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FSCO launches risk-based monitoring model for defined benefit plan

The Financial Services Commission of Ontario (FSCO) announced it is starting risk-based monitoring of defined benefit pension investments in 2006.  This follows the consultation paper on the same topic released in 2004 and the sample testing carried out on 300 pension plans in 2005.  The testing confirmed the usefulness and effectiveness of the investment monitoring program and allowed the model to be revised and improved.

The Investment Information Summary (IIS) - Form 8 is to be filed by all defined benefit pension plans registered with FSCO within six months after each fiscal year end of the plan occurring on or after December 31, 2005.

Plan administrators should be aware that

1. The IIS Form 8 requests asset information, queries the status of the Statement of Investment Policies and Procedures (SIP&P) and assesses compliance with the federal investment regulations and the SIP&P.
2. The plan administrator must certify as to the accuracy of the information on the IIS Form 8.
3. Only the defined benefit component of a hybrid plan should be reported on the IIS.

Plans flagged by the automated assessment process will be subject to a further review.  FSCO will follow up with the plan administrator if there is any non-compliance with the investment regulations or standards.

FSCO’s risk-based monitoring is intended to encourage best practices and raise awareness about the effect of pension fund investments on pension plan solvency.

The instructions and Form 8 as well as other background information is available on the FSCO website.

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