Recently overshadowed by the big announcement on the new funding framework for defined benefit pension plans, earlier this month the Ontario government issued a pair of draft regulations to increase the powers of the Superintendent of Financial Services. The draft regulations would allow the Superintendent to impose Administrative Monetary Penalties (AMPs) as well as to order the preparation of a new actuarial valuation report.
It’s potentially about to get a lot more expensive for sponsors of pension plans in Ontario. The draft regulations propose a whole list of penalties which will be imposed for each day that a required filing or notice is late. The fees range from $100 to $200 per day, and there is a specific prohibition from paying any penalties from the pension fund.
We are fortunate that we attract clients who don’t want to miss deadlines and, with our proprietary work inventory and reminder system, missed deadlines are a very rare occurrence.
Notwithstanding our success keeping clients on track, we remind clients that they also must be vigilant to notify us as soon as possible when specific events occur which may require an amendment to their pension plan text, investment policy or other documents. Examples of such events include:
The laws were changed back in 2010 to permit the Superintendent to demand a new actuarial valuation report in “prescribed circumstances” if the Superintendent believes there are reasonable and probable grounds that benefits are at risk or there has been a significant change in the plan’s circumstances. It took a while, but the circumstances have now been prescribed:
As you can see, they might as well have said “anytime the Superintendent wants” since virtually every plan has seen a decline in members, a decrease in employer contributions, or a decrease in assets at one time or another.
Now, maybe the regulator is trying to curb the practice of employers cherry picking optimal valuation dates in order to minimize their contribution requirements? Under the new rules, if the plan sponsor elected to have a valuation prepared at a random date that just happened to be a high-water mark for the plan’s assets, the Superintendent could turn around and order a new valuation at a not so favourable date. However, other jurisdictions have solved this problem by simply requiring valuations at the plan’s fiscal year end date.
We hope that FSCO will issue some guidance shortly on how they will apply these broad new powers in order to provide a reasonable level of predictably for sponsors of pension plans in Ontario. The last thing that we need is additional uncertainty for sponsors of DB pension plans, they have enough risks to deal with already.