated. There'll be time for questions, and if you do have a question, you have microphones on your table. If you see the little talky button on the microphone. Just press that and ask your question, and then turn it off after you're done.

So yeah, we're delighted that you're here. And thank you for your questions that you sent in advance. We appreciate them, and we're going to hopefully try to answer them as the morning progresses. So here is our organizational chart from last year. And because I think I'm very fancy with my animation, I wanted to visually depict for you these changes that happened in our senior management team over the last year, because we had a few changes. So last time we met with you, John Grace was the Director of Policy Approvals and Corporate Reporting, and he retired in June of last year. So here you go, he's gone off to greener pastures. (Laughter). Then Kim Page – Kim. Yup. (Laughs). Kim Page has moved over to John's role. She was a Manager on the Supervision Team, and she replaced John. Krista McAlister moved over. Where's Krista? There's Krista. She moved over from the Manager of Approvals over to take Kim's role on the Supervision Team. And Claire Ezzeddin – you can wave, Claire. She worked on the Supervision Team, but more recently on the Policy Team, and now she is now the Manager of Approvals. Did I do that one? Oh, no. OK. There we go. This is an org structure right now of the Private Pension Plans Division, or PPPD. And I'm not going to go through the agenda. You should have received it electronically. I'm not going to spend a lot of time there, but I'm going to, as I introduce folks – you've had a few of the introductions already – we'll talk about what they're going to talk about this morning.

So as I had mentioned, I'm Tamara DeMos. I lead the Private Pension Plans Division. And Kim Page, who is the Director of Policy Approvals and Corporate Reporting, will be talking about the results of OSFI's Pension Industry Survey. On Kim's team are Sylvia Bartlett, the Manager of Policy. She's sitting beside Kim there. And Claire Ezzeddin – and I already introduced Claire – is the Manager of Approvals. And Sylvia will be describing updates to our guidance as well as some recent changes to our pension plan assessments. Claire is available to respond to any questions that you may have on approvals. Benoit Brière over there all by himself – (laughs) – is the Director of the Supervision Team, and reporting to him are the two Managers of Supervision, Krista McAlister and – Krista, you're way down there and I already introduced you; and Paul Rozon is way at the end. All the relationship managers –or RMs, we call them, they report to Krista and Paul. And you may have had some interactions with them. They all are assigned a portfolio of pension plans, and they tend to have the one-on-one, direct communications with the pension plan administrators.

Krista and Paul will describe at a very high level our supervisory framework, how we supervise pension plans, kind of unveiling the mystique, so to speak, as well as provide some updates on the work the Supervision Team is doing. And right after I'm done speaking to you, we will hear from Marc Sauvé – there he is, oh, yeah, right at the end here – who is the Senior Manager Actuarial. And he'll be talking about the results of the Estimated Solvency Ratio exercise that we conduct annually. And rounding out the morning will be Tara Berish. She's our Senior Counsel, and she'll be providing a very informative update on a couple of litigation cases that OSFI is involved in. And Lynn Hemmings, the Acting Director General, Financial Sector Policy Branch, at the Department of Finance. Lynn will be talking about some policy initiatives with respect to the Pension Benefits Standards Act 1985. While OSFI's role is to administer the Acts, the Pension Acts, it is the Department of Finance who's the lead on amendments to the Federal Pension Acts or Regulations.

And before I move on, I did want to mention that Carolyn Rogers, Assistant Superintendent, Regulations Sector, who's my boss, will be the Secretary General of the Basel Committee on Banking Supervision for an initial term of three years. She is leaving us in June. And Ben Gully, who currently has the role of Assistant Superintendent, Risk Support Sector, at OSFI, will be replacing her. And that will be in the fall.

You may also be interested to know that Assia Billig, was recently appointed the Chief Actuary and Head of the Office of the Chief Actuary within OSFI. Assia succeeded Jean-Claude Ménard, who retired in mid-April after 20 years as Chief Actuary.

And as I said, I'm not going to necessarily go through the agenda. Just to mention that for the group that's up here right now, there'll be a little bit of time for questions after they speak and just before the break. The break is kind of scheduled for 10:35. And then there'll be time for questions in the afternoon for Tara and Lynn, when they're – not the afternoon, sorry, after the break – when Tara and Lynn speak. And then we actually have a section, a time period at the very end, for questions as well, so hopefully a lot of time for your questions.

And yeah, I think – oh, and also, you may be uncomfortable kind of to talk about your own plan specific questions in this kind of setting, but we will all be available during the break and after this morning's session for you questions if you want to just kind of approach one of us with your question.

This is – and I apologize, the words are really small. You might not be able to read it from the back of your room, but it's really just to simply introduce the fact that OSFI recently posted our 2019-2022 strategic plan, our three-year strategic plan. And it sets out a framework for OSFI's work, it provides a vision for the future, and confirms OSFI's purpose and values, and sets clear objectives. This is a plan for all of OSFI, and, as I suspect you are likely very aware, OSFI not only supervises federally-regulated pension plans but also all banks and some insurance companies. Also, of course, the Office of the Chief Actuary provides actuarial valuation and advisory services to the Government of Canada.

These are the very four high-level goals in the strategic plan. And these are their key components: first of all, to improve regulated entities' preparedness and resilience to financial risk; improve their preparedness to identify and develop resilience to non-financial risk. So again I apologize to those who may not be able to read it, but the first one is about financial risks, the second one is about non-financial risks, and the third one is to improve OSFI's agility and operational effectiveness through responsible stewardship of our resources. So that's looking internally at our own people and our technology and our use of technology. And finally, to preserve support from Canadians and cooperation from the financial services industry by being transparent and accountable.

We look at our own Private Pension Plans Division and what are we working on in the next year and how it relates to the strategic plan. We have a number of priorities under all four goals, but probably the ones that impact you folks the most are those that are under the Goal 1 and Goal 2. And so you look under the first goal, OSFI recently conducted a defined contributions study, pension plan study, and thank you to all of you who might have completed the study. The purpose of the study is to enhance OSFI's risk-based approach to supervision of defined contribution plans by requesting specific information on plan fees, the default investment option, and the number and type of investment options offered to members. In 2019/20 – and our fiscal year runs from April 1st to March 31st, so we're talking about April 1st to March 31st there – OSFI will analyze the information received and may adjust its supervisory procedures or update external guidance based on the risks identified.

The objective of the second project under Goal 1 is to determine if OSFI should increase its supervision of pension plan investments. The result will hopefully inform us as to whether we need to produce guidance, increase reporting requirements, or perform targeted examination of pension plan investments, as well as whether we have internal resources with the appropriate skill level to supervise pension plan investments. In our review, we are considering how OSFI supervises insurance company investments as well as the approach to supervision of other pension plan regulators, both Canadian regulators as well as around the world, internationally. And we're going to consider the challenges posed by our current legislative framework and other rules that apply to pension investments, and recommendations are expected in the fall.

The first item under Goal 2 is that we will be reviewing the extent to which pension plans should be considering environmental, social, and governance factors in their investment decisions. In this, we will be considering the work being done internationally. In the Private Pension Plans Division, we are working with our OSFI colleagues who supervise banks and insurance companies, as well as our national pension regulator counterparts through work that we will be carrying out by the Canadian Association of Pension Supervisory Authorities, or CAPSA. Similarly, for the final priority under Goal 2, considering whether we will need to enhance our supervisory practices due to risks related to technology, we will again be working with OSFI, along with all the other pension regulators in Canada. We'll be working with our OSFI colleagues and with CAPSA. And as many of you know, CAPSA is an association that OSFI, along with all the other pension regulators in Canada, are members of. CAPSA recently also released its strategic plan for 2019-2022. And I will thank, on behalf of CAPSA, those of you who contributed to that.

