Pension regulators publish new guidelines for capital accumulation plans

The Canadian Association of Pension Supervisory Authorities (CAPSA), the association of provincial pension regulators and the federal government, have published two guidelines for capital accumulation plans (CAPs) and pension plans, that are designed to reflect the evolution that has taken place in group savings plans in the past 20 years.

First implemented in 2004, the 2024 revision is the first major revision made since the guidelines were first put in place. Since 2004, defined contribution (DC) plan assets have grown by more than $100-billion, according to Mercer. Plans have adopted automatic plan design features and, notably, the onus and responsibility has evolved, shifting responsibility for the success of a plan member’s retirement savings, from the plan sponsors, to the plan members themselves.

The guidelines outline CAPSA’s expectations and provide principles, but Mercer says how CAP sponsors act in response to the guidance will vary based on the sponsor’s objectives and the size and complexity of their CAP.

New expectations 

Guideline No. 3 introduces new expectations and a framework for governance, accountability, risk mitigation and future-proofing governance processes. Guideline No. 10, meanwhile, lays out key principles for effectively managing the risks associated with pension plans.

Although Guideline No. 10 specifically applies to pension plans, in a recent webinar, New CAPSA Guidelines: How might they impact your DC plan?, Mercer’s specialists say it has material implications for CAPs, as well. Among those implications to consider, they say there are three types of risks that are outlined in Guideline No. 10 that are materially relevant, including cyber security risk, third party risk and environmental, social and governance (ESG) risk. 

Fee transparency 

Also new in the guidelines, relative to their 2004 version, is the need to provide member education. It discusses fee transparency, fee-review practices, the selection and review of service providers and appropriate data protection for member’s personal data. The guidelines are also clear on the need for structured and documented governance efforts that are appropriate for the nature and complexity of the CAP, says principal and senior consulting lawyer with Mercer, Leslie Steeves.

“The new guideline, for the first time, formally acknowledges a standard of care owed by plans sponsors to plan members,” she adds. “There are many different new concepts that were referenced in the new guideline that were not in the original.”