The Financial Services Regulatory Authority of Ontario (FSRA) has published its third quarter solvency report for defined benefit (DB) pension plans, showing a two percentage point decrease over the last quarter’s overall funded position – this slipped to 121 per cent as of September 30, down from 123 per cent as of June 30. They say solvency discount rates decreased from one quarter to the next, resulting in an increase in plan liabilities, which largely offset the impact of asset gains made over the quarter.

The percentage of pension plans projected to be fully funded on a solvency basis, remains unchanged at 90 per cent. “Only two per cent of plans had a solvency ratio below 85 per cent, also unchanged from last quarter,” the report states. They add that investment returns were positive across all asset classes during the third quarter of 2024, averaging a net return of 6.3 per cent.

Reassess investment strategies 

“Potential interest rate declines could negatively impact funding levels,” FSRA’s chief actuary, pensions, Lester Wong warns. “FSRA encourages pension plans to use stress tests, modelling and other analytical tools to proactively manage risk and reassess investment strategies to ensure financial resilience,” they add.

The Quarterly update on Estimated Solvency Funded Status of Defined Benefit Pension Plans in Ontario, they say, “is one of the supervisory tools FSRA utilizes to improve outcomes for pension plan beneficiaries and to proactively engage in a dialogue with plan sponsors where there may be a concern over the security of the pension benefits. It should also be useful for plan fiduciaries,” the report states.

“After seven consecutive quarters where the median projected solvency ratio steadily increased, the trend has been broken as it deteriorated over the quarter. While the overall funded position of plans remains strong at 121 per cent, this pause serves as a reminder to plan sponsors and administrators to remain vigilant, be future-focused and strategic in managing plan risks as market conditions evolve.”