On March 28, 2014, the Canadian Association of Pension Supervisory Authorities (CAPSA) released the Defined Contribution (DC) Pension Plans Guideline (CAPSA previously released a draft for comment in July 2012). While CAPSA’s guidelines do not have the force of law, these guidelines may be used as a benchmark by the courts and/or regulators to assess whether a DC plan administrator has fulfilled its fiduciary obligations.
The Guideline includes:
- a summary of guidance previously issued by CAPSA related to DC pension plans;
- clarification as to the respective rights and responsibilities of plan administrators, employers, plan sponsors, service providers, fund holders and members with respect to DC pension plans; and
- examples of what would constitute an “adverse amendment” for a DC pension plan (e.g., reductions in employer contributions, increases in employee contributions, changes in who pays for administrative expenses, and changes to the retirement age). The significance of classification as an adverse amendment is that, in certain jurisdictions, notice of an adverse amendment must be provided to specified individuals before the amendment can be registered.
Perhaps the most interesting aspect of the Guideline is that it contains guidance regarding the tools and information that should be provided to members both during the accumulation phase and as they are approaching the payout phase (also known as the “de-accumulation” phase). With respect to the latter, the Guideline states that “[i]t is expected that the plan administrator will provide information regarding all of the retirement products available to members with respect to the payout phase”. This information should allow members to make “informed decisions which strike a balance between protection from the risks inherent in the various products and achieving target replacement rates”. To assist plan administrators, CAPSA published an accompanying Reference Document which provides a non-exhaustive list of regulated retirement products available in various jurisdictions.
The Guidelines clearly show that the pension regulators in Canada see plan administrators as having a proactive role to play in assisting DC plan members to transition to the de-accumulation phase. For plan administrators (and their allied service providers), there is no time like the present to review your employee communications and to carefully consider whether these obligations are being met in accordance with the standards set out in the Guidelines.