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Alert: FSRA Releases Approach to Limitations on Defined Benefit Commuted Value Transfers and Annuity Purchases

May 29, 2020

On May 22, 2020, the Financial Services Regulatory Authority of Ontario (FSRA) released Approach No. PE0202APP: Limitations on Commuted Value Transfers and Annuity Purchases (DB Pension Plans) (Approach), which outlines FSRA’s approach to reviewing applications to transfer commuted values (CVs) or to purchase annuities pursuant to sections 19(4) and (5) of Regulation 909 (Regulation) under the Pension Benefits Act (PBA).

Administrators of defined benefit pension plans should carefully consider the Approach given recent market volatility arising from the COVID-19 pandemic. The Approach was developed to address events when a defined benefit pension plan’s transfer ratio (TR) has declined by 10 per cent or more and the resulting TR is below 0.9. The Approach has significant differences from and replaces Financial Services Commission of Ontario Policy T800-402, Commuted Value Transfers until further notice.


Sections 19(4) and 19(5) of the Regulation are triggered if the plan administrator “knows or ought to know” that since the date of the most recently filed valuation report, events have taken place that result in a reduction in the TR: (i) to less than 0.9 when the TR was equal to or greater than 1.0, or (ii) of at least 10 per cent when the TR was less than 1.0. Where sections 19(4) and 19(5) of the Regulation apply, then all CV transfers, and annuity purchases under section 43 of the PBA, are automatically suspended. In these circumstances, administrators may choose to apply to FSRA for approval to continue CV transfers and/or annuity purchases.

Additionally, when sections 19(4) and 19(5) of the Regulation apply, the provisions of sections 19(6), (7), (7.1) and (7.2) of the Regulation do not automatically apply. However, FSRA’s approvals may set out similar requirements.

FSRA has indicated that during periods of market uncertainty, administrators should be ready to determine if section 19(4) or (5) of the Regulation apply at any time. Administrators cannot rely solely on carrying out quarterly checks of the TR.


The Approach sets out three processes for applications in respect of CV transfers, set out in further detail below. The Approach indicates that when reviewing an application to continue CV transfers, FSRA will consider an expedited review process for those that qualify. For all other applications to continue CV transfers, there will be a more in-depth review process which will require more time. FSRA has outlined that administrators should consider the situation as soon as practicable after becoming aware that section 19(4) or (5) of the Regulation has been triggered. Administrators need to assess, in their fiduciary capacity, whether it is in the best interests of all plan beneficiaries, and the sustainability of the pension plan, to request a continuation of CV transfers, and, if so, at what level. The administrator should inform FSRA of its decision and intended plan of action in a timely manner.

A Form 10, Request for Approval to Transfer Commuted Values or Purchase Annuities (Form 10) is required to be filed if CV transfers are to continue. The applicant does not need to specify an expedited or in-depth review process—FSRA will determine the level of review. FSRA may deny approval to any application and has authority to add terms and conditions to its approval and/or request additional information.

The Approach indicates that FSRA may carry out ongoing supervision of the pension plans, whether a Form 10 is filed or not, and FSRA may require additional information or reporting while the circumstances leading to the triggering of section 19(4) or (5) of the Regulation persists.

1. No Approval Requested

In some cases, an administrator, after fully considering its obligations under the PBA and its fiduciary obligations to all plan beneficiaries, may decide that the best course of action until plan stability has improved is not to apply for approval to continue CV transfers. The result would be a continued cessation of all CV transfers. Administrators should obtain legal and actuarial advice before making this decision.

FSRA has requested to be notified in a timely manner if an administrator does not apply for approval to continue CV transfers. An administrator should explain the reasons for taking this approach and the factors that were considered; for example, infrequent terminations, liquidity considerations, balancing the interests of all plan beneficiaries and financial conditions of participating employers. In addition, the administrator should indicate: (i) how long the cessation of CV transfers is expected to continue, (ii) what communication is being made to plan beneficiaries, and (iii) what steps are being taken to return to a situation where CV transfers can be made. FSRA may request additional information.

2. Expedited Process

FSRA has outlined in the Approach that an application will generally be considered under the expedited process if:

  1. The administrator proposes to transfer out full CVs if it is satisfied that an amount equal to the full transfer deficiency—based on the updated TR—has been remitted to the fund by the participating employer with respect to each CV transfer; or
  2. The pension plan’s updated TR is at least 0.85 and the administrator proposes to transfer out full CVs, so long as the aggregate of all transfer deficiencies since the last valuation date does not exceed five per cent of the plan’s assets at that time; or
  3. The updated TR is less than 0.85 and the administrator proposes to only transfer out a portion of the CV at the updated TR, with the remainder being transferred out within no more than five years.

Under this expedited process, FSRA has indicated that it will strive to respond to applicants within five business days of receiving a completed Form 10.  FSRA may determine that it requires additional review under the in-depth process (discussed below) or allow an expedited process on more lenient terms. 

