OSFI issues instruction guides on disclosure requirements for DB and DC pension plans
In October 2016, the Office of the Superintendent of Financial Institutions (OSFI) released two Instruction Guides on disclosure requirements for defined benefit (DB) and defined contribution (DC) pension plans, respectively. The Instruction Guides replace a 1998 guide that was applicable to both DB and DC pension plans. Although for the most part the Instruction Guides summarize the requirements of pension legislation applicable to federally regulated pension plans, they provide useful guidance on OSFI’s expectations of how plan administrators can meet legislative requirements and what should be provided to members at all stages of plan membership.
OSFI references an administrator’s fiduciary responsibilities and states “the disclosure of information should be carried out in a manner that is consistent with the disclosure requirements of the legislation and with the administrator’s fiduciary responsibilities and applicable standard of care”.
The Guides say that administrators should aim to make disclosure of information timely, easily understood and accurate. Furthermore, any document provided to a member should give the name, address and telephone number for a contact person who can answer any follow-up questions.
Although the federal pension legislation does not provide a list of topics to be included in the plan booklet or summary that is provided to members, the Instruction Guides includes a list of topics that OSFI expects to be addressed in the plan booklets provided to members. The main headings are as follows:
- Description of the plan
- Eligibility to join the plan
- Contribution information
- Investment options (DC)/investment of the pension fund (DB)
- Plan expenses and fees
- Benefits at retirement
- Benefits on cessation of membership before retirement
- Death benefits before retirement
- Non-assignment/commutation of pension benefits
- Marriage or common-law partnership breakdown
- Termination of the plan
- Additional information available on request
It should be noted that there are a number of specific requirements with respect to each heading. Although OSFI’s previous disclosure guide included a number of specific requirements, the list of requirements has been significantly expanded. A federally regulated plan administrator should review the plan booklet or summary for accuracy and should ensure that the plan booklet meets OSFI’s expectations.
Summaries of plan amendments
OSFI considers an amendment to a plan to be made as of the date that the decision regarding the amendment is properly adopted in accordance with the governance procedures for that plan.
OSFI expects plan administrators to apply the legislative requirement to provide notice of amendments broadly. OSFI assumes that most amendments to a plan could be considered applicable to all members of the plan. For example, while a particular amendment may not directly affect the benefit level of a particular class of members, it may have an impact on the funding of the plan. This may effectively require notice of nearly every DB plan amendment to all plan members, including former members.
CAPSA guidelines for DC plans
Although not legislatively required, OSFI recommends that CAPSA Guideline No. 8 – Defined Contribution Pension Plans Guideline and CAPSA Guideline No. 3 – Guidelines for Capital Accumulation Plans (the CAP Guidelines) should be followed by administrators of all DC pension plans. OSFI expects the plan administrator to provide the information recommended by CAPSA regarding topics such as decision-making tools, fees and expenses, transfer options and performance reports.
In addition to the prescribed information for statements, statements provided to members or survivors who are offered portability should also:
- Include a recommendation that members or survivors should seek independent financial advice before deciding on available portability options;
- State whether the administrator permits portability in the situations where notification is received after the expiration of the notification period given on the statement and if a recalculation of the transfer amount (pension benefit credit) is possible in that circumstance (DB plans only);
- State that members or survivors who do not elect to take portability should file any future changes of address with the plan administrator.
In addition to the information described above, the Instruction Guides also summarize disclosure requirements relating to electronic communications, investment information, annual statements to members and former members (including spouses and common-law partners), termination/retirement/death statements, variable benefits (DC only), phased retirement (DB only), and plan termination. They also include checklists for annual member and former member statements for both types of plans.
The Instruction Guides provide a useful, comprehensive summary of the information disclosure requirements for federally regulated pension plans. Furthermore, they provide valuable insight into OSFI’s expectations for communications and disclosure, which in some cases go above and beyond the strict legislative requirements.