InfoPensions - Issue 25 - November 2021
InfoPensions includes announcements and reminders on matters relevant to federally regulated private pension plans including pooled registered pension plans. To receive email notifications of new items posted to OSFI’s website, including this newsletter and other pension-related documents, please subscribe using Email Notifications.
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Table of contents
Supervision
OSFI review of pension investments - Update
In the previous Issue 24 of InfoPensions, we provided an overview of work being carried out by OSFI and its Private Pension Plans Division (PPPD) to review how we supervise defined benefit pension plan investments. Among the areas for improvement we identified is the need for additional OSFI guidance intended to promote more robust investment risk management practices among the pension plans OSFI regulates. We are committed to keeping you informed of key developments relating to this important initiative.
Since our last update in May 2021, work has been ongoing to develop a discussion paper that proposes a set of principles-based regulatory expectations relating to risk management for pension plan investments. A key consideration for OSFI has been ensuring that pension plans of all sizes, investment complexity and risk profiles are able to apply and adapt these proposed regulatory expectations commensurate with their circumstances and experience. The intention of selecting the discussion paper format is to solicit feedback from plan administrators and other pension industry stakeholders regarding the implementation by pension plans of the proposed regulatory expectations set out in the discussion paper.
The discussion paper is expected to be published in early 2022 (in lieu of a late autumn 2021 timeframe that we have previously communicated). A consultation period will follow, during which plan administrators and other pension industry stakeholders are encouraged to review and comment on any aspect of the discussion paper. Feedback received will inform the development of guidance, which will first be released in draft form for comment prior to being finalized.
FSRA/OSFI collaboration on defined contribution plans – Update
Since December 2020, OSFI has collaborated with the Financial Services Regulatory Authority of Ontario (FSRA) in a joint consultation with stakeholders to improve outcomes for members through an enhanced supervisory approach for defined contribution plans. The Technical Advisory Committee (the Committee), established to review the supervisory approaches of both regulators, has completed its work. The Committee met six times and the discussions focused on the following main topics:
- Administrator/employer responsibilities
- Improving regulatory guidance for defined contribution plans
- Promoting member engagement
- Exploring regulatory efficiency and effectiveness
- Decumulation
OSFI and FSRA have published a summary of outcomes of the discussions on the various topics listed above on their respective websites. In light of the wide acceptance of the Canadian Association of Pension Supervisory Authorities (CAPSA) Capital Accumulation Plan Guidelines, the Committee recommended putting forward a series of recommendations to CAPSA. Finally, the Committee recommended that plain-language guidance for pension plan members be produced. This guide − that administrators are encouraged to share with their members − is intended to communicate basic information and prompt action for key member decisions. The guide was endorsed by CAPSA and is available on CAPSA’s website.
OSFI and FSRA hosted a webinar on these topics on November 9, 2021. The recording and the transcript will be available shortly on OSFI’s website.
Information about the Committee, as well as summaries of the meetings, outcomes, recommendations and the member guide, are available on OSFI’s website.
Guidance and legislative matters
Amendments to the Pension Benefits Standards Act, 1985 in the 2021 Budget Implementation Act
On June 29, 2021, Bill C-30 – An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures (the Budget Implementation Act or BIA) received royal assent. The BIA included amendments to the Pension Benefits Standards Act, 1985 (PBSA) as well as other measures related to pensions:
- Changes to the PBSA to implement a new framework for negotiated contributions plans, including the requirement for these plans to establish a funding policy and a governance policy.
- Changes to the PBSA’s unclaimed asset regime, including changes to facilitate the Government’s intent to expand the scope of the federal unclaimed assets regime to include unclaimed pension benefits for unlocatable members of terminated federally regulated pension plans.
- Changes to the Income Tax Act establishing rules to permit Variable Payment Life Annuities (VPLA) and Advanced Life Deferred Annuities (ALDA) for defined contribution pension plans and pooled registered pension plans.
Please note that changes to the negotiated contribution plan framework and unclaimed asset regime are not intended to be brought into force until the associated changes to the Pension Benefits Standards Regulations, 1985 are implemented. Similarly, defined contribution pension plans and pooled registered pension plans will not be able to offer VPLAs as a decumulation option until changes to pension benefits standards legislation have been implemented.
OSFI discussion paper: Navigating Uncertainty in Climate Change – feedback and next steps
On January 11, 2021, OSFI released a discussion paper on Navigating Uncertainty in Climate Change (PDF, 2,480 KB). In response to the consultation, which closed on April 12, 2021, OSFI received feedback from over 70 respondents including federally regulated financial institutions, federally regulated pension plans (FRPPs), industry and professional associations, interested organizations and individuals. In October 2021, OSFI published a letter providing a summary of feedback received and next steps. For FRPPs, OSFI will continue collaborating with the Canadian Association of Pension Supervisory Authorities (CAPSA) to develop guidance on integrating Environmental, Social and Governance considerations in pension investment decisions and assess the need for additional guidance thereafter.
