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MEBCO’S Feedback on FSRA’s Supervisory Approach to Target Benefit Implementation Guidance

June 5, 2025

Dear Paul:

We are writing to submit our comments and recommendations with respect to FSRA’s Supervisory Approach to Target Benefit Implementation Guidance. On behalf of MEBCO’s Ontario-registered pension plan members we appreciate the effort the Ministry of Finance and FSRA have allocated to this important achievement.

About MEBCO

The Multi-Employer Benefit Plan Council of Canada (MEBCO) in a not-for-profit corporation, established in 1992 to represent the interests of Canadian multi-employer pension and benefit plans (MEPs). MEBCO consults with provincial and federal governments regarding proposed or existing legislation and policies affecting these plans. MEBCO is a federal no-share capital corporation.

Here are MEBCO’s comments:

Reference to Leading Practices

The Guidance states:

1. “The TB Framework incorporates many important leading risk management and governance practices that were identified in FSRA’s supervisory work with MEPPs to date, set out in FSRA’s DB MEPP Leading Practices Information
2. This target benefit Supervisory Approach Guidance is intended to complement and support the permanent TB Framework”

We think it would be helpful if the Guidance emphasizes that the supervisory work was with DB MEPPs only and does not apply to DC MEPPs.

Examples:

In general, we believe FSRA should provide examples of documents and concepts they refer to in the Guidance. In many cases the Guidance references the Regulations however plan administrators will be looking for guidance beyond the language of the Regulations. We do not want the Guidance to be overly prescriptive but simply that it provides some examples or suggestions for compliance.

We are concerned that pension plans will go to significant expense to prepare documents and processes they believe are appropriate and FSRA may disagree which will be a waste of fiduciary and other stakeholder time and pension plan funds.

Multi-Jurisdictional Pension Plans

We are very concerned about the potential instability the Guidance indicates for a pension plan that could transfer its major regulator to Ontario from a jurisdiction where the plan was already registered target benefit plan. Take for example a plan that is currently registered in the Province of British Columbia as a target benefit plan and then transfers to Ontario. The Guidance indicates the pension plan must make application and satisfy FSRA that it qualifies for registration as a target benefit plan. Further the Guidance makes it clear the pension plan should not assume it will be registered as a target benefit pension plan. In such cases, we believe that there should be an expediated or simplified process for having the plan registered as a TB plan in Ontario.

Further if the pension plan registered in another jurisdiction has a membership of greater than 10% in the Province of New Brunswick the Guidance states that registration as a target benefit plan is not possible.

We think the multi-jurisdictional provisions need to be carefully reviewed and amended.

Good Faith

The Guidance states:

The term "good faith" is used in the Guidance however it is not defined. We also find the term to be qualitative. FSRA also does not define “consult” or “consultation”. For example, does FSRA expect pension plans to inform the applicable parties and ask for feedback by a specified date as “consultation”?

It would be helpful if FSRA provided examples or some suggestions for what it would consider as good faith consultations.

PfAD Examination

The Guidance indicates a potentially expensive and unclear set of tests a plan administrator should consider when constructing its PfAD. The Guidance states

For the PfAD, as may be required by FSRA under section 98.2 of the PBA, any supporting documents and analysis used to support the development of the PfAD must be made available to FSRA when requested through more targeted engagements. These could include, but are not limited to, the following: projections.

• Short- and long-term funding
• Projections of financial results under alternative funding methods.
• Asset / Liability studies.
• Stress testing and/or sustainability testing involving the use of deterministic or stochastic modelling; and
• Financial Modeling.

There should be some parameters set for pension plans of various asset sizes or another risk metric as many smaller pension plans would not be able to afford many of the items in the list above yet are viable target benefit plans. Would FSRA clarify that the stress testing required under actuarial standards should be sufficient?

General observation when determining PfAD on page 9. The Guidance states “When determining the PfAD the administrator should consider the risks that could affect the plan’s ability to achieve its funding and benefits objectives. These could include:

• Changes to the actuarial assumptions in the base economic model from when benefits were set to the current time. For example, changes to:
  • Expected returns
  • Standard deviation of specific asset classes
  • Correlations between asset classes; and
  • Inflation.
• Adverse plan experience from economic and demographic factors compared to that expected in the actuarial valuation assumptions. For example, expected rates of return below expectations or membership longevity above expectations;
• Material changes to the composition of plan membership. For example, increasing inactive membership or increasing age of active membership;
• Any asset of liability mismatch inherent in the plan’s investment policy any industry-specific risk such as a significant decline in new memes or hours worked; and
• Sponsor or participating employer’s risk, such as the failure or withdrawal of a sponsor or one or more participating employers.

We are concerned that while the list above is broad, the context is not clear. Many of the tests would be included under actuarial standards for preparing stress tests. Other items are included in typical asset-liability studies.

Content and Timing of Notices

The Guidance does not provide examples or timelines for the sending of notices or plan amendments. It would be helpful if the Guidance provided suggestions for streamlining the notice provisions so that only a single notice was required for the entire conversion process.

New Target Benefit Plans

The Guidance describes a five-year window commencing January 1, 2025 and ending December 31, 2029. There is no guidance for a pension plan that is established after this window.

We would be pleased to discuss our comments on the Draft Guidance and invite you to contact us should you have any questions, or if we can be of further assistance.

Yours truly,

Alex McKinnon, MEBCO President

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