Developments affecting federally regulated pension plans
The Office of the Superintendent of Financial Institutions (OSFI) has released issue 22 of its InfoPensions newsletter, which includes a number of announcements that affect federally-registered pension plans.
Electronic amendment filing
As of April 1, 2020, plan administrators filing plan amendments will be required to upload the applicable plan amendment filing form, along will all other relevant documents, to the Regulatory Reporting System (RRS), which is currently used to make filings such as the Annual Information Return (AIR). The new RSS system will not apply to applications that require the Superintendent’s authorization, such as defined benefit transfers of assets between pension plans.
Updated returns for regular annual filings
OSFI announced changes to some of the annual regulatory returns that federally-registered pension plans must file.
The Actuarial Information Summary and the Solvency Information Return have been amended for plan years ending October 31, 2019 or later. For plan years ending December 31, 2019, a revised AIR, Certified Financial Statement, Pension Plan Annual Corporate Certification and Replicating Portfolio Information Summary are to be used.
OSFI has also developed a new Auditor’s Report Filing Confirmation that all plans must complete in order to determine whether the plan will be required to submit an auditor’s report.
Revised instruction guides are expected to be posted in the spring of 2020.
In an effort to address issues arising from late contributions, OSFI has posted a Schedule of Expected Contributions Form that may be used to inform trustees or custodians of amounts to be remitted to the pension fund, as pension plan administrators are required to do under section 9.1 of the Pension Benefits Standards Act, 1985. Use of the form is optional.
Requirements for an annuity purchase discharge
OSFI summarizes some of the conditions that an administrator will have to satisfy in order to take advantage of the provisions of Bill C-97 that amend the federal Pension Benefits Standards Act, 1985 to permit a plan administrator to satisfy an obligation under the plan to provide a pension benefit to a former member or survivor through the purchase of an immediate or deferred life annuity. While Bill C-97 was passed on June 21, 2019, these provisions are not yet in force as of the end of 2019.
Defined contribution pension plan study
OSFI includes some preliminary observations following its survey on defined contribution (DC) pension plans in which members are permitted to make investment choices (“member choice account plans”), which was initially circulated in December of 2018. According to the survey, the most popular default investment option was a target-date fund, which 55% of member choice account plans use as their default option, followed by a balanced fund, which 25% of plans used as their default investment choice. OSFI notes that money market funds are not generally considered to be a suitable default option, despite being used as such by some pension plan administrators.
The survey found that the median number of investment options offered to members in member choice account plans is 22. While the average number of options offered is 34, OSFI suggests this number skews high due to a small number of plans that offer a number of options that is well-above the average. OSFI suggests that a large number of investment options to be overwhelming to most plan members, and could be difficult for an administrator to review.
The survey revealed that, while administrators are generally aware of investment management fees, the amount of administrative fees paid by the plan members and/or by the employer is not well known. OSFI encourages administrators to become aware of all fees relating to their plan and inquire about fees with their service providers.
Annual assessments of pension plans
OSFI has set a basic rate of $10 for plan years ending between October 1, 2019 and September 30, 2020. This represents an increase of $1 from the basic rate that is currently in effect. The basic rate is used to calculate the annual assessments that are invoiced to pension plans by OSFI. The minimum assessment amount will increase from $450 to $500 and the maximum assessment amount will increase from $180,000 to $200,000. OSFI will determine a plan’s assessment after the plan has filed its Application for Registration or its AIR, and will send invoices approximately 45 days after determining the assessment, regardless of the AIR’s due date.