FSRA Assessments – Holiday Bills Come Early
The Financial Services Regulatory Authority of Ontario (“FSRA”) surprised us all last month by getting a jump on the post-holiday bill hangover and issuing a non-regularly scheduled invoice at the very end of November.
Whereas the old Financial Services Commission of Ontario (“FSCO”) previously issued invoices at the end of their fiscal year, the new FSRA will be issuing invoices at the beginning of their fiscal year. Inevitably this meant that there would need to be an ‘off cycle’ invoice to make the switch.
Adding to the surprise for many plan sponsors was the significant increases in fees that they are now facing. This is especially true for smaller pension plan sponsors since the minimum fee has tripled from $250 to $750 per year. Also, the per-member fees are now tiered (they start at $8.62 per member for the first 1000 and drop all the way down to $0.06 per member after 150,000), which further penalizes the smaller pension plans.
While I totally understand that the regulation and supervision of smaller pension plans requires a base level of resources, the smaller plans also tend to be way more cost sensitive. What I don’t understand is why the same fees apply to all types of pension plans. A defined benefit (DB) pension plan definitely requires more supervision than a defined contribution (DC) pension plan, yet they pay the same fees. I worry that this may drive more and more employers to setup Group RRSP plans rather than true DC pension plans.
Another special class of pension plans that are significantly impacted by these new rules are Individual Pension Plans (“IPPs”), or more broadly known as Designated Plans. These plans are typically setup for executives or business owners and often have only one plan member. Their fees have just tripled to $750 per year. However, it’s not all bad news for these plans as the Ontario government recently announced in their Fall Economic Statement that they may exempt certain IPPs and Designated Plans from the Pension Benefits Act, so presumably that would mean no fees paid to the Province. While this will be good news for those plans, it will be bad news for the remaining pension plans in Ontario as thousands of plans will no longer pay $750 per year and this shortfall will need to be made up by the others.
While FSRA did sent out a blanket email to all pension plan sponsors before the invoices were sent, they only provided one week’s notice and the details of the fee changes were buried behind internet links. FSRA also didn’t copy the service providers to this advance communication, so we found ourselves handling client calls one at a time to provide context and explanations to our clients – not the most efficient way to do business.
It’s still early days of FSRA as a new regulator, and I’ve largely been impressed with their approach to supervising pension plans, but they will need to do a better job of clearly communicating with pension plan sponsors (and other stakeholders) regarding the fees that they are charging and the services they deliver with those fees.