Disconnect between plan provisions, actual practices for consent benefits: OSFI

Plans should have documented procedures for administration

The Office of the Superintendent of Financial Institutions (OSFI) has issued an advisory to provide further detail on its expectations with respect to consent benefits.

Some pension plans offer benefits that are subject to the administrator’s consent, such as unreduced early retirement benefits. In certain cases, however, OSFI has found that, despite provisions in the plan text that state that a benefit is subject to consent, in practice these benefits may not be genuinely subject to consent. In order to be considered a consent benefit, an administrator, in its fiduciary role, must have the discretion to grant or deny the benefit.

Where an administrator does not have such discretion, the benefit is not a consent benefit but rather a promised pension benefit that must be funded.

In determining whether an administrator truly has discretion to grant or deny a benefit, documents or agreements outside the terms of the plan may be relevant and must be considered along with the plan terms.

In addition, where any such documents or agreements require that a pension benefit be granted, or otherwise promise a pension benefit payable from the pension fund, they should be appropriately reflected in the terms of the plan. Administrators have a responsibility to ensure all promised benefits that are to be paid from the pension fund are clearly identified and described in the plan text.

Plans should have documented procedures for administering consent benefits that should clearly:

•demonstrate that the administrator has discretion to grant or deny consent

describe the administrator’s considerations when exercising its discretion

•demonstrate that the administrator’s considerations are consistent with its fiduciary role.

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