Pension Plans

The AcSB discussed feedback from the Pension Plan Working Group and research related to improvements to the disclosure of investment management expenses. The Board tentatively decided that improvements should be made to the disclosures related to investment management expenses in pension plan financial statements to increase transparency and comparability. The Board will seek additional feedback from the Pension Plan Working Group in July to obtain input on the nature of any proposed disclosures. 

In addition, AcSB members discussed that pension plans commonly hold interests in investment funds and other structured entities. As such, the Board is considering whether it may be useful to introduce disclosure requirements to improve transparency in this area. The Board will seek more feedback on this matter, including potential solutions at its Pension Plan Working Group meeting in July 2023.

The AcSB discussed feedback from its Pension Plan Working Group on disclosures for buy-in annuity contracts under Section 4600, Pension Plans. In December 2022, Section 4600 was amended to introduce new guidance specific to buy-in annuity contracts. Those amendments require buy-in annuity contracts to be measured at a value equal to the related benefit obligation instead of at fair value.

However, the fair value disclosure requirements from IFRS 7 Financial Instruments: Disclosures and the Appendix to Section 4600 were still required. The AcSB considered feedback from its Pension Plan Working Group that these disclosures may become less useful for buy-in annuity contracts once the December 2022 amendments take effect. The Board agreed with this feedback.

Therefore, as part of its 2023 annual improvements process, the AcSB plans to issue an exposure draft to scope out buy-in annuity contracts from the fair value disclosure requirements. The Board tentatively decided to propose an effective date of January 1, 2024, to align with the effective date of the December 2022 amendments. Earlier application would be permitted. The Board reviewed a draft of the exposure draft at the meeting and gave permission to begin the balloting process. It expects to issue the exposure draft in early May 2023 with a 30-day comment period.

The AcSB completed its deliberations on stakeholder comments on the Exposure Draft, “Pension Plans,” after considering the feedback of its Pension Plan Working Group. The Board also reviewed a draft of the amendments, reflecting its decisions at its July 2022 meeting.

The AcSB decided to make amendments to clarify its intent regarding:

• the criteria for derecognizing a pension obligation transferred to a third party in a buy-out arrangement; and
• the dates on which assets and liabilities would be recognized in an amalgamation and derecognized in a split.

The AcSB approved the issuance of the final amendments to Section 4600, Pension Plans subject to drafting and a written ballot. The Board plans to issue the amendments in mid-December 2022.

The AcSB considered the sufficiency of feedback from its outreach activities and comment letters received on the Exposure Draft, “Pension Plans.” The Board concluded that it received sufficient feedback from stakeholders including practitioners, preparers, users, provincial accounting bodies, regulators, academics, actuaries, and other individuals.

The AcSB then deliberated stakeholder feedback on its Exposure Draft. The Board tentatively decided to:

• include a requirement to disclose the applicability and status of a regulatory discharge for arrangements in which an entity purchases an annuity from a third party that assumes some or all of the obligations of the pension plan (commonly referred to as “buy-out” annuity contracts);
• reiterate that plans do not need to remeasure the amount of pension obligations transferred to a third party subsequent to the year of transfer in a buy-out annuity contract;
• add disclosure requirements for investments in a master trust to provide for cases where the plan’s position is not proportionate to the plan’s total position in the master trust; and
• defer the effective date to annual periods beginning on or after January 1, 2024, with earlier application permitted.

The AcSB tentatively decided to finalize the following proposals in the Exposure Draft, subject to certain minor edits:

• clarifying that a statement of changes in pension obligations is not required for defined contribution pension plans;
• guidance on determining the split or amalgamation date for pension plans;
• recognition, measurement, and disclosure guidance on the accounting for guaranteed annuity contracts (commonly referred to as “buy-in” annuity contracts);
• most of the derecognition guidance for pension obligations transferred to a third party in a buy-out annuity contract;
• additional risk disclosures for investments in master trusts; and
• presentation requirements for combination plans.

