2023 Ontario Pension Recap

The Financial Services Regulatory Authority of Ontario (FSRA) recently released its annual report, which outlines its many activities in the past year. This bulletin summarizes FSRA’s main activities in 2023.

FSRA delivered on all its planned priorities in 2023. Several communications have been published to educate employers and plan members about pension benefits (launch of the first Annual Pension Awareness Day, resources on the value of pensions, bankruptcy guide, etc.).

From a legislative point of view, FSRA conducted several consultations to gather comments from various stakeholders to release new or updated pension guidelines. These pension guidelines include, among other things, guidance on:

• Pension Plan amendments, which are determined to be retroactive adverse amendments (current consultation closes on January 19, 2024);
• Potential FSRA rule-making authority on Family Law matters on the valuation and division of pension benefits upon marriage breakdown (current consultation closes on January 19, 2024);
• A guide for employers on communicating the value of their pension plan and a guide for plan members for understanding their commuted value;
• Pension Plan Administrator roles and responsibilities including the following new sections:
  • Managing and retaining records
  • Responding to complaints and inquiries
  • Communicating information to plan members accurately and in a timely manner
• Information Technology (IT) risk management guidance (coming into effect April 1, 2024) on sending documents securely and notifying FSRA of IT-risk-related incidents.

FSRA conducted several governance exercises as part of its main objectives:

• Review of governance and risk practices of large public sector plans
• Benchmarking process with DB Multi-Employer Pension Plans (MEPPs)
• Revamping of FSRA’s pension plan examination framework
• Continuing leadership through Canadian Association of Pension Supervisory Authorities (“CAPSA”) to harmonize pension regulatory effectiveness across Canada

FSRA also published its Proposed 2024-2025 Statement of Priorities, with objectives focusing on the assessment of systemic and high-priority risks and on the support and development of target benefit regulation. Also, the Province is seeking ideas from the public through its consultation for the 2024 Ontario Budget.

In March 2023, the Ministry of Finance launched its consultations on proposed regulations necessary for implementing a permanent target benefit framework in Ontario for Specified Ontario MEPPs. The main aspects of the proposed regulations are detailed in our bulletin entitled A Permanent Framework for Target Benefits.

FSRA reported that the median Defined Benefit (DB) plan was 93% funded on a going-concern basis and 113% solvent as of December 31, 2022. Furthermore, FSRA recently noted that the median solvency ratio improved to 117% as of September 30, 2023. The improvement of the solvency ratio is mainly explained by the significant increase in interest rates.

Given the current market context, pension plans may consider the impact of interest rate levels on the decision to purchase annuities to secure part of pension liabilities. DB plans that have or will have made buy-out annuity purchases will be required to provide FSRA with a copy of the Request for Proposal (RFP) or Request for Quotation (RFQ) provided to the insurer as of January 1, 2024, if the annuity contract does not set out the plan provisions that must be adhered to.

Employers that provide a Defined Contribution (DC) plan have many responsibilities regarding the administration of the plan. For this purpose, FSRA has published a guide for plan sponsors providing key elements in the administration of a DC plan including information on potential regulatory penalties. Furthermore, a Report on Administrative Monetary Penalties and Defined Contribution pension plan engagement was recently published and presents procedures to follow for filling requirements. FSRA encourages plan administrators to add a delegate from their organization on the Pension Service Portal to help them with the filling requirements and reduce the risk of late remittance penalties.

Normandin Beaudry consultants will continue to monitor Ontario pension sector news and developments with FSRA’s activities and will keep you informed. Feel free to contact us if you have any questions.