Retroactive Pension Plan Amendments: How FSRA Is Applying Its Guidance

Last year, the Financial Services Regulation Authority of Ontario (FSRA) released its Pension Plan Amendments Guidance (the Guidance)¹, offering insight into how FSRA interprets and administers the Pension Benefit Act (Ontario) (PBA) provisions related to retroactive amendments. As of March 31, 2025, FSRA has reviewed 17 retroactive amendment applications with a negative impact, and registered eight. While FSRA has indicated that these decisions should not be considered precedent for future cases, pension plan sponsors and administrators contemplating plan amendments may find it helpful to review the factors FSRA identified in its decision-making to ensure compliance.

What you need to know

• Since the release of this Guidance in June 2024, FSRA has reviewed 17 retroactive amendment applications with a negative impact and registered eight as of March 31, 2025.
• Amendments that had no impact on any members, were filed only a few weeks after their effective dates, and/or where members and the union were notified in advance (and notified of their entitlements under the plan terms) between the effective date and filing date were most likely to be registered by FSRA.
• While FSRA has noted that decisions with respect to retroactive amendments are context-specific and should not be considered precedent for future cases, reviewing the factors FSRA considered relevant in its determination may be helpful for sponsors and plan administrators contemplating amendments that will have effective dates prior to the date filed with FSRA.

The Pension Plan Amendments Guidance

What is a retroactive adverse amendment?

According to FSRA, a retroactive adverse amendment is an amendment that (i) may negatively impact a member's or a beneficiary's rights and/or benefits; and (ii) purports to be effective on a date before the amendment is filed with FSRA. It is FSRA's view that retroactive adverse amendments are not permitted (i.e., void) under the PBA.

What are the exceptions?

The Guidance indicates that an amendment can have a negative retroactive impact on member rights and benefits without being considered a retroactive adverse amendment. In this instance, the pension plan administrator must be able to demonstrate both of the following:

1. the negative retroactive impacts on the rights and benefits of plan members and beneficiaries are non-material; and
2. these impacts are offset by considerations of transparency, reasonableness and equity.

The Guidance lists examples of amendments that might fall into this category, which include collectively bargained amendments (such as member contribution increases), amendments like those in the Supreme Court of Canada's Nolan v. Kerry (Canada) Inc. decision, and certain amendments arising out of corporate reorganizations.

Further, FSRA has indicated that it will generally register amendments that are both retroactive and which have positive effects (e.g., benefit improvements), despite its interpretation that amendments with an effective date earlier than the filing date are not permitted under the PBA.

Registration of retroactive amendments: update

The Guidance allows a plan administrator to apply to FSRA to register an amendment that has retroactive negative impacts provided the plan administrator demonstrates a reasonable and good faith belief the amendment is not a retroactive adverse amendment.

When determining whether to register an amendment with retroactive and potentially negative impacts, FSRA will consider (i) transparency, (ii) reasonableness, (iii) equity, and (iv) whether the filing of the amendment is consistent with the plan administrator's fiduciary duty. It is important to note that FSRA imposes this obligation on plan administrators when they are performing the clerical function of filing the amendment, despite the fact that it is the plan sponsor/employer who would, in most cases, be responsible for plan design and making the amendment. Plan sponsors/employers are not subject to fiduciary duties when making plan amendments.

Plan administrators are also encouraged to provide a legal opinion (separate from any opinions provided to the plan sponsor and/or administrator) that supports the registration of the amendment. Before sharing a legal opinion with FSRA, the plan administrator should also fully understand the consequences of losing solicitor-client privilege over that legal opinion.

Since the release of the Guidance, FSRA has reviewed 17 retroactive amendment applications as of March 31, 2025, and has registered only eight. While FSRA has noted that decisions with respect to retroactive amendments are context-specific and should not be considered precedent for future cases, reviewing the factors FSRA considered relevant in its determination would be helpful for sponsors and plan administrators seeking to file similar amendments.

Registered retroactive amendments

Summarized below are the amendments and factors considered by FSRA when it reviewed retroactive amendments that were eventually registered under the PBA. Frequent themes reflected in of these amendments are (i) short periods of time between the effective date and the date the amendment was filed; (ii) member and union awareness of the amendment through earlier notices; (iii) transparency about the effect of the late filing on member entitlements; and (iv) no or little impact to members. In one case, the plan was administered under the old terms until the filing date (which was nine years after its effective date).

