The Office of the Superintendent of Financial Institutions (OSFI) issued a Guide to Intervention for Federally Regulated Private Pension Plans on January 21, 2011. The objective of the Intervention Guide is to promote awareness and enhance the transparency of the intervention process used by OSFI for federally regulated private pension plans. It outlines when and how OSFI will intervene, depending on the particular pension plan’s Composite Risk Rating (CRR), which reflects OSFI’s overall risk assessment of the plan.
“Stage Ratings” identify the applicable interventions that may be initiated by OSFI and there are three stages that are of main concern: Stage 1 (Early Warning), Stage 2 (Risk to Solvency), and Stage 3 (Future Solvency in Serious Doubt). Key examples of the triggers for each stage and the regulatory actions that OSFI may pursue, are outlined below.
STAGE 1 – EARLY WARNING
At this stage, OSFI may have identified deficiencies in the plan that are within the administrator’s abilities to address. Regulatory actions may include:
- Recommend the administrator provide appropriate disclosure to plan members;
- Recommend scenario/stress testing be conducted;
- Confirm with Asset holder/custodian that required contributions have been remitted to pension fund;
- Obtain an action plan from the administrator to address issues.
STAGE 2 – RISK TO SOLVENCY
OSFI has identified problems that pose a threat to the security of members’ benefits, which could deteriorate into a serious situation if not addressed promptly, and at this stage, OSFI would intensity its supervisory interventions. Regulatory actions may include:
- Require early filing of actuarial report;
- Require the plan administrator to hold a meeting with plan members or other relevant parties;
- Require freezing/restricting portability for transfer of benefits from the plan or annuity purchases that would impair the solvency of the plan.
STAGE 3 – FUTURE SOLVENCY IN SERIOUS DOUBT
At this stage, OSFI has identified material and immediate threats to members’ benefits and would escalate its interventions further. Regulatory actions may include:
- Issue a Direction of Compliance;
- Revoke the plan registration where a Direction has not been complied with;
- Terminate the plan;
- Bring an action against the administrator, employer or any other person.
The release of OSFI’s Intervention Guide is consistent with other recent developments in federal pension law, including Bill C-9 (Jobs and Economic Growth Act ) and Bill C-47 (Sustaining Canada’s Economic Recovery Act ) which resulted in various amendments to requirements in the Pension Benefits Standards Act, 1985, as well as recent changes to the Pension Benefits Standards Regulations, 1985.
OSFI’s Intervention Guide can be found at: