As we discussed in our April post, in late 2017, the Ontario pension regulator, the Financial Services Commission of Ontario (“FSCO”), announced that it was undertaking a series of “targeted reviews” of selected pension plans. FSCO recently released the results of its targeted review of Form 7 – Contribution Reporting & Monitoring Process.
Targeted Review Process
According to FSCO, the targeted review of selected pension plans is intended to: (i) help ensure compliance with the Pension Benefits Act (Ontario) (“PBA”) and FSCO policies; (ii) identify common issues and trends; and (iii) determine if and what further guidance or education the industry may need.
FSCO has not indicated on what basis plans are being or will be selected for a targeted review but has committed to posting a notification on its website before each targeted review begins.
If a plan is selected for a targeted review, the plan administrator will be contacted by FSCO, by mail or email, and advised that its plan has been selected for review. The plan administrator will be advised that it has a defined period of time to provide requested information.
Form 7 Targeted Review
In November 2017, FSCO undertook a targeted review of Form 7 – Summary of Contributions / Revised Summary of Contributions. Under the PBA, pension plan administrators are required to complete and file a Form 7 with the pension fund trustee on an annual basis. In turn, the trustee is required to notify the Ontario Superintendent of Financial Services if it does not receive a Form 7 or if a contribution is not paid in accordance with Form 7.
In its review of the Form 7 process, FSCO targeted 168 defined benefit plans (which plans included some combination plans) and 75 defined contribution plans. The purpose of the review was to determine whether plan administrators are correctly completing the Form 7s and whether pension fund trustees are reporting non-remittances or variances to the pension fund.
According to FSCO’s report on the results of the Form 7 Targeted Review, while more than 99% of plan administrators were aware of the requirement to complete Form 7, there were a number of problems with the quality of the reporting. Specifically, FSCO reported that:
- contributions were not correctly remitted to the pension fund under 35% of defined benefit plans and 35% of defined contribution plans;
- the Form 7 was not completed properly in respect of 26% of defined benefit plans and 35% of defined contribution plans;
- non-remittances or variances were not reported to FSCO in respect of 84% of defined benefit plans and 96% of defined contribution plans; and
- 22% of defined benefit plans and 29% of defined contribution plans did not use the updated Form 7.
The results of the Form 7 targeted review are concerning and demonstrate a lack of understanding of the contribution reporting and monitoring process. In response, among other things, FSCO has indicated that it will increase monitoring and enforcement action activities for administrators, trustees and custodians who do not report missing or late contributions and will explore changes to the Form 7 reporting and monitoring process to make it more effective. Plan administrators, trustees and custodians should ensure that they are correctly reporting and monitoring pension fund contributions in order to avoid penalties under the legislation.