Changes to Statement of Investment Policies and Procedures (SIP&P) for Ontario Registered Pension Plans: Are You Ready?

Administrators of Ontario registered pension plans are required to submit SIP&P filings electronically through the Financial Services Commission of Ontario (FSCO)’s Pension Services Portal. Changes concerning SIP&P filings are coming into effect January 1, 2016.

What You Need To Know

• Administrators will also be required to abide by the following upcoming deadlines for filing their SIP&Ps and SIP&P amendments with FSCO:
  • For plans registered before January 1, 2016, the SIP&P must be filed by March 1, 2016;
  • For new plans registered on or after January 1, 2016, the SIP&P must be filed within 60 days after plan registration; and
  • Amendments to a SIP&P must be filed within 60 days after the date the amendment is made.
• After the initial filing in accordance with the above deadlines, only amendments to the SIP&P need to be filed. The SIP&P does not need to be filed annually.
• Plan assets will be required to be invested in accordance with the SIP&P, which in turn must comply with the federal investment rules (FIR).
  • As a matter of good plan governance, the assets of the plan should always be invested in accordance with the SIP&P. However, the legislative requirement to do so only comes into effect as of January 1, 2016.
• The filing will be required to include a statement about whether environmental, social and governance (ESG) factors are incorporated into the plan’s investment policies and procedures and, if so, how they have been incorporated. However, the rules do not require the plan to adopt an ESG policy or program.
• Effective July 1, 2016, administrators must include prescribed information about the SIP&P in their statements to members, including former and retired members.
• In addition to the legislatively required changes, two Investment Guidance Notes, IGN-003 and IGN-004, were issued by FSCO in October 2015.

• IGN-004 provides background information and guidelines on ESG factors to assist plan administrators in meeting the Pension Benefits Act requirement to include a statement in their SIP&Ps in this regard.
• IGN-003 sets out FSCO’s expectations regarding the content of SIP&Ps for defined contribution (DC) plans. In particular, FSCO expects administrators to consider including the following information in the SIP&P:

• General investment principles. This includes investment principles and assumptions that helped shape the DC plan’s investment program, including the administrator’s views on active and passive management, the use of life cycle or target date funds, and the approximate number of investment options to be made available to plan members.

• Permitted asset classes from which investment funds can be selected.

• The default investment option for member accounts where no selection is made.

• Processes and criteria to be followed in the selection, monitoring and terminating of investment managers and funds.

• Plan expenses and investment fees related to the DC plan. This includes: indicating which categories of expenses and fees will be paid by the employer and which will be borne by plan members; expectations, ranges, or limits on total plan expenses and fees; and guidelines for monitoring expenses and fees.

• Related party transactions. The SIP&P should document the policies and procedures pertaining to related party transactions permitted under the FIR and criteria used to establish whether a transaction is nominal or immaterial to the plan under the related party rules.

• Information guidelines for plan members on investment options. The filing should identify at a high level the categories of information to be provided to plan members concerning their investment choices under the Plan.
• An additional investment guidance note (IGN-005) dealing with the content of SIP&Ps was released by FSCO in draft for consultation on December 8, 2015. Draft IGN-005 outlines the content, filing and disclosure requirements for SIP&Ps and lists the factors that FSCO expects plan administrators to consider in establishing filings in accordance with their fiduciary duties. Torys will provide an update for plan administrators when the consultation process on IGN-005 has been completed and the final version is issued by FSCO.

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