3. In-Depth Process

The Approach outlines that FSRA’s in-depth review and decision-making regarding applications may take into consideration, amongst other things, factors including the financial position of the plan, liquidity concerns (or lack of such concerns), the expected frequency of terminations and the average size of termination CVs and concern about the employer(s)’ ability to absorb fluctuations in plan costs or fund deficiencies on wind up. While FSRA will strive to respond to the applicant within 15 to 20 business days, administrators should expect that this review process may, in some cases, take longer.


The terms and conditions attached to any approval granted under the expedited or in-depth process will often include: imposing a similar test to the one in section 19(6)(b) of the Regulation (or something more restrictive); a requirement to transfer only a portion of CVs; rules regarding when requirements/applicability of the approval will cease to apply; rules concerning when any remaining portion of the CVs can be transferred; and other exceptions and requirements relating to the approval.

Any approval given by FSRA remains in effect until the earlier of the date the next valuation report is filed or the date the TR drops by five per cent or more from the level identified in the most recently filed Form 10—triggering a new cessation of CV transfers—or until FSRA revises its previous decision.


Administrators that elect not to file a Form 10 are expected to have a plan to allow them to return to a situation where CVs can be transferred. Those administrators can resume making CV transfers if (i) a new, full valuation report is filed pursuant to section 3 or 14 of the Regulation and CVs can be transferred pursuant to the requirements of section 19 of the Regulation, (ii) FSRA approval is obtained after filing a Form 10 with an updated TR, determined as at the date the past event under section 19(4) or (5) of the Regulation occurred (i.e., for which the administrator initially did not file a Form 10), or (iii) at the same time as filing a Form 10 or later, and if in accordance with FSRA’s approval, the administrator also files a statement signed by the plan’s actuary within 60 days of the measurement date, showing an estimated updated TR which is equal to or greater than 0.9.

Administrators who have filed a Form 10 and have been denied approval by FSRA to transfer CVs or have been approved to transfer CVs at less than 100 per cent can resume unreduced CV transfers if (i) a new, full valuation report is filed pursuant to section 3 or 14 of the Regulation and the TR is equal or greater than 1.0 or the conditions in section 19(6) are satisfied, (ii) participating employers fully fund deficiencies with respect to all CV transfers, or (iii) it is a term of FSRA’s prior approval, and a statement signed by the plan’s actuary is filed with FSRA (within 60 days of the measurement date of the TR) showing an estimated updated TR of equal to or greater than 0.9.


Where an administrator knew or ought to have known that a section 19(4) or (5) of the Regulation event has occurred because its plan’s TR fell by at least 10 per cent and the resulting TR ratio is below 0.9, and the administrator received approval to transfer CVs on some basis after filing a Form 10, and then, subsequently knows or ought to know that the plan’s TR has declined by at least an additional five per cent from the level identified in the previously filed—and still in effect—Form 10, the administrator must again cease transferring CVs and decide whether to file another Form 10 reflecting the newly updated TR.


The Approach provides that “small benefit” transfers and transfers made pursuant to a reciprocal transfer agreement are exempted from the operation of sections 19(2) to 19(7) of the Regulation. Additionally, FSRA will generally authorize transferring (as a term or condition) CVs in the following circumstances:

  • Already existing transfer deficiencies will continue to be subject to any existing terms and conditions established when the deficiency arose;
  • Benefits payable under a shortened life expectancy provision will be payable in full; and
  • Death benefits pursuant to section 48 of the PBA, or the remainder of any guarantee period for a post-retirement death, will be payable in full.


An administrator must consider its fiduciary obligations when deciding when and what to report to beneficiaries once the conditions in 19(4) or (5) of the Regulation have been met. This is true whether or not the administrator files a Form 10 or FSRA approval is received.

FSRA has indicated that, generally, administrators should inform persons entitled to a CV transfer pursuant to the PBA or plan terms about any restrictions that apply to the transfer of CVs. Administrators must continue to provide eligible terminating and retiring beneficiaries with option statements containing the information required by the PBA and Regulation within prescribed timelines. Those statements must inform the recipient if all or a portion of the CV must remain in the plan, and the time frame within which the remainder is expected to be transferred out.

Administrators must take into account the current situation when considering whether to allow beneficiaries to exercise rights under the plan that are subject to time limits.


If FSRA approves the continuation of CV transfers at less than 100 per cent, then it will generally make it a term of its approval that the remainder must be transferred out within no more than five years. The terms on which the transfer of the remainder will be made will be agreed with FSRA in the approval or otherwise on a case-by-case basis.


For administrators who wish to purchase annuities pursuant to section 43 of the PBA, if section 19(4) or (5) of the Regulation apply, a Form 10 must be filed and the approval of FSRA must be received. FSRA will generally require employers to contribute the full amount of any deficiency—based on the updated TR—before the purchase can be made.

Annuity purchases made pursuant to section 43.1 of the PBA are not subject to section 19 of the Regulation, but must comply with the requirements of section 43.1 and applicable regulation.
For further information, please reach out to a member of our Pensions, Benefits & Executive Compensation group or your usual Blakes contact.

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