On September 9, the Canadian Association of Pension Supervisory Authorities (CAPSA) released new guidance aimed at providing an update on the design, operation and administration of capital accumulation plans (CAPs). CAPs include defined contribution pensions, Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs) and First Home Savings Accounts (FHSAs).
CAPSA is a national association of pension regulators whose mission is to facilitate an efficient and effective pension regulatory system in Canada. It develops practical solutions to further the coordination and harmonization of pension regulators across Canada.
The Role of CAPSA Guidelines in the Industry
CAPSA guidelines are intended to support the continuous development and improvement of industry practices. CAPSA’s guidelines are not mandatory laws, but they serve as best practice recommendations. Pension regulators across Canada expect registered pension plans to generally operate in alignment with these guidelines. However, individual jurisdictions may have additional or specific requirements that pension plans need to follow.
Key Areas Covered by CAPSA Guidelines:
The following are topics covered in the guidance. For detailed information on CAPSA guidelines, click here.
- Flexible Pension Plans
- Electronic Communications in the Pension Industry
- Guideline for Capital Accumulation Plans
- Pension Plan Governance
- Fund Holder Arrangement
- Prudent Standards
- Pension Plan Funding Policy
- Defined Contributions Pension Plans Guideline
- Searching for Unlocatable Members of a Pension Plan
- Guideline for Risk Management for Plan Administrators
Two New Guidelines: What Is Covered?
The intent of this guideline is to outline and clarify the regulators’ views on:
- The responsibilities of CAP sponsors, administrators, service providers and CAP members
- Industry best practices in the maintenance and administration of a CAP
- The information that should be provided to CAP members.
Please note, this guideline does not replace or modify any legal requirements applicable to particular CAPs.
Following a 2022 consultation, CAPSA shifted development to one comprehensive risk management guideline to consolidate approaches to pension risk management on topics including cybersecurity; the use of leverage; third-party advisors or service providers; investment governance; and environmental, social and governance (ESG).
- The plan administrator should create a risk management framework to identify, evaluate, manage and monitor material risks.
- The plan administrator should review the risk management framework regularly.
- The design of each pension plan’s risk management structures and practices will vary based on the plan’s characteristics and circumstances and the risks being assumed.
This guideline is intended to complement CAPSA Guideline No. 4: Pension Plan Governance, as well as other CAPSA guidelines that refer to risk management (for example, Guideline No. 7: Pension Plan Funding Policy).
Impact of New Guidelines on Pension Plans
These updated guidelines provide much-needed clarity for plan sponsors, administrators and service providers. With the introduction of clear communication requirements and a consolidated approach to risk management, CAPSA’s guidelines aim to enhance both the security and transparency of pension plans in Canada.
Pension plans, especially defined contribution plans, must now ensure their operations reflect these best practices. This includes implementing stronger cybersecurity measures, improving governance and considering ESG factors in investment decisions. Additionally, the emphasis on clear communication should improve plan members’ understanding of their benefits, reducing confusion and fostering better long-term financial planning.
CAPSA’s new guidelines represent a significant step forward in the regulation of capital accumulation plans in Canada. By focusing on the responsibilities of plan sponsors, administrators and service providers, as well as providing robust risk management guidance, CAPSA is helping to ensure the ongoing development and improvement of the Canadian pension landscape.
Plan administrators and sponsors should take note of these guidelines and consider how best to incorporate them into their operations. While these are not legally binding rules, aligning with CAPSA’s expectations will help ensure that pension plans remain secure, transparent and well managed for the benefit of all participants.
Want to learn the latest tools, ideas and strategies for making effective decisions on behalf of your plan members? Join us at one or more of our upcoming conferences, including the 57th Annual Canadian Employee Benefits Conference in San Antonio, Texas, November 24-27.
