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FSRA sets out pension priorities

The Financial Services Regulatory Authority of Ontario (FSRA) has published a draft FSRA Priorities and Budget Consultation Document for 2020-2021, describing its priorities as it sets out to strengthen its oversight activities in the pension sector. FSRA also released its proposed Pension Sector Guiding Principles, identifying the proposed principles that will guide its activities in the pensions industry. These documents provide some early insight into what Ontario pension administrators can expect in terms of FSRA’s approach to pension regulation.

FSRA’s priorities for the 2020-2021 fiscal year

FSRA’s priorities reflect a heightened focus on burden reduction and regulatory effectiveness. For example, FSRA aims to reduce the quantity of guidance to its sectors by as much as 40%.

FSRA states that its priorities with respect to pensions are to support pension plan evolution, develop a prudential supervisions framework and focus on burden reduction.

Pension plan evolution

FSRA aims to ensure that the regulatory framework facilitates asset transfers, consolidation, plan flexibility and other sector evolution to support the pension sector. Over the coming year, FSRA intends to adjust its organizational structure and relationship model to gear more towards large and jointlysponsored pension plans. It also intends to review and consult on inherited guidance and develop a plan to update, retire or merge inherited guidance.

Prudential supervision framework

FSRA plans to consult on a plan to enhance its oversight of pension matters and begin implementation over the next year. This will include consideration of plan governance, a financial and risk assessment of the Pension Benefit Guarantee Fund (PBGF), and improved pension risk analysis. FSRA also intends to enhance its expertise in key areas such as credit analysis and pension risk analysis.

FSRA also intends to focus on certain types of pension plans. It intends to focus on standards and best practices in the use of leverage and illiquid assets in jointly-sponsored pension plans, as well as develop best practices in terms of funding, governance and investments for multi-employer pension plans (MEPPs). FSRA also intends to begin development and documentation of a risk-based supervisory approach for defined contribution (DC) pension plans in areas such as member behaviour and engagement, decumulation options, investments and fees. FSRA promises consultation and collaboration with pension plans in these areas, including through technical advisory committees.

Regulatory burden reduction

FSRA will continue to focus on high-value regulatory activity and reduce unnecessary regulatory burdens by updating its guidance framework, describing regulatory approaches, improving processes and modernizing information management and technology.

FSRA established technical advisory committees for missing members and asset transfers in fall 2019, and intends to create a new technical advisory committee for family law matters. It also intends to create a technical advisory committee, as well as work with the Ministry of Finance to reduce regulatory burden and improve regulatory effectiveness for DC pension plans.

Guiding principles for the pension sector FSRA has also released its Proposed Pension Sector Guiding Principles, identifying the following seven principles that would guide its activities in the pensions industry: (1) risk-based, (2) reasonable, (3) aware, (4) adaptable, (5) facilitative, (6) effective and efficient, and (7) collaborative and transparent.


Comment

Ontario pension plan administrators will be interested to follow FSRA’s progress in reforming its pension supervisory approach and reducing regulatory burdens on plan administrators. Developments in the regulation of MEPPs and DC pension plans will also be of interest to those particular sectors, while the risk analysis of the PBGF will be of interest to single employer defined benefit pension plan sponsors.


News & Views - November 2019 (PDF)