The Financial Services Regulatory Authority of Ontario has issued new guidance on transferring commuted values and purchasing annuities when a pension plan’s transfer ratio has declined since the most recently filed valuation report by 10 per cent and is now below 0.9.

If the defined benefit plan’s transfer ratio is less than 1.0 the plan can only transfer the portion of the commuted value equal to the commuted value multiplied by the transfer ratio reported in the last filed valuation report. However, there are two exceptions: the administrator is satisfied that an amount equal to transfer deficiency has been remitted to the pension fund; or the aggregate of all transfer deficiencies for all transfers made since the effective date of the last filed valuation report is less than five per cent of plan assets.

Read: Changes coming for pension plan commuted-value standards

In addition, if the plan administrator “knows or ought to know” that, since the date of the most recently filed valuation report, events have taken place that led to the reduction in the transfer ratio to less than 0.9 when the transfer ratios was more than 1.0, or at least 10 per cent when the transfer ratio was less than 1.0, then all commuted-value transfers will be automatically suspended.

In these circumstances, administrators can choose to apply to the FSRA for approval to continue commuted-value transfers and/or annuity purchases.

The FSRA has also updated the information on plausible adverse scenarios in actuarial valuation reports. And, following on from the Ontario government’s amendment in early May, it has updated its information on temporary relief to pension plan sponsors that are unable to pay their pension benefits guarantee fund assessment on time, a move that is further to the FSRA’s previous communication about deferring PBGF assessment certificates.

Read: Ontario temporarily slashes penalties for PBGF non-payment

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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