April 29, 2020
Ontario’s pension regulator, the Financial Services Regulatory Authority (“FSRA”), has released new guidance for pension plan administrators, sponsors, members, retirees, and other stakeholders navigating the ongoing COVID-19 crisis.
This statement, effective April 24, 2020, follows two earlier releases from FISRA regarding the impact of COVID-19. You can read more about these prior statements in our blog posts from March 26, 2020 and April 17, 2020.
This most recent statement provides the rationale behind FSRA’s advice to stakeholders and describes the effect of the Ontario Government Emergency Order on statutory deadlines in the pension sector. The statement also addresses specific situations that may arise for pension plan administrators, sponsors, and members. Finally, the statement provides guidance on the timing of FSRA events, consultations, and communications and how to contact FSRA during this time. These topics are summarized below.
- Rationale and Principles
FSRA’s guidance is subject to the general principle that throughout the crisis, FSRA expects pension plan sponsors and administrators to meet their obligations to pay benefits, make and remit contributions, file required filings, and communicate with members. Administrators and sponsors are urged to advise FSRA immediately where deadlines cannot be met because of the disruption.
- The Ontario Government Emergency Order, Deadlines, and the Pension Sector
On March 20, 2020, the Ontario government issued an Order under the Emergency Management and Civil Protection Act (the “Order”) that has relevance for the pension sector.[1] The Order suspends statutory time periods within which steps must be taken in proceedings or intended proceedings that are currently before the Courts or the Financial Services Tribunal. The Order also applies to matters that are subject to a “notice of intended decision” (or “NOID”) under the Pension Benefits Act (the “PBA“).[2] As such, NOIDs and orders following from NOIDs under the PBA generally will not proceed until the Order expires.
The Order does, however, provide FSRA with some discretion to proceed with NOIDs, orders, and related processes in certain circumstances. FSRA has explained that it will exercise this discretion where the benefit of proceeding outweighs any potential prejudice. The statement provides specific directions for anyone who feels that a specific matter may warrant proceeding.
- The Impact of COVID-19 on Specific Stakeholder Groups
Pension Plan Administrators and their Advisors
The statement reiterates the guidance FSRA had previously released regarding extensions for upcoming regulatory filing deadlines, difficulties with member disclosure, and situations where a transfer ratio of a defined benefit pension plan has deteriorated by 10% or more. You can read our summary of that guidance here. The statement also addresses the following scenarios:
- Applications for FSRA’s consent to a specific transaction. All pending transactions that have been filed with FSRA will continue to be processed, although there may be some delays.
- Difficulties sending required member communications by regular mail. Unfortunately, FSRA has no discretion over the requirements set out in the PBA regarding regular mail and electronic communications. If deadlines for required member communications cannot be met, administrators should refer to FSRA’s guidance regarding extensions for upcoming regulatory filings (discussed in our previous blog post).
- Electronic submission of certified copies: Certified copies that are required under the PBA can be filed electronically. This applies, for example, to sponsors of pension plans seeking to file certified copies of board resolutions regarding plan amendments.
- Actuarial valuation reports, economic decline, subsequent events: In preparing an actuarial valuation report for funding purposes as of December 31, 2019, the economic decline of 2020 can be classified as a “subsequent event.” FSRA provides further information regarding disclosures that must be included in such a valuation report.
Pension Plan Sponsors
- Defined contribution (DC) pension plans: Companies that sponsor DC plans and have experienced a significant drop in corporate revenue may be concerned about making their required contributions, and employees facing reduced earnings may also prefer not to contribute. However, employers and members cannot simply stop making contributions required by the PBA and their pension plans.
Members may be able to choose to reduce some optional contributions in accordance with plan rules. For employers, any change to required contributions can only be on a go-forward basis and must be supported by an amendment to the pension plan. However, until further notice, FSRA will not order a plan to be wound up solely because the plan has, as a result of the COVID-19 crisis, been amended to temporarily suspend contributions for a portion of the 2020 calendar year.
- Defined benefit (DB) pension plan. For companies that sponsor DB plans that last filed a valuation with an effective date of December 31, 2017, and that valuation revealed that the ratio of the solvency assets to the solvency liabilities was above 85%, then the next filed valuation must have an effective date of not later than December 31, 2020. FSRA provides guidance for companies in this situation who wish to file a valuation report with an effective date of December 31, 2019 but are having more difficulty than usual in obtaining the necessary data and encountering further delays with their service providers.
- Single-employer defined benefit pension plans: Sponsors of single-employer defined benefit pension plans face obstacles in filing certificates of assessment for the Pension Benefits Guarantee Fund (PBGF). These sponsors should apply to FSRA for an extension under section 105 of the PBA. FSRA explains that it will generally grant extensions for sponsors that are unable to file PBGF assessment certificates due to the current crisis.
Pension Plan Members
- Accessing pension funds: Members who have lost their income may wish to access the money in their pension plan, locked in retirement account (“LIRA”) or life income fund (“LIF”). Generally, these funds can only be used to provide retirement income and cannot be withdrawn for other purposes. However, there are certain exceptions, which FSRA outlines in this new guidance. FSRA outlines options specifically for pension plan members with shortened life expectancies, terminated members whose benefit remains in the pension plan, and terminated members who have already transferred their pension to a LIRA or LIF. This guidance expands FSRA’s earlier release regarding withdrawing pension benefits summarized in our previous blog post.
- Investments held in a LIRA or LIF: Members may be nervous about the impact of COVID-19 on investments held in LIRAs or LIFs. These members may be able to change how those funds are invested, depending on their contract with the financial institution that holds their LIRA or LIF. Members should contact their financial institution to determine what investment options are available.
- Events, Consultations, Communications, and Contact
FSRA is temporarily suspending on-site examinations, certain pension sector consultations, and certain stakeholder engagement activities. However, FSRA will still work to be transparent and consultative, and FSRA may call “ad hoc” meetings with standing committees as a way to continue to engage and listen to the challenges faced by the sector.
Contacting FSRA
Plan administrators, sponsors, and their advisors should email their FSRA Pension Officer as their first point of contact for questions or concerns. Plan members can do the same, or they can contact FSRA at 416-250-7250 or at 1-900-668-0128 or email FSRA at Pension Inquiries@fsrao.ca.
[1] RSO 1990, c E.9; Order Under Order Under Subsection 7.1 (2) of the Act – Limitation Periods, O Reg 73/20.
[2] RSO 1990, c P8.
Authored by Lily Hassall, Articling Student
Practice Area
Pension and Benefits
