Submission to FSRA on Asset Transfers
On December 2, 2020, PIAC responded to FSRA’s consultation on its draft Supervisory Approach to Asset Transfers under the Pension Benefits Act. PIAC supported the proposal and offered suggestions to further improve the draft guidance in three key areas:
- PIAC agrees with a consistent approach to Notices of Intended Decisions across all types of asset transfers but has a number of concerns over the 10-day notice period.
- Policy already requires the consent of each pension regulator so it is unclear why FSRA would need a more detailed review where an asset transfer application includes multiple pension plans or members in other pension jurisdictions. PIAC called for improvements to the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans to reduce interprovincial barriers and red tape.
- FSRA’s public postings on approved variances should be broad in scope to avoid disclosure of sensitive information about individual transfers.
On November 27, 2020, PIAC responded to a consultation by the Canadian Institute of Actuaries’ (CIA) Actuarial Standards Board (ASB) on its Quinquennial Review of Part 3000. PIAC focused on three areas:
- Benefits Security
PIAC stated that the meaning of benefits security, and any mandated disclosures and related calculations are a public policy issue for law makers and regulators and not the responsibility of the ASB. “Going concern plus” funding is an appropriate and adequate measure to ensure the long-term funding of DB plans.
- Meaningful Stress Testing
Stress testing standards should be principles-based and involve a risk review by the actuary and plan sponsor(s) / administrator. PIAC offered to assist the CIA in developing educational materials to help actuaries understand leverage, its inherent risks, and its impact on the expected return on assets and in turn on the discount rate; as well as the valuation methods for many of the privately traded alternative asset classes and their impact on smoothing of the value of these assets.
- Pension Plans
In hypothetical wind-up valuations, PIAC raised the concern that disclosure of a worst-case scenario on wind-up (such as a bankruptcy) will likely lead to disclosure and communication challenges for plan sponsors with their employees and plan members. Moreover, there is the potential for unintended consequences whereby the disclosure of the scenario motivates regulators to use it as a minimum actuarial standard to calculate transfer value ratios, which would ultimately lead to higher costs for plan sponsors.