Here, for my last slide, I thought I'd put a few federal pension plan fun facts. And you can see the data here is at March 31st, 2018. It's a little outdated. And that's because basically most of our pension plans have December 31st year ends and we're not going to get that updated data at the end of 2018 until June-ish. So this is a little bit outdated, but there's some interesting points in here. So OSFI supervises over 1200 defined benefit, defined contribution, and combination pension plans. This represents around approximately seven percent of private pension plans in Canada. There are over 1.1 million active, retired, and deferred vested members in these plans. According to Statistics Canada reports, OSFI supervises pension plans that represent around ten percent of the active membership in Canadian pension plans. The percentages for asset allocation, looking here, they don't actually add up to a hundred percent; they add up to 104 percent. But I don't know how to depict negative four percent in a pie chart. But that four percent, or the negative four percent, is related to the leverage that is being used in our pension plans, like, mainly basically defined benefit pension plans.

Total assets of federally registered pension plans is over $218 billion, the vast majority from defined benefit provisions. This is over double what they were March 31st, 2009, just after the financial crisis. One final point to mention is that you can see in the pie chart for asset allocation the yellow piece there, the 12 percent, it represents 20 – 12 percent, is the Other category. And this is made up of categories such as infrastructure, private equity, and hedge funds. And this category has grown from two percent as at March 31st, 2009 to 12 percent.

So this concludes my opening remarks. And I will now turn it over to Marc Sauvé, who will be providing an overview of the estimated solvency ratio exercise.

Marc Sauvé: Thank you, Tamara. Good morning, everyone. Glad to be here in Toronto this morning with you. Glad also to see that several actuaries are present in the room this morning. Hopefully we'll have a chance to chat some more at the break or later on, at the end of the session.

So like Tamara mentioned earlier, I'll spend the next few minutes on one of the projects managed by the Actuarial Team, which is the Estimated Solvency Ratio. We do that every year, and I'll present the process and the results over the next few minutes.

The Estimated Solvency Ratio, or ESR, as we call it, is calculated by the Actuarial Team for all pension plans supervised by OSFI that have a defined benefit, or DB, component. The ESR exercise assists OSFI with the early identification of solvency issues that could affect the security of pension benefits that are promised. The solvency ratio is defined as the ratio of assets over liabilities on a plan termination basis. The exercise uses the most recent actuarial, financial, membership data information that each plan filed with OSFI last year. So we're looking at the 2018 ESR, later on, on the next slide, and this is based on the information that was filed by plans last year by June 30th for most of the plans that have a December 31st or January 1st valuation date. An exception to that, though, is the rate of return to project assets. The rate is based on the Solvency Information Return that was filed by plans this year by February 15th.

Solvency liabilities are projected using relevant commuted value, and annuity proxy rates that are determined based on standards and guidance of the Canadian Institute of Actuaries. This year we estimated the solvency ratio for 361 defined benefit plans. Approximately 250 of these plans are defined benefit only, and the balance having both a DB and a DC component. From these 361 defined benefit plans, 50 plans are fully indexed, and the balance are either partially indexed or not indexed at all.

Once the results of the ESR exercise for each plans are available, these are shared with the relationship managers and inform their early intervention for problematic pension plans. For example, some plans were contacted to request additional information for further analysis. Other plans were asked to submit an action plan to ensure that funding requirements are met. So these are only two examples of the early intervention that relationship managers may pursue following the ESR exercise.

The 2018 results were included in Info Pensions. that was posted on the OSFI website last Friday, and I'll spend the next few minutes discussing and sharing the results with you. The bar chart on the screen, this page shows the Estimated Solvency Ratio for 2018, and also previous years. So essentially, we have ten years of data. And let's look more closely at the bars on the right-hand side here, the two bars, so 2017 and 2018. The ESR for all the plans as at December 31st, 2018, or January 1st, 2019, is 0.98. This is an average, and compares to 102 in 2017. Just to clarify, the ESR is a weighted average of the each plan's estimated solvency ratio, and this is based on liabilities. So it's a weighted average based on liabilities. So that means that large plans essentially drive the results that you see on the screen.

Higher solvency rates increase the solvency ratio at the end of the year. But this was offset by the updated information provided to OSFI, by plans, and also offset by low investment returns that were seen in 2018. So for your information, the average return for all plans that are included in the study is 0.3 percent, so 0.3 percent for 2018. And that's net of investment expenses.

Now let's look at the median, which is the 0.94 here, so at the end of 2018, down from 0.96 at the end of 2017. The median is the midpoint of all plans, if all plans were ranked from the lowest ESR to the highest ESR. So essentially, half of the plans are below this level and the other half is above this level. So for the median liabilities and assets, a plan do not necessarily impact the overall results because each plan is really counted as one.

As these results show, the overall solvency position of federal plans deteriorated in 2018 compared to 2017. This was due to a sharp decrease in investment returns, as I just mentioned, in the last quarter of 2018 especially, but that was reversed early in the year, in the first quarter, as we saw revived equity markets during that period of time. Unfortunately, since the valuation dates of actuarial reports are either at the end of the calendar year or beginning of the calendar year, that will not have an impact on the funding requirements of most plans in 2019.

Now let's look at the third information on the graph, which is the three-year estimated average solvency ratio, which is presented – which is shown by the line on the graph. The numbers for the line are not presented because it was a bit too crowded. But I'll focus more on 2017 and 2018 with respect to this information. So solvency funding requirements, as you may know, are based on the three-year average solvency ratio. And this measure was introduced in July 2010, which is why you don't see any numbers before 2012, because it shows a three-year average. The measure brings some stability in solvency special payments, from one year to the next. And, as you will see shortly, that is the case this year. There was some funny movement in the numbers, but the three-year estimated solvency ratio is essentially stable.

The overall ratio for 2018 is 0.98, and that replaces the 2015 lower value of 0.95 in the calculation. There are some other adjustments included in the three-year average solvency ratio, but I won't get into these details because it's really not relevant for the purpose of the presentation. So we see that the three-year average solvency position has increased slightly from last year. Actually, the – underlying numbers are 0.97 for 2017 and 0.98 for 2018. So despite a small increase, the solvency ratio, as we saw earlier, in 2018 is lower than in 2017. So that's essentially the smoothing effect which I was referring to earlier. As a result, and similar to last year, most plans are not expected to experience an increase in their funding requirements. However – and as the case is with respect to specific pension plans, there might be specific conditions, circumstances that may generate an increase in funding requirements.

The next graph – this chart shows the distribution of plans according to their estimated solvency ratios for the same years as shown in the previous chart, so essentially ten years of data again. Looking at the right-hand side of the chart, 74 percent of plans had a solvency ratio less than one, meaning they weren't funded on a solvency basis, at the end of 2018. The number represents the sum of the bottom three boxes, essentially 16 plus 16 plus 42. So that's 74 percent. Last year the number was 63 percent, so that's an increase of 11 percent.

