Ontario’s proposed regulatory framework for target-benefit pension plans includes requirements that are more prescriptive than other jurisdictions and could result in additional costs and reduced benefits for plan members, said the Association of Canadian Pension Management.
In an open letter, the ACPM noted the inclusion of policies — such as those determining funding and benefits, governance and communications — under the province’s minimum standards for pension documents is problematic. Ahead of the framework’s enactment, the organization is urging the government to demonstrate these new requirements will lead to better outcomes.
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“[The ACPM] encourages an approach through which plan governance is supported by principles-based regulatory guidance and where the oversight performed by trustees and the regulator aligns with, and may evolve with, a plan’s characteristics and risks. As fiduciaries, plan administrators are subject to high standards of care under the Pension Benefits Act and at law, and [multi-employer pension plans] are managed by their trustees consistent with their fiduciary obligations, industry guidance and best practices.”
The proposed framework specifies that the initial filing of certified copies of these policies must occur within one year after the effective date for an existing plan conversion to a target-benefit plan and, at a minimum, each policy must be reviewed every three years and any updates filed within 60 days.
If these filings are required, the ACPM said it requests that the process be hassle-free and implemented with consideration to the impact on plan governance schedules and planning. “Administrators and boards of trustees will need to adapt their processes and ensure sufficient time to review and approve these policies on a reasonable cycle.”
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The Ontario government has also requested feedback on the approach of potentially moving the provision of information requirements to a new stand-alone regulation that would address information requirements for all plan types.
While the ACPM said it has no immediate objection to this approach, it noted there’s a risk of fragmentation where such disclosure requirements relate to certain situations, such as asset transfers or family law matters.
“We would welcome an opportunity to further discuss how the provision of information regulations could be modernized to support more effective plan administration and member engagement.”
The framework’s rules for benefit reductions and improvements are too prescriptive and administratively burdensome, noted the letter. “Fiduciary responsibility requires that the board of trustees [of a target-benefit plan] act in an even-handed way and in the best interest of the plan and its members. Each plan is unique and the prescriptive rules in the proposal will not necessarily be in the best interest of the members and beneficiaries of every plan.”
A requirement for multi-employer target-benefit plans to file an annual valuation if surplus is used to meet the contribution sufficiency test is inconsistent with the requirement for single-employer plans that are only required to file actuarial cost certificates each year to demonstrate that surplus still exists that can be used for a contribution holiday, said the ACPM.
It also requested that the setting of the provision for adverse deviation formula be the responsibility of boards of trustees and informed by the Financial Services Regulatory Authority of Ontario. “The proposal is vague on determination of the PfAD in first conversion valuation report, other than stating it does not need to comply with the plan’s funding and benefits policy.”
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