Directives of the Superintendent – FAQs

Deadline Extension

1. Is OSFI extending filing deadlines for annual filings due in 2021?

   No. Deadlines have returned to the regular filing schedule for plans subject to the Pension Benefits Standards Act, 1985 (6 months after plan year-end) and for plans subject to the Pooled Registered Pension Plans Act (4 months after plan year-end).

   If a plan administrator is facing challenges complying with the prescribed timelines, they should contact their OSFI Relationship Manager.

Portability Transfers

2. What are portability transfers?

   When a member of a defined benefit pension plan ceases employment with the employer sponsoring the pension plan, they can choose to leave their entitlement in the pension plan and receive a monthly pension payment when they eventually retire, or they can, in some circumstances, exercise "portability". Exercising portability means transferring the value of the pension (also referred to as the "pension benefit credit" or "commuted value") to a locked-in vehicle such as a life income fund or locked-in registered retirement savings plan, transferring to another pension plan or using the value of the pension to purchase an annuity.

   The Pension Benefits Standards Act, 1985 (PBSA) is the legislation that protects members of pension plans who work for federally regulated employers. These protections include limiting the circumstances under which money can leave a plan. The PBSA provides the authority to the Superintendent to impose conditions on, or to prohibit portability transfers if he believes the transfer would impair the solvency of the pension fund.

3. Are portability transfers currently subject to any conditions?

   Yes. The Directives of the Superintendent include conditions on portability transfers and buy-out annuity purchases.

   The Superintendent grants his automatic consent to transfers that relate to defined benefit provisions made pursuant to section 26 of the Pension Benefits Standards Act, 1985, subject to the following terms and conditions:

   1. The amount of the initial transfer cannot exceed the "transfer value" (i.e. the commuted value of the pension benefit multiplied by the plan's "transfer ratio"). The transfer ratio means
      1. the solvency ratio determined in the most recent actuarial report of the plan; or
      2. where the commuted value is calculated in accordance with subsection 3570 of the Standards of Practice for Pension Plans of the Canadian Institute of Actuaries, 1.00.
   2. Where the plan's transfer ratio is less than 1.00, the full amount of the commuted value can be transferred if
      1. at any time the plan administrator remits to the pension fund the amount by which the commuted value exceeds the transfer value (i.e. the "transfer deficiency"); or
      2. the transfer deficiency for any individual transfer is less than 20% of the Year's Maximum Pensionable Earnings for that year, provided that the sum of all individual commuted values transferred on this basis does not exceed 5% of the assets of the plan (see question 13 for further details on how this overall limit is calculated and applied).
   3. Where the full amount of the commuted value is not transferred, the transfer deficiency must be transferred on the earlier of
      1. five years from the date the commuted value of the pension benefit was calculated; and
      2. the date on which the solvency ratio of the plan is determined to be at least 1.00.

      In addition, the transfer deficiency must be credited with interest from the date of determination of the commuted value to the date of the transfer, at the same rate used to determine the commuted value.

   For additional details regarding the conditions applicable to negotiated contribution plans, please refer to questions 15 through 17.

4. Is OSFI still requiring solvency ratio projections for portability transfers?

   No. As of the effective date of the Directives of the Superintendent (the Directives), references to the solvency ratio in the Directives will mean the solvency ratio as defined in subsection 2(1) of the Pension Benefits Standards Regulations, 1985. Generally, this means that the applicable solvency ratio for portability transfers is the solvency ratio of the pension plan based on the most recently filed actuarial report.

5. What if a plan administrator was using a solvency ratio projection for portability transfers in accordance with the previous version of the Directives of the Superintendent?

   Under the previous version of the Directives of the Superintendent (the Directives), the transfer ratio was defined as the lower of the solvency ratio of the plan as filed in the most recent actuarial report and the solvency ratio of the plan, projected to a date no earlier than March 31, 2020.