If we look at the bottom part of the bar, there's a small increase in the number of plans with an ESR less than 0.8, from 13 percent to 16 percent. So as a result, the number of plans with an ESR above 0.9 – just this part here – or the top two boxes, has decreased by eight percent. Based on these observation, it is fair to say that the overall financial position of plans has deteriorated from last year. However, as I just mentioned earlier, the funding requirements for most plan is not expected to be affected negatively.

So this concludes my presentation, and I'll now pass it along to Kim Page, who will discuss the results of the pension plan survey. Thank you.

Kim Page: So for those of you who have attended our industry forum in the past, you'll know that we like to share the recent results of our last survey, what the key findings were, and what action plan we've put in place to address any concerns that were raised. For the new people in the crowd, I'll provide a little background on our pension plan survey. The most recent one was conducted in November and December of 2017. We do them usually every three years, so the next one is scheduled for the fall of 2020. The main reasons for conducting these surveys is that we want to have an overall perspective of how OSFI is doing as a regulator. We want to track our performance on a series of key measures. And also, this is a great way of getting suggestions for improvements.

So with these objectives in mind, the questions are – are pretty similar from one survey to the next so that we can compare our results, but we do try to put in some new lines of questioning based on maybe potential areas that we see could be problematic or the interaction of the teams with the industry. And we really try to formulate the questions so that the information that we get out of this can tell us what the issues are, and for us to be able to make changes or develop action plans to address the concerns. The surveys are conducted with pension plan administrators and professionals, so these include actuaries, lawyers, custodians, pretty much anybody who deals with OSFI on behalf of pension plans. And in 2017 the survey was sent to more than a thousand participants.

An overview of the 2017 survey results is available on the Consultations and Surveys area of OSFI's website, and the link in the presentation should take you there. And also there, you'll be able to access the final report that's published on Library and Archives Canada website.

OK, so how did we do? As I mentioned, following each survey, the objective really is to develop an action plan to address the concerns that were raised. And hopefully, at the next survey we see that there were improved results in those areas. The 2014 survey revealed two main areas that required an action plan. We observed low levels of satisfaction with the timeliness of OSFI's responses to general or plan-specific inquiries, and also there was quite a lot of frustration expressed relating to the regulatory reporting system, or RRS. This didn't surprise us in 2014 because the survey was conducted just a few months after RRS was first implemented.

So the action plan developed to address the first point led to the implementation of more formal service delivery standards. And we implemented a benchmark to respond to written inquiries within 15 business days. We also established a process where there would be more communication with the inquirers for the complex questions that may exceed the benchmark. So we were very eager to see what the results would be in the 2017 survey, and we were very happy to see that we had made significant progress in this area and people were a lot more satisfied with the timeliness of our responses to their inquiries. We do realize that the more complex issues are not really often responded within 15 days, but we're really trying to make an effort to address them as efficiently as we can.

Now, with respect to RRS, I think here it's important to remember that RRS is a tri-agency system. It's managed by OSFI, the Bank of Canada, and Canada Deposit Insurance Corporation. RRS is not just used by pension plans to file their returns; it's used by the banks and the insurance companies, and they file regulatory information on a monthly basis. So given the confidential nature of all the data that's included in the system, there are very strict security requirements, and they're set by all three agencies that are involved.

So with this in mind, you will understand that the action plan that was developed following the 2014 survey was really focused on trying to make RRS more user friendly, rather than making it disappear, which is what some people would have liked. (Laughs). Since the 2014 survey, there was a lot of work that was done in trying to help users with the RRS experience. We've developed additional pension-related training materials. This included a webinar explaining how to file returns using RRS. There was also guidance on how to update corporate information. There were improved links and better placing of the RRS information on our website. There were updated error messages and validation rules to help people sort of go through the files more easily. And there's always continued improvements because the system – there's regular maintenance upgrades or something once or twice a year so, they try to fix the little things as we go. So after all of this, did we see any improvements in the 2017 survey? We did, slightly But, as you will see in my next slide, there's still a little bit of work to do.

So what else was identified in the 2017 survey: results, for the most part, are comparable to 2014, and most participants provided responses of good or very good in response to most of the questions. However, as I mentioned, regardless of the slight improvements with respect to RRS, many of those who provided final comments at the end indicated that there were still frustrations in using the system. And those that had said that they were not satisfied with OSFI as a regulator, when we drilled down to their responses of why, it was often linked to RRS.

Also in 2017, we observed lower levels of satisfaction with OSFI's approvals process. So while caution was exercised here in interpreting the results because there was a very small number of respondents that had actually went through an approvals process in the past few years, we still took the results seriously and we developed an action plan to address the frustrations that were identified. A further breakdown of those results indicated that it was mostly the professionals that were frustrated with the process, and this is normal because they usually deal with us on behalf of the plan administrators in these types of transactions; and also with respect to asset transfers, and we weren't surprised by that because they're often the more complex and lengthy files that we treat. You'll get a better idea of the numbers we're talking about with regards to approvals cases on my last slide, where I have a breakdown of the approvals cases we treated over the past four years.

So what are we doing about this? Here's the action plan that was developed last year. So we continue to look for options to reduce the challenges faced by RRS users and enhance the system's accessibility and usability. Both OSFI and the Bank of Canada have committed to providing additional support to pension plan users specifically. And there's also increased resources available during the peak filing periods, which are usually mid-June to beginning of July. We're continuously working with the software developer to try and optimize return development and implementation, and there is another product upgrade that is being tested at the moment and will be implemented in November 2019, so really only forthe filings in June 2020 for most people. So the upgrade is expected to improve the functionalities of RRS and make it a bit more user friendly and easier to navigate. There's even talk of reviewing the password reset and the expiration date, but work on this is only scheduled to begin sometime in 2020.

So with respect to approvals, we've already reviewed and made changes to our internal processes and the documents we use for recommendations. We've also made revisions to guidance material to set out more clearly what our expectations are. Delays are often caused, we've noticed, by incomplete applications; also, if we discover plan compliance issues while we're reviewing a file. So as Sylvia will mention in a few minutes, we're thinking that maybe if we've updated our guidance so that it's clearer what we expect when you submit these applications, that might help in reducing the delays for treating them. Also with respect to approvals, we've started reviewing our internal benchmarks to be able to support a more efficient process. That's work that's ongoing, and we're going to work hard on this this year.

Finally, given the progress that we made on responding to inquiries, we're committed to reviewing our service standards every year. We're going to monitor how we're doing on an annual basis against the targets that we've set for ourselves. But I just want to mention that if you use the information e-mail address to send in your written inquiries, they get tracked automatically, and that might help ensure a quicker response.

OK. Now, just quickly, here are a few statistics on the approvals cases we have closed over the past four years. As I was mentioning, it gives you an idea of the number of people that are actually involved with these types of transactions, and also the significance of the survey results. Remember that we supervise more than 1200 pension plans, and we usually deal with about 60 approval transactions a year. It might not come as a surprise to you that there seems to be a trend with regards to the registrations, not that many DB plans getting started. And the two that were registered last year were one-member designated plans. We were also a little bit worried at some point with the trend in the terminations because it looked like there's be no DB plans left pretty soon. But this seems to have slowed down a little bit in the past few years, and we're hoping that that trend continues.

While we're on this slide, and I think Tamara mentioned that we have Claire here with us, who's the Manager of Approvals. So if there are any approvals-related questions afterwards, she'll be happy to answer. And now I think that's it for me, and I'll hand it over to Sylvia to discuss recent policy updates and guidance. Thank you.

