As of July 28, 2021 the Financial Services Regulatory Authority of Ontario (“FSRA”) released a final guide outlining the roles and responsibilities of pension plan administrators. The guide aims to consolidate and update four existing guides and outlines regulatory principles in pension plan risk management, respective responsibilities for employers and plan sponsors, statutory obligations, and base standards of care.
The pension plan administrator’s responsibilities include providing information to plan members in compliance with applicable provincial and federal regulations, managing the pension fund as per the terms of the plan, maintaining accurate records, ensuring the plan is funded with sufficient contributions, and providing benefit payments to plan beneficiaries and former members of the plan. The administrator must also implement processes to ensure any risks which might impact the promised pension benefits are addressed. Additional administrator roles are outlined in the Pension Benefits Act, the pension plan documents, and any other applicable legislation.
The pension plan sponsor is responsible for the design and implementation of the plan, including adjustments for any amendments or plan termination. The employer must have an understanding of the aforementioned risks to the plan and must make required contributions to ensure the plan is sufficiently funded.
Specifically, the guidance focuses on the potential conflicts of interest that may arise from situations where the employer acts as both plan administrator and plan sponsor. Employers are tasked with acting in the best interest of the corporation which may not always align with the best interests of plan beneficiaries. One example of this conflict arises in invoicing for payment of services. Plan sponsor’s activities are not payable from the pension fund, contrary to administrator activities. Further, certain administrator and actuarial services that are not specifically in the interest of plan beneficiaries, such as valuations to reduce required employer contributions, are not payable from the plan. The payment of fees becomes especially complex when the plan sponsor acts as administrator and the conflict of interest arises when they must determine if service fees are payable from the plan or directly invoiced to the company.
The FSRA maintains the guide does not represent a complete representation of all duties required of the pension plan administrator, and the administrator is responsible for performing their duties in accordance with applicable law and meeting the necessary standard of care as outlined by the Canadian Association of Pension Supervisory Authorities.