OSFI discussion paper: Developing Financial Sector Resilience in a Digital World - results of consultation
On September 15, 2020, OSFI issued a discussion paper on Developing financial sector resilience in a digital world (PDF, 5,754 KB). OSFI sought feedback on a range of technology-related risk areas, with a focus on cyber security, advanced analytics, and the technology third party ecosystem.
In response to the consultation, which closed on December 15, 2020, OSFI received over 50 submissions from a diverse group of respondents including federally regulated financial institutions, industry associations, technology companies and consulting firms.
There was broad support for OSFI’s emerging principles-based and technology-neutral perspectives on technology risk management, as presented in the discussion paper. Respondents indicated that OSFI should first leverage its existing guidance and align any additional guidance with existing international and IT standards. Their input will help inform OSFI's regulatory and supervisory approaches to technology risks that meet our mandate of protecting private pension plan beneficiaries while recognizing that plan administrators are ultimately responsible for risk decisions.
The Private Pension Plans Division (PPPD) will review any draft guidance to determine if it is appropriate for federally regulated private pension plans. Pension plan administrators and stakeholders will be apprised of any draft guidance issued for pension plans and given an opportunity to provide feedback on specific OSFI proposals prior to the issuance of any final guidance.
Basic rate for assessment of pension plans
The Assessment of Pension Plans Regulations require the Superintendent to publish annually in the Canada Gazette, Part I, a notice setting out the basic rate that will be applied to the assessment of pension plans in the upcoming fiscal year.
A notice was published in Part I of the Canada Gazette on September 25, 2021, setting out that the basic rate in effect for assessments that are invoiced by OSFI for plan years ending between October 1, 2021 and September 30, 2022 is $10. This basic rate is the same as last year’s rate and applies to all pension plans registered under the Pension Benefits Standards Act, 1985 and the Pooled Registered Pension Plans Act.
Please refer to the Pension Plan Assessment Rate schedule on our website for more information on the applicable rate.
Since April 1, 2019, pension plans are no longer required to calculate their own plan assessment. OSFI determines the assessment due for a pension plan and sends an invoice after the due date of the plan’s Annual Information Return (AIR) or, where applicable, after having received an application for registration. OSFI expects to prepare the invoice approximately 45 days after determining the assessment, e.g. approximately 45 days after the due date of the AIR. We ask that you please wait to be invoiced rather than sending the assessment along with an application for registration or the AIR.
Guidance posted on OSFI’s website
The following documents were posted to the OSFI website since the last edition of InfoPensions:
- November 2021 - Final version of the revised Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans (Actuarial Guide). The draft version of section 2.7.4 of the revised Actuarial Guide was posted in July 2021 for consultation. The revisions provide updated expectations for plans using a replicating portfolio approach.
- October 2021 - Pension Plan Assessment Rate Schedule and Pooled Registered Pension Plan Assessment Rate Schedule.
- May 2021 - OSFI’s Near-Term Plan of Prudential Policy for Federally Regulated Financial Institutions and Federally Regulated Private Pension Plans. This document sets out clear priorities and timelines to develop policies and guidance that will support continued resilience of banks, insurers and federally regulated private pension plans. Note that timelines may be impacted by the application of the caretaker convention during the federal election period.
Actuarial
Revisions to the Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans
On November 5, 2021, OSFI issued the revised Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans (Actuarial Guide) for consultation with pension plan stakeholders. The revisions to the Actuarial Guide provide updated expectations for plans using a replicating portfolio approach. The consultation period ended on September 10, 2021. We would like to thank everyone who provided input on the draft revisions.
Minor changes to other sections of the Actuarial Guide that have no impact on funding requirements were also made to clarify other expectations.
A draft of Section 2.7.4 of the revised Actuarial Guide was issued on July 9, 2021. A non-attributed summary of comments received, along with our responses and Guidance Impact Analysis Statement has been posted on OSFI’s website.
The revisions to the Actuarial Guide will apply to actuarial reports with a valuation date on and after December 31, 2021. Early adoption is permitted.
Regulatory filings and important dates
Revised processes performed by a Local Registration Authority in the Regulatory Reporting System
The Bank of Canada’s implementation of BoC Connect earlier this year included improvements to the processes performed by Local Registration Authorities (LRAs).
LRAs are the first point of contact for BoC Connect and Regulatory Reporting System (RRS) users within their organization. LRAs are responsible for managing user profile accounts for their organization, and, as needed, are the primary contact for the Bank of Canada’s support personnel.