   Going forward, portability transfers must be paid out of the pension fund at the solvency ratio of the plan as determined in the most recently filed actuarial report. This means that if a plan administrator was using a projected solvency ratio, it must now use the solvency ratio as determined in the most recently filed actuarial report, whether or not it preceded March 31, 2020.

   Please refer to questions 15 through 17 for the rules applicable to negotiated contribution pension plans.

6. Do the Directives of the Superintendent provide for automatic consent for buy-out annuity purchases by a plan administrator?

   Yes. Where a plan administrator wishes to purchase an immediate or deferred life annuity other than for the purposes of portability transfers under section 26 of the Pension Benefits Standards Act, 1985, and the purchase does not settle all the liabilities of the plan, consent is given if

   1. the solvency ratio following the purchase of the annuity is not less than 0.85; or
   2. an amount has been paid to the pension fund to maintain the solvency ratio following the purchase of the annuity at the lesser of 0.85 and the transfer ratio.

   The "solvency ratio following the purchase of the annuity" is the solvency ratio, adjusted to reflect the effect of the purchase of the immediate or deferred life annuity.

7. Do the conditions on transfers apply to defined contribution plans?

   No. The conditions on transfers in the Directives of the Superintendent do not apply to defined contribution plans, nor do they apply to the benefits payable from the defined contribution provisions of a plan with both defined benefit and defined contribution provisions (i.e. a combo plan).

8. Do the conditions on transfers affect pensions currently being paid from federally registered private pension plans?

   No. The conditions on transfers in the Directives of the Superintendent do not affect the monthly pension payments that retirees or surviving spouses are currently receiving from a federally registered private pension plan. The conditions also do not affect the payment of monthly pensions from the plan for future retirees or surviving spouses.

9. Do the conditions on transfers apply to buy-in annuities?

   No. A buy-in annuity is not considered an immediate or deferred life annuity under section 26.1 of the Pension Benefits Standards Act, 1985. As indicated in OSFI guidance on Buy-in Annuity Products, they are considered investments of the plan and are subject to the same rules that apply to any investment made by the plan administrator.

10. What transfers from the pension plan are not subject to the conditions set out in the Directives of the Superintendent?

    The Directives of the Superintendent do not affect payments from the pension fund that are not portability transfers under section 26 of the Pension Benefits Standards Act, 1985 (PBSA). This includes the following:

    • Non-locked-in pension benefits where a member has not been a member for a continuous period of at least 2 years (pursuant to paragraph 18(1)(c) of the PBSA)
    • Shortened life disability payments (pursuant to paragraph 18(2)(b) of the PBSA)
    • Small benefit commutations (pursuant to paragraph 18(2)(c) of the PBSA) where the plan text provides that the small benefit must be taken in cash (i.e. where this cash payment is not at the option of the member)
    • A death benefit payable to the estate of a member when there is no surviving spouse or common-law partner
    • Monthly pensions in payment
    • A withdrawal of a member's additional voluntary contributions
    • The commutation of a remaining guarantee period payable to a beneficiary following the death of a member
11. Can a plan administrator decide not to transfer a member's commuted value?

    No. If a member is eligible for portability then the member's election must be processed in accordance with the Directives of the Superintendent (the Directives). If a plan administrator has concerns about complying with the Directives, they should contact their OSFI Relationship Manager.

12. What portability conditions apply to federal and provincial members of multi-jurisdictional pension plans?

    The federal government signed the 2020 Agreement Respecting Multi-jurisdictional Pension Plans (2020 Agreement) that came into effect on July 1, 2020. At that time, the other signatories to the 2020 Agreement were Alberta, British Columbia, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan. Manitoba and Newfoundland and Labrador joined the 2020 Agreement when the 2023 Agreement Amending the 2020 Agreement came into effect on July 1, 2023. As a result, all jurisdictions in Canada that have pension legislation and all multi-jurisdictional pension plans in Canada are subject to the 2020 Agreement.

