PIAC supporting FSRA’s proposed approach to addressing changing pension environment

The Pension Investment Association of Canada has released comments on the proposed strategic priorities for the newly formed Financial Services Regulatory Authority of Ontario, which will officially launch this spring.

“In our first year, our focus is on burden reduction and regulatory effectiveness,” the FSRA said in a consultation paper on proposed priorities for 2019-20. Specifically, for the pension sector, the FSRA identified three priorities: supporting plan flexibility, reviewing the prudential framework and focusing on burden reduction.

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When it comes to plan flexibility, the proposals included instituting a relationship model for larger plans and jointly sponsored pension plans and better supporting complex transactions including plan mergers.

The PIAC said it strongly supports the proposed approach to addressing the changing pension environment, particularly for jointly sponsored plans and related mergers of pension assets. “Enhancing relationships with larger and evolving plans would be most welcome as well.”

On prudential pension matters, the FSRA is aiming to ensure appropriate assessment of risks and targeting supervision. “This will include consideration of appropriate governance of plans; how regulatory oversight manages and identifies potential risks to the Pension Benefit Guarantee Fund; approaches to distressed plans; evaluating risks to the benefits/entitlements of plan members; and sector reputation,” it said.

The PIAC recognized the importance of this priority, but urged the FSRA to ensure it develops the expertise to do so. “We urge FSRA to enhance the pension expertise among the team to review your oversight of prudential pension matters.”

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When it comes to burden reduction, the FSRA proposed focusing on “high-value regulatory activity” and reducing unnecessary and low-return regulatory activities.

“The allocation of resources to areas of low regulatory value limits attention available for higher risk or more significant benefit regulatory activity,” it said. “FSRA will continue to assess the effectiveness and efficiency of our regulatory framework and other practices for all plan types, to ensure they are principles-based and risk-based and to identify opportunities to reduce burden and improve regulatory effectiveness.”

The PIAC indicated it supports principled-base regulation instead of rules being overly prescriptive and encouraged FSRA to work on addressing regulatory burdens for cross-jurisdictional employers, highlighting that this can be a disincentive for maintaining defined benefit plans. “To this end, we encourage FSRA to work closely in its role within [the Canadian Association of Pension Supervisory Authorities] to strive for harmonization of legislation across Canada,” the PIAC said.

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The FSRA has posted comments and responses to the consultation online. Its respondents included the Ontario Teachers’ Pension Plan, the Ontario Municipal Employees’ Retirement System and the Healthcare of Ontario Pension Plan.

The FSRA indicated it submitted its 2019-22 business plan to the Ministry of Finance on Feb. 28, and it will be posted online once approved.