In January 2010, the Financial Services Commission of Ontario (FSCO) released a consultation paper outlining proposals to streamline the regulatory review process for defined benefit (DB) applications (PDF). The proposals outlined in the most recent paper – an earlier consultation process had taken place in the spring of 2009 – are designed to lead to more accurate and timely processing of applications involving DB pension plans (including applications in respect of surplus withdrawals, wind ups, asset transfers, refunds of employer overpayments and refunds of member contributions).
The paper proposes several solutions to address problems inherent in processing DB applications:
- Incomplete applications: FSCO will create more standardized applications, and a specific process will be followed by FSCO to address non-compliant or incomplete applications. This is a welcome reform, in that FSCO is proposing that meetings or conference calls would be held to discuss incomplete applications. Currently, incomplete applications are often dealt with through an exchange of written correspondence between FSCO and the applicant, which can continue over months or even years.
- Resolution of prior transactions: FSCO will not delay processing a more recent application if a prior pending transaction does not significantly affect the subsequent application. This is also a welcome reform, since FSCO’s current practice is to delay processing an application if a prior application affecting the same pension plan is pending. If the pending application would have no direct bearing on the subsequent application, it makes sense for FSCO to process the subsequent application without delay.
- Contested applications: Applicants will be given 30 days to respond to any objections, and complainants will be given 30 days to reply. In addition, complainants will be invited to attend any compliance meetings with FSCO staff.
- Analysis of trust law: FSCO has recognized that applications involving DB plans are often delayed because FSCO staff must undertake a trust law analysis of current and historical plan documents. This state of affairs has arisen as a result of court cases such as Tecsyn and Transamerica (PDF). While some pension plan sponsors would like to see FSCO apply a “less stringent” approach despite the pronouncements of the courts, FSCO has correctly suggested that legislative reform is required to address this issue.
- Lack of service goals and performance measures: FSCO will create service goals for approving complete and compliant applications. While it is helpful for FSCO to publish service goals that it will strive to meet where an application is compliant (no missing documents, complies with law and policy, uncontested), the time needed to review and approve certain applications is arguably still too long (e.g., 150 days – 5 months – to review and approve a surplus withdrawal application).
The proposed solutions outlined by FSCO are a step in the right direction, and if implemented should help DB applications to be processed in a more timely manner. As FSCO correctly points out, however, the only way to truly streamline the regulatory process is through legislative reform. Bill 236 is a first step in this direction (see our December 10, 2009 and January 7, 2010 posts discussing pension reform in Ontario).
FSCO is inviting stakeholders to submit comments on the consultation paper, by February 10, 2010.