    Paragraph 6(f) of Schedule B of the 2020 Agreement provides that the portability conditions of the jurisdiction under which the plan is registered (the major authority) will apply to portability transfers for all members, regardless of jurisdiction. Subsection 8(2) of the Directives of the Superintendent (the Directives) confirms this provision for federal members in these multi-jurisdictional plans.

    For more information on the 2020 Agreement, please see our related Frequently Asked Questions.

13. How should plan administrators measure the aggregate limit under subparagraph 8(1)(b)(ii) of the Directives of the Superintendent?

    Subparagraph 8(1)(b)(ii) of the Directives of the Superintendent (the Directives) provides that the full amount of the commuted value can be transferred if the transfer deficiency is less than 20% of the Year's Maximum Pensionable Earnings for that year, provided that the aggregate value of all transfers made does not exceed 5% of the assets of the plan at the valuation date of the most recently filed actuarial report. The value of the aggregate limit should be measured on a plan year basis (i.e. from one valuation date to the next).

14. Can the Superintendent impose different conditions or reintroduce a portability freeze?

    Yes. The Superintendent exercises his authority under section 26.1 of the Pension Benefits Standards Act, 1985 by issuing Directives of the Superintendent. The purpose of this authority is to protect the benefits of all plan members and beneficiaries, by granting the Superintendent the ability to restrict transfers out of the pension fund where they pose a risk to the overall financial health of the pension fund.

    As a result of future events, such as a further deterioration in the financial and economic environment, the Superintendent may determine that any transfers would impair the solvency of pension funds and that it is prudent to reintroduce a temporary freeze or to change the conditions for providing automatic consent.

    For instance, in the event of renewed market volatility, the Superintendent has the flexibility to require plan administrators to use a more recent projected solvency ratio as the basis for such transfers, if appropriate. Such a change would require plan administrators to use the lower of the solvency ratio as at the last filed actuarial report, and a solvency ratio projected to a date no earlier than the date set by the Superintendent. This would allow plan administrators to continue portability transfers in the ordinary course, using a more up-to-date solvency ratio. As a result, portability transfers should not adversely impact the financial position of the pension plan.

Negotiated Contribution Plans

15. How do the portability conditions of the Directives of the Superintendent apply to portability transfers from negotiated contribution plans?

    The definition of transfer ratio has been amended to set the transfer ratio at 1.00 where the pension benefit credit (or "commuted value") is calculated in accordance with subsection 3570 of the Standards of Practice for Pension Plans of the Canadian Institute of Actuaries (the Standards) that came into effect on December 1, 2020. As a result, federally registered negotiated contribution plans should transfer the full amount of the commuted value when it is determined in accordance with subsection 3570 of the Standards, regardless of the solvency ratio of the plan.

16. What happens if there is an outstanding amount payable for commuted values calculated in accordance with subsection 3570 of the Standards of Practice for Pension Plans of the Canadian Institute of Actuaries?

    Subsection 8(1.1) of the Directives of the Superintendent (the Directives) provides that, for commuted values calculated in accordance with subsection 3570 of the Standards of Practice for Pension Plans of the Canadian Institute of Actuaries (the Standards), and transferred out of the pension fund between December 1, 2020 and the effective date of the Directives, any amount of the commuted value that remains payable to the member, plus interest, should now be paid out.

    Prior to December 1, 2020, federally registered negotiated contribution plan commuted values could not be calculated in accordance with subsection 3570 of the Standards. Any transfer deficiencies determined prior to this date continue to be subject to the conditions set out in subsection 8(1) of the Directives. For additional details on these conditions, please refer to Question 3.

17. What portability conditions apply to federal and provincial members of multi-jurisdictional negotiated contribution plans?

    The portability conditions applicable to multi-jurisdictional negotiated contribution plans are the same as those set out for multi-jurisdictional pension plans in question 12 of these FAQs.

    However, the member's benefits and how the commuted value is calculated will depend on the pension legislation governing that member's benefits. A member's commuted value will be determined in accordance with the legislation of their jurisdiction (be it provincial or federal), notwithstanding that another jurisdiction's portability conditions may apply to the plan as a whole.