OSFI revises pension directives to remove temporary COVID-19 related measures
On February 25, 2021, the Office of the Superintendent of Financial Institutions (OSFI) revised its Directives of the Superintendent pursuant to the Pension Benefits Standards Act, 1985 (the Directives) for federally regulated pension plans, reversing certain temporary measures that were introduced in light of the COVID-19 pandemic crisis and making certain other clarifications.
OSFI has also revised its frequently asked questions (FAQ) page to detail the changes to the Directives.
Under the revised Directives, OSFI has cancelled the temporary extension of deadlines for annual regulatory filings from six to nine months, which was discussed in the April 2020 News & Views. The extension had applied to the following regulatory filings:
- Annual Information Return (AIR),
- ActuarialReportandActuarialInformation Summary (AIS) and, if required, Replicating Portfolio Information Summary (RPIS), and
- Annualstatementstomembersandformer members, as well as spouses and common-law partners.
OSFI invites plan administrators facing challenges complying with the prescribed timelines to contact their OSFI Relationship Manager.
As of February 25, 2021, OSFI no longer requires solvency ratio projections for portability transfers (as discussed in the June 2020 and September 2020 News & Views). Under the revised Directives, portability transfers must be paid out at the solvency ratio of the plan as determined in the most recently filed actuarial report, regardless of the valuation date.
The full commuted value transfer may be made for a plan with a solvency ratio of less than 1.0 if the employer remits the full amount of the transfer deficiency or if the transfer deficiency for any individual transfer is less than 20% of the Year’s Maximum Pensionable Earnings (YMPE) for that year, provided that the sum of all individual commuted values transferred on this basis does not exceed 5% of the assets of the plan at the valuation date of the most recent actuarial report. It should be noted that the limit for any individual transfer was 5% of the YMPE prior to March 2020.
Effective February 25, 2021, a projected solvency ratio is no longer required for obtaining consent for buy-out annuity purchases. The revised Directives provide for automatic OSFI consent for buy-out annuity purchases by a plan administrator if the solvency ratio following the purchase of the annuity is not less than 0.85.
The revised Directives signal OSFI’s belief that temporary COVID-19 related measures for pension plans may now be removed, and will provide greater flexibility for commuted value transfers for federally regulated defined benefit pension plans.
OSFI notes that it may reconsider re-introducing temporary restrictions in the event of a further deterioration in the financial and economic environment or renewed market volatility.