Regulator report says defined benefits pension plans performed well in 2022

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By Mehreen Shahid | Sept. 1, 2023, 2:20 p.m.

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A report by the Financial Services Regulatory Authority of Ontario (FSRA) says that defined benefit (DB) pension plans in Ontario remained financially healthy in 2022.

The 2022 Report on the Funding of Defined Benefit Pension Plans in Ontario, released in July 2023, determines pension plan health by considering three categories: general funded status, solvency funding and fund investment.

The 2022 report is based on the latest filed valuation reports for DB plans that have valuation dates between July 1, 2019, and June 30, 2022, and fund financial statements for the fiscal year ending between July 1, 2021, and June 30, 2022.

The report says the number of pension plans continues to trend lower, with a reduction of 68 single-employer pension plans and one multi-employer pension plan compared to what’s recorded in the previous year’s report. The industry regulator says this trend is primarily a result of windups and asset transfer transactions. There was one new listed jointly sponsored pension plan.

Overall, the report says, compared with the 2021 report, the funded position of the pension plans (as at last filed valuation dates) has improved on both a going-concern basis and a solvency basis.

The numbers show that on a going-concern basis, the 2022 median funded ratio was 111 per cent, compared with 108 per cent in 2021. In addition, more plans were considered fully funded on this basis: 83 per cent in 2022, compared with 76 per cent in 2021.

On a solvency basis, the median funded ratio in 2022 stood at 102 per cent, compared with 97 per cent the previous year. On this basis, 56 per cent of funds were considered fully funded, compared with 41 per cent in 2021.

“The improvement in the projected solvency ratio is primarily attributed to a significant increase in solvency valuation discount rates,” write the experts. “However, this impact was mostly offset by double-digit negative investment returns in 2022.”

The report also says that minimum required contributions for 2023, including employer normal cost contributions, member-required contributions and special payments, are estimated to increase by about three per cent from the 2022 level.