On September 9, 2024, the Canadian Association of Pension Supervisory Authorities (CAPSA) published their highly anticipated revisions to the CAPSA Guideline No. 3.

Background

The Guidelines for Capital Accumulation Plans (CAP Guidelines) were first issued in May 2004 by the Joint Forum of Financial Market Regulators to outline regulators’ expectations for workplace CAP operations, regardless of the regulatory framework. These guidelines were later adopted by CAPSA as Guideline No. 3, establishing a minimum standard of conduct for CAP sponsors.

Given the significant evolution of the industry over the past 20 years in new product types to diverse investment options and increased member engagement, there was broad consensus that CAPSA’s decision in 2022 to revisit the guidelines was timely and necessary.

Revisions to Guideline No. 3

The revised guideline had been expanded to include additional plan types, such as decumulation plans. The guidelines also broadened the role of CAP sponsors, recommended greater member disclosure, and suggested features aimed at improving member outcomes, such as advice beyond investment options.

Some additional guidance include:

• Clarifying Roles and Responsibilities: Expansion on the roles, rights and duties of key CAP stakeholders, including the standard of care expected by the plan sponsor towards plan members.
• Enhancement of Member Education and Engagement: Implementing strategies aimed at enhancing decision-making and results, including providing plan members with income projections and introducing new features to statements.
• Considerations of Future Innovations: The proposed guidelines include a framework for offering automatic features, including auto-enrolment and auto-escalation.
• Expanded Disclosures: New section on expanded disclosures of fees and expenses and how to communicate details to plan members.
• Increased Factors in Investment Selection, Monitoring and Advice: Additional factors that plan sponsors should consider in their selection process of investments funds and third party advisors.
• Governance Structure: Detailed governance framework required by plan sponsors based on the size and complexity of their CAP.

Next Steps

We will continue to review the new guidelines and their implications as we work towards revising our governance framework to ensure enhanced best practices are considered.  We will also continue to assist plan sponsors as they navigate the changes and provide the support needed to meet responsibilities throughout the entire lifecycle of a pension plan.

Click here for CAPSA Guideline No.3.

New Guideline No. 10 – Guideline for Risk Management for Plan Administrators

In response to stakeholder feedback from the 2022 consultation, CAPSA has developed a comprehensive Risk Management Guideline that consolidates various approaches to pension risk management.

The guideline covers topics such as cybersecurity, the use of leverage, third-party advisors or service providers, investment governance, and environmental, social, and governance (ESG) factors. Both guidelines take into account the diversity in size and sophistication of pension plans, administrators and sponsors.

Click here for CAPSA Guideline No. 10.