The AcSB plans to review a draft of the final amendments to Section 4600, Pension Plans, at its September 2022 meeting. 

The AcSB approved a communications and outreach plan for the upcoming Pension Plans exposure draft. The Board intends to engage in targeted consultation activities with industry and regulatory groups and hold general roundtable discussions for all pension stakeholders.

The AcSB also discussed other topics its Pension Plan Working Group raised, which are broader in scope than those addressed in the upcoming exposure draft. These included valuation of defined benefit obligations, presentation of investment management fees and investment disclosures. The Board will discuss how to prioritize these topics in the context of its other domestic standard-setting agenda at its March 2022 meeting. 

The AcSB discussed the proposals to include in the Exposure Draft to amend Section 4600, Pension Plans. The Board considered feedback from its Pension Plan Working Group and directed staff to make clarifications to the proposals. The Board reaffirmed the proposals will address the following topics:

• determining whether a statement of changes in pension obligations for defined contribution plans is required;
• determining the split or amalgamation date for pension plans;
• accounting for guaranteed annuity contracts (commonly known as “buy-in and buy-out” contracts);
• presentation of combination pension plans; and
• disclosing risks for investments in master trusts.

The AcSB expects to issue the Exposure Draft no later than March 1, 2022, with an anticipated comment period deadline of June 15, 2022.

The AcSB considered a revised project proposal that included advice from its Pension Plan Working Group.

The AcSB approved the project proposal to address:

• determining whether a statement of changes in pension obligations for defined contribution plans is required;
• determining the split or amalgamation date for pension plans;
• accounting for guaranteed annuity contracts (commonly known as “buy-in and buy-out” contracts);
• presentation of combination pension plans; and
• risk disclosures for investments in master trusts.

The AcSB recognizes the importance of addressing this topic on a timely basis and plans to issue a document for comment no later than March 2022.

The AcSB continued discussing the Pension Plan Working Group’s recommendations for addressing pension accounting issues in Part IV of the Handbook.

In developing proposed solutions, the AcSB decided to seek additional input from the Pension Plan Working Group. The Board reaffirmed it would prioritize the issues that could be addressed in the short term and would consider the remaining issues for its next Strategic Plan to be issued in 2022.

The AcSB will consider the Pension Plan Working Group’s advice at the Board meeting in September 2021.

The AcSB discussed the feedback and recommendations from its Pension Plan Working Group on current pension accounting issues in Part IV of the CPA Canada Handbook – Accounting.

The AcSB considered whether to undertake a standard-setting project and what the scope would be. The Board directed staff to undertake additional research on the nature and size of defined benefit pension plans. The Board decided to seek additional input from the Pension Plan Working Group on potential solutions to address the issues raised in Part IV.

The AcSB will consider the research and advice from the Pension Plan Working Group at its meeting in June 2021.

The AcSB received an update on staff research to identify users of pension plan financial reporting and to better understand the regulatory environment.

The AcSB directed staff to conduct outreach with regulators, pension plan member advisors, and representatives (e.g., trade unions and trustees), to better understand how they use pension plan financial statements.

The AcSB will consider a project proposal to address stakeholder concerns with, Section 4600, Pension Plans, in the third quarter of 2020.

The AcSB considered feedback on application issues received from stakeholders including actuaries, public practitioners, and preparers from across Canada. The Board discussed available options to address the concerns raised. It directed staff to engage additional stakeholder groups, including users and pension regulators, and to further explore the options discussed.

The AcSB plans to continue its discussions in March 2020.

Given issues raised by stakeholders in Quebec on the application of Section 4600, Pension Plans, in Part IV of the CPA Canada Handbook – Accounting, the AcSB approved an outreach plan to understand issues arising from stakeholders.

The AcSB will discuss the priority of potential future projects, including a potential pension plans project, at its December 2019 meeting.