Pension plan examinations conducted by OSFI (November 2017)

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

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

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