March 30, 2020
The Office of the Superintendent of Financial Institutions (OSFI) has issued a letter concerning COVID-19 to the federally-registered pension plans that it regulates. The letter summarizes actions that OSFI is taking to address issues stemming from COVID-19, and announces a regulatory freeze on portability transfers and annuity purchases, as well as the extension of certain filing deadlines.
Freeze on Portability Transfers and Annuity Purchases
OSFI has announced a change to the Directives of the Superintendent pursuant to the Pension Benefits Standards Act, 1985. The new provision requires that defined benefit plans obtain the consent of the Superintendent prior to any transfer or annuity purchase. The new section provides as follows:
Pursuant to section 26.1 of the Act, the administrator of a defined benefit pension plan must obtain the consent of the Superintendent to transfer any moneys that relate to defined benefit provisions out of the pension fund under section 26 or to purchase an immediate or deferred life annuity to provide pension benefits under defined benefit provisions, as the Superintendent is of the opinion, given financial market conditions, that any transfer or purchase would impair the solvency of the pension fund.
This section illustrates OSFI’s concerns about the degradation of the funded status of federally-regulated pension plans. OSFI is quick to point out that this has no impact on the payment of pensions to retirees and other beneficiaries.
OSFI notes that it will review this temporary measure in the coming months as it continues to monitor the impact of the COVID-19 crisis on defined benefit pension plans. OSFI’s letter also invites administrators to request the Superintendent’s consent to a transfer or annuity purchase based on plan-specific or special circumstances, but does not provide what circumstances would allow for OSFI’s consent. Presumably a plan administrator would need to show that its funded status remains at a high level, but it is unclear if this alone would be sufficient to allow such transfers and annuity purchases to continue.
Extension of Filing Deadlines
OSFI’s letter also announces that it is extending the deadlines for certain actions and annual filing requirements under the Pension Benefits Standards Act, 1985 (PBSA) and the Pooled Registered Pension Plans Act (PRPPA). Generally speaking, OSFI has provided three month extensions to a variety of regulatory deadlines, including the deadlines for Annual Information Returns, Certified Financial Statements, Auditor’s Report Filing Confirmations, Actuarial Reports and Annual Statements to members, former members and spouses.
A full summary of the applicable extensions is available on OSFI’s website.
Pension and Benefits