Sylvia Bartlett: OK, thanks, and good morning, everybody. Thanks for coming. As Kim mentioned, the survey indicated there was some level of unhappiness with respect to the processing of our approvals. We think that at least part of this unhappiness is probably related to requests for additional or different kinds of information throughout the approval process. Based on that assumption, we reviewed all our approvals-related guidance to see if we could improve anything there. And sure enough, we found that we could be more transparent in terms of OSFI's expectations. So over the last year or so, we've revised the approvals-related guidance that's listed here.

The revisions don't really involve any significant policy changes, but they are really our attempt to clarify our expectations in what we want to see before we would make a recommendation for an approval of a transaction. And although all of our revisions go through a pretty extensive review process before they see the light of day on our website, it is possible that what we think is crystal clear or maybe a minor point is not that clear and not that minor to some of the other parties. So while we've always issued new guides as drafts, we've had a history of doing that, we've recently decided to issue even the revisionsto the guidelines as drafts so that we can get input from stakeholders before we finalize that guideline.

While it's not mentioned here, we'll also be revising the actuarial guide, and we're in the process of doing that right now, and that's going to also be released as a draft for comment. And I think Marc probably expects that by the end of August or so, right? OK. So look forward to that.

One of the changes common to all the revisions that we've made so far relates to multijurisdictional plans, and specifically our requirements for information on individuals that are impacted by the transaction that are also subject to provincial pension legislation. And in some cases, the provincial pension legislation has to be applied to that transaction. So we really need to know about the provincial members or beneficiaries in order to do that, and unfortunately that's not always easy to determine based on the information that we already have. Information filed in the annual information return really only splits out the jurisdiction for active members, and unfortunately that information isn't always correct on the annual information returns.

Additionally, the transaction may impact retirees or deferred members whose benefits are also subject to provincial jurisdiction. And that breakdown we don't get at all on an annual basis, although we're working on changing that. And I think Krista will talk a little bit about that later. Sometimes we find out about these provincial members partway through an approval process, so, as you can imagine, that's not particularly efficient for anyone involved. In the benefit reduction guide that we just issued last week – isn't it funny how all this stuff is coming out the week before our seminar – get that out. Anyway, we added details to help determine whether or not an accrued benefit – or whether an amendment does actually reduce an accrued benefit. So we recognize that that's not always easy or straightforward, so we thought that was an issue where we could clarify or expand upon it a bit.

We also recognize that, in terms of providing comments on these guides, that it's often not apparent what's missing or what's unclear until you actually go through that proThe revisions don't really involve any significant policy changescess yourself. So you know, although we have to put a cut-off date for our comments, just know that we're open to receiving comments on our guides, any of our guides, at any time. Because the consultation process has always worked really well for us in the past. We always end up with much better guidance as a result, so we really look forward to any comments that people want to provide, and we really appreciate them.

So all of the guides, and all our other guidance, are available on our website. And until last year, the guidance was organized by type of plan and by topic. And that way, when you were looking for a guide, then you would also see any Info Pensions articles or any other related guidance on the same topic. But now, based on external and actually internal feedback as well, we've added another, more direct way to access our guides and the related forms. So the guidance by topic is still there above the red arrow there, but we've added a menu for guides and forms that's related to applications and approvals, which would include the guides that were on the previous page: annual regulatory filings, such as actuarial reports, the AIR, and certified financial statements; pooled registered pension plans, or PRPPs; and other OSFI guidance, such as our derivatives and disclosure guideline. And we also have a link to the Canadian Association of Pension Supervisory Authorities, or CAPSA's website, where you can see all of their guidelines. They're all individually set out there.

So CAPSA, which Tamara mentioned, is an organization of pension regulators, including OSFI, and they have a mandate to facilitate an efficient and effective regulatory system. So in addition to its own meetings that they have, they also have an annual meeting with stakeholders. And the input received during those stakeholder sessions plays a pretty integral role in the development of their three-year strategic plan. So CAPSA's recently posted guidance that's listed here, really reflects the expectations of member regulators, including OSFI, and is largely the product of its 2016 to 2019 strategic plan. And, as Tamara mentioned, CAPSA recently adopted its new three-year plan in April, and it's now available on the CAPSA website. So there you can see all of the projects that CAPSA will be working on for the next three years or so.

Now. OSFI is a member of many of the working groups that have been set up to work on those projects, and some may involve industry working groups. Some of you here may have already been members of these working groups, so you may actually be asked to participate. Because there's quite a few projects on the strategic plan, so you may be asked to participate in one or more of those industry working groups. And your input is certainly very much appreciated. They will often ask us for plan sponsors that are under federal jurisdiction or something like that, so that's why you might get the call.
OK, I'd like now to give you a little bit of background on the recent changes to the assessment regs that became effective April 1st of this year. So the authority to assess or to charge pension plans is actually under the OSFI Act, rather than the PBSA. So we, rather than the Department of Finance, take the lead in developing regulations under that Act, although the Department of Finance certainly does ferry them through the government approval process on our behalf. As many of you are aware, prior to April 1st, a plan had to submit a self-assessment form, with the annual amount due within six months after the plan year-end date. And unfortunately, this self-assessment system didn't really work as efficiently as we would have hoped when it was put in place. Many of the forms – well, many; some – a lot we received used the wrong beneficiary level or they didn't identify which plan it was for. So that involved us having to do a fair number of fixes and searches, and take a lot of time and effort. So we needed to do something about that from our perspective.

And to let everybody know about the proposed changes to the assessment regs, we sent a detailed explanation to all our plan administrators and our website subscribers last year. We also described the changes in an Info Pensions article from the fall of last year. And nobody voiced any objections, so we forged ahead with our regulation-making process. And when the changes were approved, we sent out another notice to all the administrators and website subscribers, and we also put an article in the Info Pensions that was just released.

So the change that affects all plan administrators is the elimination of the requirement to pay the assessment within six months after the plan year-end. So that enabled OSFI to send an invoice based on the AIR that was filed by the plan administrator. The changes also eliminate assessments for a number of terminated plans. We didn't want to charge plans that terminated underfunded, where the deficit wasn't going to be paid by the employer. In that situation, paying the assessment may have taken away some of the assets that were available to pay the beneficiaries. And quite honestly, the chances of OSFI actually collecting it were pretty much zero anyway. However, under the old regulations, we were obliged to make that assessment and then go through quite a process through the government finance system to write off that receivable. So now we just won't charge it in the first place.

We also now stop annual assessments after five years after a plan is terminated. We know that wind-ups extending beyond that period are usually due to unlocatables, and we didn't want to make that process any more painful than it already is. The change to the definition of beneficiary is actually a bit more obscure, and I expect nobody besides us even knew what it had said beforehand, but it was a little bit vague. But what we wanted to do was to make sure that the beneficiary base for a terminated plan only included those that had benefits still left in the plan at the time of the assessment.

So the main takeaway here is don't file a self-assessment. Wait for the invoice. And that should come within a couple of months after the AIR is filed with OSFI. And with that, I'm going to hand it over to Krista and Paul, who are going to talk to you about OSFI's supervision of pension plans.

Krista McAlister: Good morning. OSFI continually monitors plans and their employers to understand how the pension plans work and to understand any issues that may impact a plan's viability. This morning Paul and I, we will be walking you through OSFI's risk assessment framework, which is available on our website. And the three components you can see on this slide. The first one is our ongoing monitoring and initial review, then it's our in-depth review, followed by any interventions, if required.

