Recent Changes To SIP&Ps

Starting January 1, 2016, plan administrators of Ontario registered pension plans have had to submit the statement of investment policies and procedures (SIP&P) electronically via the Financial Services Commission of Ontario (FSCO)’s Pension Services Portal.

Other changes to SIP&P that became effective this year include:

• The requirement for administrators to include specific information in their plan member annual statements, as well as in biennial retired and former member statements with regard to the SIP&P, including how members can access it.
• The guidance issued by the FSCO on the content of the SIP&P regarding the DC components of plans or member-directed DC pension plans.
• The requirement that plan administrators ensure their SIP&P reflects the FSCO’s expectations in both the DC components of plans and environmental, social, and governance (ESG) factors before the March 1, 2016 filing deadline. With regard to the ESG factors, the filing should state whether these factors are incorporated into the investment policies of the plan, and if so, how they have been included. That said, the rules do not require the plan to adopt an ESG program or policy.
• The SIP&P for all new plans registered starting January 1, 2016 must be filed within 60 days from the date of plan registration. Additionally, amendments to the SIP&P must be filed within 60 days from the date of plan registration.
• The SIP&P does not require annual filing. Instead, administrators only need to file amendments after the initial filing as per the deadlines mentioned above.
• Plan assets must be invested as per the conditions in the SIP&P, which must be compliant with the FIR – federal investment rules – as a matter of good plan governance.
• Starting 1st July, 2016, administrators will be required to include prescribed information about the SIP&P in their statements to both former and retired members.
• Besides the legislatively required changes, two investment guidance notes (IGN) were issued by FSCO in October 2015: the IGN-004, which provides background information and guidelines on the ESG factors to aid plan administrators in fulfilling the Pension Benefits Act requirement to incorporate a statement in the SIP&P regarding this; and the IGN-003, which sets out FSCO expectations with regard to the content of SIP&Ps for DC – defined contribution- plans.
• With regard to IGN-003, FSCO expects administrators to incorporate the following information in the SIP&P:
  • Permitted asset classes where investment funds can be selected
  • General investment principles – like the administrator’s perception on active and passive management
  • The default investment option for member accounts if no selection is made
  • Criteria and processes to be followed during selection, evaluation, and termination of investment funds and managers
  • Associated party transactions
  • Plan expenses and investment fees pertaining to the DC plan

Lastly, IGN-005 was added to address the content of SIP&Ps in draft for consultation, outlining the content, filing, and disclosure protocol for SIP&Ps and expectations of the FSCO for plan administrators in establishing filings as per their fiduciary obligations.