Written by Susan Seller, Jordan Fremont and Jaspreet Kaur
This is an update to a previous blog from March 30, 2020.
On March 27, 2020 the Office of the Superintendent of Financial Institutions (OSFI) announced a series of regulatory adjustments designed to help reduce some of the operational stress on federally regulated institutions, including federally regulated pension plans.
Following this announcement, on April 4, 2020, OSFI published a list of Frequently Asked Questions (FAQs) to provide additional guidance on the measures taken to address the many challenges posed by the COVID-19 crisis.
The key measures announced for federally regulated private pension plans include:
- Freeze on portability transfers and annuity purchases: Effective March 27, administrators of defined benefit (DB) provisions of pension plans are directed to place a full freeze on portability transfers and annuity purchases (including those involving the wind-up of a plan after the approval of the termination report). Any amounts that were still in the pension fund on that date are subject to the portability freeze. Since the current financial market situation has negatively affected the funded status of DB provisions of pension plans, this temporary measure is introduced with a view to protect the benefits of DB members and beneficiaries.
The payment of DB pensions to retirees and other beneficiaries is not impacted by this measure. Also, the freeze does not apply to defined contribution (DC) plans, buy-in annuities and payments that are not portability transfers under the Pension Benefits Standards Act, 1985 (PBSA), such as small benefit commutations.
During this period, plan administrators are required to issue termination/retirement statement option forms. Under the portability freeze, a member’s entitlement to a pension benefit calculated as of their termination date is unaffected, however, the transfer options are temporarily on hold. The member can select a commuted value option but the administrator cannot make the transfer at this time without prior consent of the superintendent.
Plan administrators of DB provisions may request the superintendent's consent to a transfer or annuity purchase based on plan-specific or special circumstances. The superintendent will consider consent for a transfer or an annuity purchase depending on the circumstances of the pension plan. OSFI expects this would involve the plan administrator providing documentation that demonstrates that a transfer or annuity purchase would not unduly impact the security of the benefits of the remaining members and other beneficiaries of the plan.
- Deadline Extensions for annual filing requirements: OSFI has provided a three-month extension to deadlines for certain actions and annual filing requirements pursuant to the PBSA and the Pooled Registered Pension Plans Act, to allow plans more flexibility to focus on issues at hand. The actions and filings subject to this three-month extension include the filing of annual information returns, certified financial statements, actuarial reports and annual statements. To help manage member expectations, plan administrators are advised that they should give notice of planned or possible delays in the delivery of annual statements.
At this time, OSFI is not considering extending the deadline for the production of individual statements. If a plan administrator is facing challenges complying with the prescribed timelines, they should contact OSFI. Requests will be considered on a case-by-case basis.
- Suspension of consultation initiatives and policy development: OSFI has suspended a number of consultation initiatives and policy development work related to new or revised guidance until conditions stabilize. Specifically, OSFI has suspended consultations on the Instruction Guide for the Preparation of Actuarial Reports for Defined Benefit Pension Plans, and the Instruction Guide for the Termination of a Defined Benefit Pension Plan.OSFI has also delayed posting of the Instruction Guide for Authorization of Amendments Reducing Benefits in Defined Benefit Pension Plans.
- Suspension of contributions to DC plans: OSFI confirmed that there is no prohibition under the PBSA or its regulations from reducing the level of contributions to a DC plan on a go forward bases as a result of a pension plan amendment. However, these amendments cannot be made retroactively and employers should consider restrictions under collective agreements and labour and employment law before proceeding with a reduction.
In these uncertain times, OSFI has advised that pension plan administrators should be proactive in informing their OSFI relationship manager of any financial or operational challenges they encounter.
Announcements and Relief Measures Introduced by Provincial Pension Regulators
Please refer to the following for a summary of COVID-19 related announcements and measures introduced by pension regulators in:
We will continue to monitor and update you on related developments of interest to pension plan sponsors and administrators. If your business or organization has questions respecting the respect COVID-19 implications to your pension plan, please contact a member of the Bennett Jones Employment Services group. In addition, please visit our COVID-19 Resource Centre for other COVID-19-related materials.