In assessing the threat of loss to members' promised benefits, our risk assessment of pension plans focuses on the early identification of problems that plans may have meeting minimum funding, complying with the PBSA, or adopting policies and procedures that manage and control their risks. Our early identification is based on a series of indicators called tiered risk indicators, or TRIs. These indicators are used to detect risk based on information submitted in the annual regulatory filings, such as the annual information return, the certified financial statements, or the actuarial information summary. Some of our indicators use two years' worth of information in order to produce the results. There's also indicators that are generated when we receive notice of non-remittance of contributions from either custodians or plan administrators. And they can also be triggered by OSFI's assessment of plan sponsors or industries through other media reports or industry reports.

Although not all tiered risk indicators will impact plans alike, they are applied to all plans, regardless of the type of benefit provided. The level of risk identified through these indicators will determine whether a more in-depth review is required. So we focus our supervisory resources on plans that have identified higher risks through these – these indicators. It's important to know that, while these indicators are pieces of information that help us to evaluate a plan's risks, and it helps us to determine which plans we're going to look at first. If, after we look at the indicators, we determine that the indicators are accurate, then a more in-depth review will be performed. And that's either done by completing a risk assessment summary or by doing a desk review or an on-site examination. And Paul will be talking about our desk reviews and on-site examinations shortly.

The tiered risk indicators, or TRIs, are broken down into three categories. Tier 1 indicators are the indicators that detect the higher level of risk. Plans that generate a Tier 1 indicator receive a more in-depth review, which means that a risk assessment summary is performed on these plans. Relationship managers will focus their attention on analyzing any plans with a Tier 1 indicator first. So we believe that the issues that set off these indicators signal a higher risk since they may impact the future or current risk in the plans. And an example of a Tier 1 indicator is when OSFI receives notice of non-remittance of contributions. Because if contributions are not being remitted to the fund, then members' benefits may be directly impacted.

Tier 2 indicators identify potential risks with a plan that may lead to one or more serious issues. And these risks are less significant than Tier 1 indicators, but if a number of 15 Tier 2 indicators arise simultaneously, a more in-depth review may also be required. An example of a Tier 2 indicator is when there are significant changes in the membership demographics in a plan. And lastly, Tier 3 indicators: they capture situations that may require greater diligence or controls on the part of the plan administrator, but may not have a significant impact on the plan's risks if they're managed appropriately. So an example of a Tier 3 indicator is when a plan has a history of late filings.

So now let's look at tiered risk indicators a little bit more closely. This slide will show you a few examples of the topics or issues that may trigger a Tier 1 indicator. As you can see, these examples generally relate to the funding of the plan. From our perspective, the biggest risk to members is that the money that's required to be remitted to either the plan's fund or to members' accounts doesn't get remitted, because that ultimately impacts the members' benefits. So for instance, when we look at timely remittance, the indicator is looking at the contributions receivable that are reported on the certified financial statements to make sure that there isn't more than one month of contributions receivables being reported. The indicators will also produce results if the plan remits significantly less contributions than is required based on the actuarial information summary, or if a contribution holiday is being taken that is greater than the surplus available in the plan.

As mentioned before, when an indicator goes off, it doesn't necessarily mean that there's something wrong. It just means that the OSFI relationship manager needs to look a little bit more closely at the plan to see if the something is really a something or if it can be explained. So for instance, maybe the required contributions are less than expected because the plan is using a letter or credit, or maybe they're using advance contributions to meet their funding requirements for that year. We would also consider whether there have been significant drops in the plan's membership, because that could also explain why the required contributions are lower. So again, if the result is explainable, then, depending on what other indicators went off, a more in-depth review may not be required.

So what do we do if the indicators produce a result? Well, we would first look at at the filings to see if we can explain it. And if we can't, then we would reach out to either the plan administrator or the plan's service providers to get an explanation. So for instance, if we receive a Tier 1 indicator for non-remittance of contributions from a plan's custodian, we'll first go back to the custodian to make sure that the contributions are still outstanding. Because it does happen on occasion that contributions are remitted a day or two late, and so that's explainable. Sometimes with outstanding contributions, though, it can lead to a more in-depth review, or it could also lead to an intervention. And Paul will discuss our interventions in a few moments.

The one issue or topic that you'll see across all three levels of the indicators is the plan's solvency ratio. So we recognize that, under the PBSA, plans are allowed to have a solvency ratio of less than one. So again, what the tiered risk indicators do is allow us to focus our attention on those plans who have lower solvency ratios. So this means that we would look at the plan more closely and at the sponsor's ability to meet any required special payments. And we would also look and make sure that the special payments are being remitted in a timely manner. We may also look at media reports to see if there's any indications that the sponsor's having financial difficulties, and we may also have discussions with plan sponsors to see if they expect to have any difficulties meeting their funding requirements.

So while Tier 1 indicators generally have to do with funding, Tier 2 indicators tend to deal with a variety of risks. If a number of these indicators produce a result, then an in-depth review may be required. One of the risks that the Tier 2 indicators look at are significant drops in the plan's membership, because this could signal that the plan sponsor's having financial difficulties. Other indicators produce results if the average age of active members is greater than 50 percent, or if the retirees' share of liabilities is greater than 50 percent, or when there's a significant increase in employer contributions. These indicators could signal to us that maybe to look at the plan's maturity and/or upcoming cash flow requirements, and to look at the plan sponsor's ability to meet their obligations.

So again, the results don't necessarily mean that something's wrong; rather, it gives us a tool to focus our attention to the plans we supervise based on the risk. Indicators will also produce results if the annual filings are outstanding. And our concern with outstanding documents is that the plan's not in compliance with the legislation, and that can also signal that there might be an issue with the oversight of the plan. It also makes it harder for us to do accurate assessments of the plan's risk if we don't have the most up-to-date filing information available.

And lastly on this slide, you can see that we have indicators that alert us when a plan has gains from changes to the actuarial asset valuation method or the actuarial cost method. So this could indicate that the methods have been revised to help improve the plan's funding position. So we would look at the materiality of the gain and the rationale for the change. As mentioned in our instruction guide for the preparation of actuarial reports for defined benefit pension plans, methods are not expected to change from one report to another, and any modification needs to clearly be disclosed in the actuarial report and include a rationale for the modification and the financial impact.

Tier 3 indicators capture situations that may not have a significant impact on a plan's risks if they are properly managed. And ultimately, the risk can be managed with good governance practices. For instance, a plan with a consent benefit provision is considered to be riskier because administrative practices for this type of provision are not always what's promised in the plan. The risk is that a consent benefit may always be granted and not funded in the actuarial report, or that the disclosure to members for this provision may not be accurate. So, as mentioned in our guidance note on benefits subject to consent, administrators have fiduciary duties under the PBSA, and when an administrator has discretion to grant or deny a benefit, it is expected to exercise that discretion in a manner that's consistent with those responsibilities. OSFI would expect in this situation that a plan would have documented procedures that are followed in administering consent benefits.

You saw under the Tier 1 and Tier 2 indicators that we have indicators for outstanding contributions and late filings. We also have Tier 3 indicators when there's a history of outstanding contributions and late filings. And our concerns with these indicators is that there may be poor internal controls, and we worry that those poor internal controls could be affecting other areas in the pension plan. In either of these cases, we may consider taking other interventions, such as on-site examination or to conduct a desk review. We also have an indicator when the plurality of membership changes from federal. And in this case, we would review the plan's membership to see if that plurality has changed over the last three years. Typically, this would lead to a change in the supervision of a plan being delegated or transferred to one of our provincial counterparts. However, before we did any transfers or delegations, we would contact the plan administrator to understand what's happening. There could quite possibly have been an error – an administrative error completing the AIR, or there may be some other situation that we should be aware of.

