Ontario’s pension regulatory landscape has seen a number of recent changes, with many of these affecting defined contribution plan sponsors, according to one expert.
Speaking at the 2018 Defined Contribution Investment Forum in Toronto in September, Mark Eagles, senior manager for pension policy at the Financial Services Commission of Ontario, took delegates through the changes.
The superintendent of pensions is now able to issue administrative penalties for activities that fail to comply with regulations, such as late filings or omissions in filings, said Eagles, noting the FSCO will be publishing guidelines for the penalties imminently. For now, it has established that the penalties are intended to promote compliance, are discretionary and can be imposed either by themselves or with other disciplinary measures. As well, the revenue to pay any penalty can’t come from the pension fund and isn’t directed to the FSCO. Instead, it will be paid to the Ontario government’s consolidated revenue. Also, these penalties don’t require a pleading or finding of guilt to be imposed. “We’ve always had the ability to fine companies, but you had to go to court and it took years and cost a lot of money,” said Eagles.
As for when the penalties will apply, they can’t be imposed on a pre-2018 event, but if an event began before 2018 and continued through the end of that year, it can be, noted Eagles. For late filings, penalties will accrue on a daily basis of either $100 or $200 per day with a maximum penalty of $10,000 for individuals or $25,000 for corporations.
“What we’re hoping to get is some degree of rule-making ability, so that we can be a little more nimble and reflect realities of the industry,” said Eagles.
Another recent change is that, as of 2017, terminated members whose benefits remain in the plan must receive a statement at least every two years. While most DC plans send statements more frequently, if a member has no current address on file with the employer, the administrator can request a waiver from the FCSO. Eagles emphasized that as fiduciaries, administrators should never send personal financial information to a member’s address if there’s any evidence showing that address isn’t current.
Looking ahead, it will be likely that missing members’ data will feed into a database administrated by the FSCO, where members can check whether their previous employers have had difficulty getting pension benefits to them, noted Eagles. The pension industry has expressed a need for the option to transfer the entitlements of missing members out to some kind of depository institution, he said.
Further, with regard to statements of investment policies and procedures, recent changes to regulations were concerning for many DC plans, since they require all SIPPs to allocate assets to investment classes. Eagles said the FSCO has recognized this isn’t really appropriate for DC plans, and it won’t be issuing monetary penalties for failure to comply to this rule alone.
“There have been a lot of regulation changes in Ontario that are heavily prescriptive in terms of what you must do to comply and there’s no leeway,” said Eagles. “There is no ability for the superintendent to take into account the facts of a situation and not apply some of those rules.”
Decumulation strategies for DC plans are quite lacking at present, he noted. Currently, the only two options are to purchase an individual annuity or to transfer the account balance to a life income fund. However, Ontario has announced changes to the Pensions and Benefits Act permitting LIF-like payments, or variable benefits, to come directly from a DC plan, which should be a lower-cost option compared to an individual LIF, said Eagles.
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