LRAs can now generate requests for the Bank of Canada Business Application Support team to:
- create new BoC Connect user profiles;
- change or remove the access to RRS for existing user profiles; and
- assign a user to act as an LRA.
They can also view/update existing user profile information and unlock user profiles when a user has been locked out due to five unsuccessful password entries. These functions no longer require you to contact the Bank of Canada.
Step-by-step instructions on processes that can be performed by an LRA on behalf of an organization may be found in the BOC Connect LRA Guide, located in the Documents section of RRS, or on OSFI’s website. For further assistance, please contact the Bank of Canada at 1-855-865-8636 and follow the instructions to reach RRS Support.
Important reminders and dates
Annual filings and plan amendments must be filed using the Regulatory Reporting System (RRS).
Documents submitted in support of an application that requires the Superintendent’s authorization should be submitted electronically at pensions@osfi-bsif.gc.ca. There is no need to mail a hard copy of the application in addition to the electronic one.
Under the Pension Benefits Standards Act, 1985:
| Action or Required Filing | Deadline |
|---|---|
| All Plans: | |
| Annual Information Return (OSFI 49) and Schedule A - Canada Revenue Agency Information Requirements (OSFI 49A) | 6 months after plan year end |
| Pension Plan Annual Corporate Certification (PPACC) |
6 months after plan year end or when changes occur |
| Certified Financial Statements (OSFI 60), Auditor’s Report Filing Confirmation (ARFC) and, if required, an Auditor's Report | 6 months after plan year end |
| Plan Assessments | Payable upon receipt of the OSFI-issued invoice |
| Annual statements to members and former members and their spouses or common-law partners | 6 months after plan year end |
| Amendments to documents that create or support the plan or fund | Within 60 days after the amendment is made |
| Defined Benefit Plans Only: | |
| Actuarial Report and Actuarial Information Summary and, if required, Replicating Portfolio Information Summary | 6 months after plan year end |
| Solvency Information Return (OSFI 575) | The later of 45 days after the plan year end or February 15 |
Under the Pooled Registered Pension Plans Act:
| Action or Required Filing | Deadline |
|---|---|
| Pooled Registered Pension Plan Annual Information Return (includes financial statements) | April 30 (4 months after the end of the year to which the document relates) |
| Auditor's Report | April 30 (4 months after the end of the year to which the document relates) |
| Pension Plan Annual Corporate Certification (PPACC) | April 30 (4 months after the end of the year) or when changes occur |
| Plan Assessments | Payable upon receipt of the OSFI-issued invoice |
| Annual statements to members and their spouses or common-law partners | February 14 (45 days after the end of the year) |
Other topics
New Superintendent of Financial Institutions
Jeremy Rudin reached the end of his term as Superintendent of Financial Institutions in June 2021 and retired. In June 2021, Peter Routledge was appointed as the new Superintendent of Financial Institutions for a seven-year term. Mr. Routledge was most recently the CEO of the Canada Deposit Insurance Corporation (CDIC) and has extensive experience in the financial sector. More information about Mr. Routledge is available on OSFI’s website.
Pension Plans Survey
Earlier this year, OSFI commissioned Phoenix Strategic Perspectives Inc., an independent research firm, to conduct a confidential online survey with administrators and professional advisors of active private pension plans regulated by OSFI. In the survey, respondents answered questions about OSFI’s performance, including its response to COVID-19, and provided suggestions for improvements. While the overall response rate (19%) was notably lower than it has been in the past, results remain comparable against previous iterations of the survey.
Among other areas, high positive ratings pertain to OSFI’s guidance material and consultations with industry when developing these guidelines, effectiveness in supervising plans under normal and COVID-19 circumstances, and timeliness in responding to enquiries. While overall assessments of OSFI were positive, in some areas we observed a shift compared to previous surveys, with many selecting “good” as opposed to “very good” or “somewhat effective” rather than “very effective”.
The majority of respondents were aware of OSFI’s COVID-19 measures and most agreed that we identified the right measures, responded in a timely manner, and provided clear expectations regarding COVID-19 circumstances.
The Private Pension Plans Division (PPPD) at OSFI responds to the results of the survey by preparing an internal action plan to address the findings that require attention. Following this year’s survey, PPPD’s action plan includes:
- reviewing all approvals processes and procedures;
- committing to PPPD’s service standards for responding to general enquiries within 15 business days in the majority of cases;
- reviewing the disclosure requirements in the Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans; and
- reminding plan administrators to update their corporate information in the Regulatory Reporting System (RRS) as changes occur to help improve OSFI’s ability to contact plan administrators.
For those that participated in the survey, thank you for your valuable input. We encourage all plan administrators and professionals to consider participating in the next survey.
For more information, please see the Overview of the Pension Plans Survey Findings on OSFI’s website, which includes a link to the final report.