So before I hand things over to Paul, I thought I'd take this opportunity to let you know of some work that OSFI has been doing around our data collection. Over the last year we've been looking at the data that we collect to make sure that it's useful. And we've also been looking across our returns to make sure that we identify any duplication to try and eliminate it as much as possible. We've also been looking at our data to figure out what data we're not collecting that would help us to better do our jobs. And for example, Sylvia mentioned that our forms will now be asking for a breakdown of plan beneficiaries subject to provincial legislation. So as a result of this project, there will be changes to the required returns for any plan that has filings due with an effective date on or after December 31st, 2019.

We will also be introducing one short return that will help plan administrators assess whether or not they need to file audited financial statements. Basically, this new return will ask you four questions. It's the same four questions that are currently found in our guide for completing the certified financial statements – and auditor's report. That's available on our website. And so if you answer these four questions and all the answers are yes, then you won't need to complete an auditor's report. If the answers are not all yes, then you'll be prompted to upload an auditor's report in the regulatory reporting system. Tamara also mentioned the work that we're doing on the investment project and the DC study. And so depending on the results of those projects, there could be further changes to our filings in future years. So I'll now pass things over to Paul, and he'll discuss the other two components of our risk assessment framework.

Paul Rozon: Thank you, Krista, and good morning, everyone. So in the next few slides I'll talk about how the examinations we conduct annually fit within our risk assessment framework, the process we usually follow to select plans to examine, and what are some of the most frequent findings we see when we conduct examinations. I'll also talk about our third component of our risk assessment framework, which consists of interventions OSFI may take as part of our intervention process.

As Krista mentioned earlier, OSFI's supervisory process is broken down into three components: ongoing monitoring, which includes tiered risk indicators; in-depth review, which includes risk assessment summaries and examinations; and, intervention. This process is applied to all the plans we supervise. So when the initial review reveals risks that warrant an in-depth review, the inherent risks facing the plan, the quality of risk management, financial indicators, and the position of the employer are assessed and documented in a risk assessment summary. The risk assessment summary reflects the assessor's judgment of the significance of the risks. Action plans are developed to address specific risks and concerns, and some plans are further assessed through an examinations, which is what I'd like to focus on.

On average, OSFI examines ten to 15 plans annually, and those examinations will consist of either on-site examinations or desk reviews. Examinations are used to assess the quality of controls and oversight of pension plans, to enhance the assessment of the financial situation of an employer and the quality of the administration of a plan. Desk reviews are usually done when OSFI has decided to conduct a targeted review of a significant activity of the plan, such as the administration or asset management of the plan, or when OSFI wants to conduct a general review of the governance structure of a plan. On- site examinations are usually conducted for plans with funding concerns or high-risk plans identified during the ongoing monitoring and initial review phase of our risk assessment process.

Whether we conduct an on-site examination or a desk review, relationship managers will write to the plan administrators to inform them of our intention to conduct an examination, and will request documentation in advance for our review. For desk reviews, after the review of the documentation received, relationship managers will recommend whether the review should be finalized as a desk review or whether it should continue as an on-site review. If issues identified are minor or immaterial, the examination will be finalized as a desk review. If more serious issues have been identified by the relationship managers, or if the RMs still have many questions following the review of the requested documentation, an on-site examination may be conducted. For both types of examinations, once our review is complete, relationship managers will have a wrap-up meeting with the plan administrator to go over their findings and recommendations, and will then send a management letter to the plan administrator outlining those findings and recommendations.

A common question we receive from plan administrators whose plans have been selected for an examination is why us. Plans can be selected for a variety of reasons. For example, it could be plans with minimum funding issues, risk factors that were identified while analyzing the tiered risk indicators for the plans; it could be due to a significant number of member complaints; or, it could be new plans that we want to look at their governance structure right away. However, plans with higher risks are usually given priority to be examined. Every year relationship managers are responsible for selecting and justifying the reasons for plans to be examined, and the management team reviews the relationship managers' selections and determine which plans will be examined.

This slide shows findings that our examiners tend to see while conducting examinations. With respect to governance document and self-assessment, some plans have little documentation regarding the roles, responsibilities, and accountabilities of those involved in the administration of the plan. Also, some plan administrators don't perform self-assessments to determine the effectiveness of the administration of their plans. We understand the governance documents and self-assessments may vary depending on the size and type of plan. OSFI's not looking for a specific type of governance document; we just want to make sure that administrators have a good understanding of the roles and responsibilities of those involved. And we encourage plan administrators to follow the CAPSA governance guideline as it provides assistance in fulfilling their governance responsibilities.

With respect to member statements, some member statements don't contain all the information that's prescribed in our regulations. Our regulations contain prescribed forms for termination, retirement, and death statements. Our member guide also includes checklists that outline the required information that a defined benefit plan and a defined contribution plan have to provide to its members and former members in their annual statements. Our disclosure guide also includes these checklists for plan administrators. And, as Sylvia mentioned earlier, all of our pension-related guidance is available on our website.

For performance measures, some plan administrators are quite reliant on their service providers but don't have established performance measures to monitor their performance. So we encourage plan administrators to develop performance measures to periodically review the performance of their service providers. And for your information, the CAPSA governance guideline includes performance monitoring as one of its governance principles.

Lastly, with respect to processes and procedures, some plans don't have a completed documented approach to administering pension plans. Documented policies and procedures can serve both as a reference tool for operational staff and form the basis upon which management oversight and controls are implemented. So we believe that the level of documentation should be sufficient to facilitate the transition of key operational tasks to new staff members.

The third component of our risk assessment framework is interventions, which are essentially actions OSFI can take under our Act to address non-compliance issues. OSFI has developed a guide to interventions for federally-regulated private pension plans, which outlines the types of involvement that a plan administrator and an employer can expect from OSFI. The intervention guide also summarizes the circumstances under which certain intervention measures may be taken. And this intervention guide is available on our website. But even though the intervention guide is available on our website, we use stage ratings for internal purposes. Stage ratings assigned to a pension plan are kept confidential and are not shared with plan administrators.

So all our pension plans are stage zero to four. Our levels of interventions or regulatory actions increase with each stage rating. A plan will be stage zero is OSFI determines that a plan's financial position is sound and that a plan's controls and oversight don't present significant problems or deficiencies. Those plans would be subject to normal, ongoing monitoring. So examples include reviewing required filings, such as a valuation report for a defined benefit plan, or analyzing tiered risk indicators. OSFI will assign a stage one rating if it determines that a plan's financial position, procedures, controls, and oversight could potentially evolve into more serious issues, such as non-compliance with our Act, plan documents, or best practices. Under this stage rating, we could recommend the filing of a revised actuarial report, recommend the plan administrator to provide OSFI with a copy of the statement of investment policies and procedures.

OSFI will assign a stage two rating if it has identified problems that pose a threat to the security of members' benefits which could deteriorate into a serious situation if not addressed promptly. Some examples include: restricting portability for the transfer of benefits from the plan; or annuity purchases that would impair the solvency of the plan; or issuing a notice of intent to issue a direction of compliance. For plans with a stage three rating, OSFI's identified material and immediate threats to members' benefits. So for those plans, OSFI can issue a direction of compliance or remove the plan administrator and appoint a replacement administrator.