1. An amendment to remove a temporarily higher employer contribution that was filed six weeks after its effective date. The plan members were notified of the amendment in advance of the effective date, the late filing was inadvertent, and the length of time between the effective date of the amendment and its filing was neither egregious nor of material impact in the circumstances. An amendment to reduce employer defined contribution (DC) plan contributions filed three days after the effective date was accepted for similar reasons.
2. Amendments to close a pension plan filed seven weeks and five months after their effective dates; an amendment to change a plan's enrolment eligibility filed 6.5 weeks after the effective date; and an amendment to terminate membership of unionized employees who had joined another plan filed 7.5 weeks after its effective date. The first two sets of amendments had no actual impact on any individuals or plan members and the late filing was due to inadvertence in all three circumstances. In addition, the union had been notified of the third amendment.
3. An amendment to close a defined benefit (DB) plan to new members that was filed two years after its effective date. New employees had been enrolled in a DC plan in the interim and retroactively administering the pension plan accordance with its terms could have resulted in significant tax consequences and additional costs for employees. Furthermore, there could have been perceived inequitable treatment between plan members, the late filing was due to inadvertence, and a revised adverse amendment notice was provided to all affected members that (i) informed them of their entitlement to join the pension plan under the terms that applied prior to the amendment; and (ii) provided a rationale for registering the amendment.

Retroactive amendments that were not registered

Summarized below are types of retroactive amendments that were reviewed by FSRA and not registered under the PBA as filed. These decisions show that FSRA will likely not register retroactive negative amendments where they are being used to correct drafting errors and/or where members are materially impacted by the amendment. The examples also generally involve significant amounts of time between the effective date and the filing date.

It's important to note that member awareness of the amended terms through booklets and general administration practice may not be sufficient if members have not also been told about their entitlements under the unamended terms between the effective date and the filing date.

1. An amendment to reduce a DB benefit formula that was filed six months after its effective date. The late filing was due to a delay in the internal sign-off processes (over which FSRA stated the plan administrator had control); the plan administrator could not demonstrate that members were aware of their entitlement to the higher formula for the six-month period or that there was an immaterial impact to members; and the plan administrator did not provide arguments about the equitability of the amendment in its submission.
2. An amendment to remove additional employer DC contributions filed 11.5 months after its effective date. The plan administrator could not demonstrate that members were aware of their entitlement to higher contributions for the 11.5-month period. The fact that a third-party service provider was alleged to have been responsible for the delay was not determinative, given that it is the administrator's responsibility to comply with the PBA. The plan administrator also made no arguments on the equitability or materiality of the amendment.
3. An amendment reducing employer contributions under a non-contributory DC plan that was filed seven months after its effective date. The plan administrator could not demonstrate that members were aware of their entitlement to the higher contributions during the interim period between the effective date and the filing date. A miscommunication between two of the plan administrator's agents was, again, not determinative.
4. An amendment to limit DC plan member earnings used to calculate contributions that was filed nine years after its effective date. The plan administrator advised FSRA that the amendment was filed retroactively to ensure the terms of the plan aligned with how the plan had been administered in prior years, but did not provide any support for that argument. Further, the plan administrator could not demonstrate that requiring contributions under the prior terms would be unfair and inequitable, despite the administrator's arguments that requiring contributions under the prior terms would be an advantage for the members who could afford to do so and a burden on those who could not.
5. An amendment to cease contributions for non-union members joining a group RRSP, filed five months after its effective date. The plan administrator acknowledged the amendment was a retroactive adverse amendment and proposed corrective action that was ultimately acceptable to FSRA, provided the effective date be corrected to no later than the date the amendment was filed (although it is unclear as to the treatment of the contributions made to the RRSP during the interim period and whether they were transferred back to the pension plan).
6. An amendment to freeze earnings for future DB service filed two months after its effective date. The plan administrator did not make a submission as to why FSRA should exercise its discretion to register the amendment as filed, and FSRA had determined that some members were negatively impacted between the effective date of the amendment and the date the amendment was filed.
7. An amendment reducing employer contributions (due to COVID business difficulties) in a DC plan with only one member, filed three years after its effective date. The retroactive adverse amendment had a significant material impact on member benefits under the plan.
8. An inquiry into a draft amendment to retroactively correct an inadvertent drafting error in a previous restatement that did not limit an employer contribution increase to members hired after a certain date. The plan administrator sought to correct drafting errors, which may only be done through rectification with the courts. FSRA indicated that it would not register the amendment if filed.
9. An amendment in a DC plan restatement to exclude certain items from the pensionable earnings definition made effective four years earlier. Although the booklet had been revised to reflect the amended definition, members were not made aware of the plan terms that would have applied prior to the amendment filing. FSRA disagreed with the plan administrator's assertion that the amendments did not materially affect the pension benefits, rights or obligations of the affected members.

Implications

For pension plans registered in Ontario, it is important for sponsors and plan administrators to understand how FSRA intends to apply the Guidance in practice. Reviewing the factors FSRA identified in its decisions on whether to register the 17 retroactive amendment applications may be helpful for sponsors and plan administrators contemplating plan amendments that will have effective dates prior to the date filed with FSRA.

Footnote

1. FSRA, Pension Plan Amendments Guidance, June 4, 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.