Ontario updates fee assessments for pension plans while BC proposes fee increase
The new Ontario pension regulator, the Financial Services Regulatory Authority of Ontario (FSRA), has released a new rule updating fees and assessments payable by the pension sector. At the same time, the British Columbia pension regulator, the Financial Institutions Commission of British Columbia (FICOM), has issued a consultation paper on proposed increases to pension assessments in British Columbia.
FSRA releases new rule on assessments and fees
The Financial Services Regulatory Authority of Ontario (FSRA) released its new rule governing fees and assessments, Rule 2019-001, Assessment and Fees (the Fee Rule) on June 8, 2019. As FSRA is intended to be a self-funded regulator that will operate on a cost recovery basis, the Fee Rule is designed to promote a simple, consistent and fair funding model. These fee assessments apply to all pension plans registered in Ontario, including both defined benefit and defined contribution pension plans, and replace the previous fee assessments that were charged by the Financial Services Commission of Ontario.
The minimum assessment for a pension plan has increased from $250 to $750 to take account of the estimated cost to regulate small pension plans. This will apply to all pension plans with 78 or fewer beneficiaries. The term “beneficiaries” includes active, former and retired members, as well as other beneficiaries in receipt of or with a right to a death benefit.
For plans with 79 or more beneficiaries, a tiered approach will be taken based on the amount of FSRA’s budget for the pension sector remaining after the minimum assessment is charged to small pension plans. This share will be calculated based on a formula that includes up to six tiers depending on the number of beneficiaries. The tiered approach is intended to better reflect that, at a certain level, as the number of beneficiaries increases, the regulatory cost per additional beneficiary declines.
The $75,000 maximum charge for a pension plan has been eliminated.
Proposed fee increases in BC
FICOM is also meant to be self-funded by fees from the financial services entities it regulates. FICOM released a Pension Fees Consultation Paper on June 10, 2019, seeking input on its proposed regulatory fee structure for the pension industry in British Columbia.
The proposed changes would see fees increase from $6.15 to $8.35 per active member, and from $4.50 to $7.30 per non-active member. The minimum fee would grow from $200 to $250, while the maximum fee would be raised to $85,000 from $75,000. The new fees would take effect for plan years ending January 1, 2020 or later, and would apply to all pension plans registered in British Columbia, including both defined benefit and defined contribution pension plans.
According to the consultation paper, the current fee structure for pension filings is insufficient to cover operations. The fee structure was last amended July 1, 2008. According to FICOM, due to changing economic conditions, larger asset sizes and increased plan risk, it is necessary to revise the fee structure once again. FICOM plans to revisit its fee structure more regularly in the future.
According to FICOM, its proposed fee structure is competitive with other pension regulators in Canada.
The recent changes in British Columbia and Ontario, as well as the recent proposed increases in Quebec that was discussed in the July 2019 News & Views, may indicate a growing focus on cost recovery for pension regulators.
The Ontario changes are somewhat complex, being dependent on FSRA’s annual budget and the distribution of plans it oversees. It can be expected that they will result in higher fees for many plans. While the impact is most obvious for small pension plans whose minimum assessment will increase from $250 to $750, the removal of the fee cap for very large pension plans, most of which are in the public sector, will also result in significant fee increases.
The British Columbia fee increase will clearly result in slightly higher operating costs for British Columbia pension plans, with plans having proportionately larger inactive populations seeing the largest increases and the largest plans facing the lowest increase in percentage terms. Comments on the new proposed fee schedule were permitted until July 24, 2019.