For plans at stage four, there's no possibility of the employer fully funding the plan, and the plan is in the process of wind-up. So in order to facilitate the wind-up of the plan, OSFI may pursue the interventions from the previous stages.

Tara Berish: As promised, I will be talking about jurisdiction over Indigenous pension plans. I'll be focusing a bit more on the general area of law than the specific cases that OSFI has been focused on this year, just because it's kind of a complicated area of law and it might behoove us to get some principles down first. Just a little note about terminology. There's a lot of different terminology to deal with various Indigenous groups, and I'll be using different terms throughout the presentation, often based on the particular case and what terminology is used there, the Constitution, which uses the word "Indian". So my terminology might change throughout, but it'll be based mostly on the source material.

So what are we looking at here? How do we determine whether OSFI or a provincial regulator should be supervising a particular Indigenous pension plan? So to get us started, we'll look a bit at the constitutional division of powers. As most people might know, the federal government has the power to legislate in some areas, and the provincial government has the power to legislate in other areas. So some examples are the federal government can legislate in respect of navigation and shipping, banking and incorporation of banks and the issue of paper money, and Indians and land reserved for Indians. And again, I'm using the exact words from the Constitution here. The provincial government, in contrast, can legislate in respect of property and civil rights in the province, and generally all matters of a merely local or private nature in the province. So that's obviously very broad wording. And essentially, a lot of businesses come under provincial jurisdiction, if they're not specifically laid out in the federal provisions.

Now let's get into labour jurisdiction more specifically. So pension jurisdiction is derived from labour jurisdiction because pensions are a term or condition of employment. And presumptively, labour relations fall under provincial jurisdiction, but the federal government may make laws regulating labour and employment of any work relating to its jurisdiction more generally. So for instance, it can make laws relating to labour for banks or, as you know, we supervise the pension plans of banks federally. And this, as you probably know, is reflected in the definition of included employment in Section 4 of the Pension Benefits Standards Act 1985, which is the legislation that OSFI oversees.

Now, moving into Indigenous pension plans, the relevant starting point here is Section 91(24) of the Constitution, which, again, to repeat, says that the federal government has jurisdiction over Indians and lands reserved for the Indians. So does that mean that anything related to Indigenous people or reserve lands falls under the jurisdiction of the federal government? No, it's not that simple. It's not enough that a law simply applies to Indians for it to fall under federal jurisdiction. So for instance, laws – provincial laws of general application can apply to Indigenous people or people who are Indians under the Indian Act, and a court is equally likely to uphold a law that's outside of federal competence if it's rationally related to intelligible Indian policies. And courts have been looking at what are the kinds of things that are really rationally related to intelligible Indian policies, and these tend to be things that relate to status, status rights, registrability, membership in a plan, the right to possession of lands on reserve, those kinds of things.

So next, we're going to start looking at the state of the law prior to Nil//Tu, O, which is a 2010 Supreme Court case that really started bringing a lot of clarity to this area of the law. So where were we before Nil//Tu, O? There were essentially two lines of cases at the time. There was a line of cases that was evident in a case called Four B. It's a Supreme Court of Canada case from 1980. And that case relied on the functional test, which essentially looks at what is the "entity" that we're looking at and what does it do. And I put "entity" in quotation marks because that question in itself can be really hard to – to figure out. Like, what is the entity that we should be even analyzing to get to the bottom of whether something falls under federal or provincial jurisdiction? So that's the first line of cases.

The other line of cases gets more closely to just whether the entity and its activities are in some way "Indian" for the purposes of the Constitution. So for instance, there's a 1980 federal Court of Appeal case that said that a particular agency was concerned not only with the welfare of children, but more specifically with the welfare of Indian children, and for that reason the social services formed an integrated part of the primary federal jurisdiction over Indians. But as we've, you know, alluded to before, it's not necessarily enough to say that a law relates to Indigenous people or to Indian people in order to say that it falls under federal competence, and that's where we're going to be getting to with Nil//Tu, O.

So Nil//Tu, O is the 2010 Supreme Court case that starts moving us towards a clearer way of making these determinations. So a little background. Nil//Tu, O provided child and family services to collected First Nations. They were regulated exclusively by the province. The employees exercised exclusively provincial delegated authority. And the child welfare services that were offered were provided primarily by Indigenous employees to Indigenous clients, and were designed to protect, preserve, and benefit the distinct cultural, physical, and emotional needs of the children and families of the collected First Nations. So that's what we were examining here.

What are the main takeaways from this case? The first thing we learn is that neither the presence of federal funding nor the fact that Nil//Tu, O services are provided in a culturally sensitive manner, displaces the overridingly provincial nature of this entity. So the fact that Nil//Tu, O serves a particular type of community doesn't change what it does, which is to provide child welfare services, and that – and those are provincially regulated.

The next thing that we get from Nil//Tu, O is a two-step test. No, we have more things on each slide than I have. OK. Alright. So here's the two-step test. The first step is that functional test that I alluded to before. And this test – this part of the test says you need to examine the nature, operations, and habitual activities of the entity that we're analyzing to see if it's a federal undertaking. Then we only go to step two if that part of the test is inconclusive. So if we know that it's a federal undertaking, then federal labour laws apply. That's easy. Federal pension laws apply. That's easy. If we can't answer that question at the first step, then we go to the second step. And that asks would the provincial regulation of that entity's labour relations impair the core of a federal head of power. And in the case of Indigenous pension plans, we are looking at Section 1 – Section 91(24), which deals with Indians and lands reserved for Indians.

So what did the court find irrelevant to the analysis that, you know, we should be carrying forward? The presence of federal funding, as mentioned before. Again, the fact that services are provided in a culturally sensitive manner, and the fact that Indigenous service providers are present. So again, the court concluded here that the essential nature of Nil//Tu, O's operation is to provide child and family services, a matter within the provincial sphere.

So after Nil//Tu, O, we all started thinking now what? We've been supervising all these plans. What do we do? So OSFI undertook a review of the jurisdiction over Indigenous pension plans that it was supervising, and ended up transferring approximately 170 of those plans on the basis of their analysis of Nil//Tu, O. But you should know that OSFI does continue to supervise more than 500 Indigenous pension plans because the analysis doesn't mean that every single pension plan is actually under provincial jurisdiction.

We also have continuing issues applying Nil//Tu, O, and you'll see more about that when we get to the two cases that OSFI has actually been involved with in the last year or so. Some of the issues that we're grappling with in these particular cases, and I think that probably a lot of people are grappling with: what is an entity? As mentioned before, do we look at things differently if there's a separate incorporated company, if a band council is the employer? Just how do all the different parts of the entity come together, and which level of it are we looking at when we make our analysis?

Second, areas of shared jurisdiction or public services also kind of confuse the analysis a bit because we're used to looking at Section 4, for instance, of the PBSA in respect of businesses. And in a lot of these cases, we're looking at public services like health care or policing, often regulated in certain ways both by the provinces and the federal government.

So to illustrate these difficulties a little bit more, we're going to start looking at Northern Inter-Tribal Health Authority and Picard, two judicial review cases that OSFI was involved with this year. So let's start with Northern Inter-Tribal Health Authority, a little background. So this is about two non-profits incorporated to deliver health services. Both were on reserve. Both non-profits were subject to funding agreements with the federal government, not with the provincial government. And most but not all of the services were provided by members of the relevant First Nations communities.

