The Financial Services Regulatory Authority of Ontario has unveiled its priorities for the next three years, including plans to reshape its supervisory role for the province’s defined contribution pension plans.
The FSRA’s plan for the financial years 2021-2024, includes three major initiative categories: the first covers a series of goals related to supporting the flexibility of DC pension plans through changes to the existing regulatory and legislative status quo; the second covers the FSRA’s work creating a new prudential supervision framework for itself; and the third covers efforts to refocus pension regulations and improve regulatory efficiency and effectiveness.
In its work supporting the flexibility of pension plans, the FSRA has outlined three major goals for the end of the 2023-24 financial year. It will aim to make the administration of pension plans less of an impediment for employers, make pensions more transparent to plan members and to inspire innovative ideas in pension investors.
To do this, the FSRA will continue to consult with the technical advisory committee that it established in January 2021. By the end of the 2021/22 financial year, the regulator will also establish a new committee mandated to engage the pension sector in discussions aimed at promoting thought leadership and communication within the industry. These efforts are set to conclude by the end of the 2022/23 financial year.
The FSRA is aiming to carry on work developing and consulting on a new prudential supervision framework. The updated framework will be completed by the end of the fiscal year 2023/24. Prior to its completion, staff will collaborate with officials from the Ministry of Finance, which has already identified areas of regulatory improvement.
In its ongoing efforts to create a new prudential supervision framework for itself, the FSRA is aiming to enhance its staff’s understanding of issues and risks for DC plan members and administrators, to adopt a more appropriate supervisory approach for DC pension plans and to improve its regulatory efficiency and effectiveness.
In working toward its goal to improve the efficiency and effectiveness of its regulatory activities, the FSRA will aim to complete an update of its guidance framework, which describes approaches, process improvements and modern information management and information technology strategies.
As part of this, the FRSA is aiming to conclude its work with a special purpose technical advisory committee and the Office of the Superintendent of Financial Institutions. The three groups have been collaborating to produce a draft of new, principles-based, outcomes-focused rules of engagement for the FRSA in its work supervising DC pension plans.
The draft is expected to include changes related to member behaviour and engagement, investments, fees and governance. It will be released toward the end of the 2021/22 financial year, beginning a one-year period of public consultation.
It will also conclude its work with another committee that has been consulting on how to provide administrators and beneficiaries with simpler, clearer guidance on how pensions should be divided following marital breakdowns. The FSRA is aiming to release these new guidelines toward the end of the 2023/24 financial year.
In order to improve its effectiveness and efficiency as a regulator over the next three years, the FSRA will be making improvements to its predictive analysis capabilities, adopt new common liquidity metrics and scorecard and benchmarking systems.
Improvements to existing predictive analysis capabilities will be aimed at defined benefit plans eligible for the pension benefits guarantee fund in Ontario engaging with single-employer plans monitored by the FSRA.
The regulator will also pilot common liquidity metrics in order to improve its ability to supervise liquidity, governance and systemic risks to Ontario’s largest public sector DB plans.
It will also use scorecard and benchmarking systems with multi-employer pension plans, with the aim of offering a more unified approach to overseeing governance, risk management, operations and communications across all MEPPs.