The Office of the Superintendent of Financial Institutions is introducing regulations amending the assessment of pension plans on April 1, 2019.
The amendments aim to streamline the process and eliminate assessments for certain terminated pension plans, noted a release from the OSFI. In July 2018, it consulted with plan administrators about the proposed amendments, with no concerns or objections brought forward.
So what do these changes mean for plan sponsors?
“The recent reforms modify two aspects of these regulations — the process to pay assessments and the circumstances where assessments will no longer be required to be paid,” says Jon Marin, an associate at Osler, Hoskin & Harcourt LLP. “Currently, the administrator of a federally regulated pension plan is required to calculate the annual assessment themselves and to submit the payment to OSFI along with a completed pension plan assessment remittance form.
“Experience has shown this approach frequently results in calculation errors, meaning OSFI has had to devote time and resources to recalculate the assessment and issue additional invoices or reimbursements.”
The most far-reaching change, says Marin, is eliminating the requirement for plan administrators to calculate the annual assessment and submit this form. “Instead, OSFI will determine the assessment due and invoice the plan for the amount owing. This is a welcomed change as it will simplify the assessment process for plan administrators and allow internal resources to be used for other purposes.”
The OSFI is expecting to prepare an invoice 45 days after determining the assessment, noted the release. It also said the amendments will enable the superintendent to determine a pension plan’s assessment after the plan has filed its application for registration or its annual information return. The OSFI will then determine what assessment, if any, is due and send an invoice to all plans.
The changes to the regulations also include identifying circumstances where assessments will no longer be required, says Marin. “First, assessments will no longer be required for a plan that’s been terminated for five or more plan years, which has the benefit of reducing some of the plan’s ongoing costs during an extended windup. Second, assessments will no longer be required where a plan is underfunded and the employer is bankrupt or insolvent, which is a positive change as it is one means to avoid further reduction to the benefits to be paid to plan beneficiaries in these circumstances.”
Finally, he says, where a pension plan has been terminated, assessments will no longer be payable to individuals whose benefits are no longer payable under the plan, “either as a result of the member exercising transfer or portability rights or the plan administrator having purchased an annuity for such person.”