In this case, the court found that the applicants' pension plans were subject to federal jurisdiction. So let's look at why. In doing so, the court applied the functional test, which we know is the test that we're supposed to be applying at this point. So let's recall. The functional test says that we have to examine the nature, operations, and habitual activities of the entity to see if it's a federal undertaking. And in this case, the court really emphasized the nature portion of the analysis and kind of de-emphasized the operations and habitual activities portion of the analysis.

So in this case, the court started going through the history of the federal government's involvement with the provision of health services to First Nations on reserve, said that this provision was longstanding, it goes back to the time of treaty making, and it's in keeping with the federal Crown's treaty and oral promises made to provide health services to the members of the applicant First Nations. It said that the Health Funding Agreement with the federal government, it was made to enable the First Nations to take over delivery of federal health services being delivered by the federal government, and which the federal government had a responsibility to provide.

The court found that the provision of these health services to the on-reserve Indians are in the nature of a federal government undertaking. And as we know, we can apply federal labour laws and federal pension laws to federal undertakings under the Constitution and under Section 4 of the PBSA. Now, in this case, the use of the word undertaking by the court is a little bit unusual. Usually we use the word undertaking to refer to a business or a project. In this case, the court is using it sort of as – in the sense of a promise. So that's a little bit unusual.

In deciding that this pension plan falls under federal jurisdiction, the court considered a couple of things irrelevant. It considered the provincial regulation of health services to be irrelevant to its analysis, and even said, you know, even if the federal government were still providing these services, they would be subject to provincial laws because there are no federal laws that regulate health services, essentially. So just to return to the application of the functional test here, the court applied it and said, applying the functional test, the nature of the applicants' activities is the delivery of health services that correspond to the federal undertaking to provide health services to the First Nations and their members on Indian reserves. So that's Northern Inter-Tribal Health Authority.

Now we'll move to another case that we've been involved with, Picard. So the background here is that it deals with a First Nations public security pension plan which provides pensions to police officers working in Indigenous communities in Quebec. It's a multi-employer plan, and the employers are 14 Band Councils within the meaning of the Indian Act. And there was an earlier case here that's relevant to our analysis. It was called Nishnawbe-Aski, a federal Court of Appeal case from 2015. And in that case, the court found that the police services in question fell under provincial jurisdiction.

The court examined the way the services were being delivered, and they said yes, they're being delivered primarily to aboriginal peoples in a culturally sensitive way, but the functions and activities of the police service are provincial in nature. They're merely tailored in a way that is to serve its particular community. The court also clearly found in this earlier case that the fact that the police services were enforcing bylaws passed under the Indian Act was irrelevant, and also found that, even though obviously it's an important objective to further and assist aboriginal self-government, that doesn't affect the analysis of jurisdiction over labour relations.

So coming back to this case, Picard, the court came to a different conclusion than in Nishnawbe-Aski, and said that the First Nations public security pension plan falls under federal pension jurisdiction. So why is that the case? Why this different outcome? The court focused a lot of its analysis again on the nature of the entity that we're looking at. And in this case, it found there's a very different structure than the police services under Nishnawbe-Aski. So those in Nishnawbe-Aski, the police services were independent legal entities operating at arm's length from the Band Council. Here the employer is the band council. Each Band Council controls the hiring and working conditions of the employees, and OSFI erred in considering that police services provided to communities on reserves and other lands reserved for Indians were divisible from the other Band Council governance activities.

So in this case, it's really finding because it's a service offered by the band council, it is a governance activity, and governance activities are federally regulated, and therefore this is also federally regulated. It also looked at things like the source of the powers, the police's powers, and kind of rejected the idea that the source of the policing powers come from the Quebec Police Act. Although this analysis is not super clear, there was some suggestion that the police are deriving their powers from the Indian Act. It also found it irrelevant that the Indigenous police force in this case had the status of peace officers under the Quebec Police Act.

And in this case, the court did find that, even though the application of the functional test was conclusive, that the – that the pension plan falls under federal jurisdiction, it decided to go to the second step of the test anyway, just – just to show us that we're absolutely sure. And it said going to the second step of the test, the answer remains the same if the core of "Indianness" under 91(24) is involved. And a provincial law can't apply to Band Councils and employers participating in the plan if that provincial law limits the band's governance powers, because that would, in effect, nullify any exercise of the constitutional power.

So that is where we are right now with these two cases. From OSFI's perspective, it's still pretty unclear how to apply the law in this area. There's a lot of contradictory case law out there, and OSFI continues to have to apply it. We have to register pension plans, we have to know where they're supposed to be registered, we have to do approvals. You know, all kinds of things come under our mandate that requires us to know who we're actually supposed to be supervising. So because of that, OSFI is appealing the decisions, really just with the hopes of getting greater clarity, not because there's any stake in the outcome here. So that's where we are. And in our quest for greater clarity, some people might be receiving phone calls to get a little bit more information about the entities whose pension plans you work with. So that's it for now. Stay tuned next year.

Tamara DeMos: Thank you very much for your participation and attendance this morning. I also wanted to say – oh, we've got it. So let's keep in touch. We've got some items here as to how we can keep in touch if you have questions for us. With respect to the regulatory reporting system, if you have concerns, we have guides on the OSFI website, and the Returns Admin Support Team are available. You can see their e-mail address right there. And don't forget, if you have changes on your team, we need to have your contact information. So please update your plan's organizational role in the regulatory reporting system, not just on an annual basis, but also a reminder that you do have to do that on an annual basis. There is a pension plan annual corporate certification, PPACC, that you have to update. It's kind of like a form, and it's just simply your contact information is included in there. And that has to be updated annually.

The electronic submissions, there's the e-mail address there. Plan-specific or general inquiries, you can contact your relationship manager. But as Kim had mentioned, the clock really is obviously starting when you send an e-mail to And a way of getting our news is to subscribe to our Pension News, like our Info Pensions, or anytime we post new guidance, we will inform you. And that's through the pension plan main page – to be able to subscribe, is on the pension plan's main page on OSFI website. And it's noted there as well.

And I also now want to kind of finalize by saying some thank-yous. The two women that you met at the desk, at the registration desk, guides us through this process, makes sure we get things done on time, make sure the documents get translated, that we get this room booked, a million things that they worry about, and then we don't have to worry about it. And so I'd like to thank Jessica Resch and Stephanie Rochefort, who were at the desk. And I don't think they're in the room right now, but I did want to acknowledge them and thank them. And to thank also Lynn Hemmings and also Kathleen. I should have introduced you. Kathy Wrye is here. She's also from the Department of Finance. She came here with Lynn today, so she can answer questions if you have questions for her or Lynn. And I wanted to thank Lynn and Kathy for attending today, and also Tara, thank you for your presentation, as well as the Private Pension Plans Division management team. Thanks to all of you. I know it's been very stressful as you get prepared for this, so I do appreciate that.

And finally, again, thank you to all of you for attending this morning, and please fill out – there's going to be a survey provided to you. We look at the survey. That's why I kept asking you if you could hear me at the back of the room, because we knew last time there were some issues. And so we do review them and we made some changes to our presentation, whether there should be more time or less time for questions. We make those kind of adjustments. So again, thank you for your attendance. We will be around if you have any further questions. Thanks. Bye-bye. (Applause).