Skip to content

CAPSA releases guidelines on Capital Accumulation Plans and Pension Plan Risk Management

Level Chan and Dante Manna

On September 9, 2024, the Canadian Association of Pension Supervisory Authorities (CAPSA) released the long-awaited final revisions to Guideline No. 3 – Guideline for Capital Accumulation Plans (CAPs) and the new Guideline No. 10 – Risk Management for Pension Plans.

Revised CAP Guideline

As we profiled in our prior update on the consultation draft, the draft revised Guideline featured a broadened definition of CAP to include Locked-in Retirement Accounts (LIRAs), Registered Retirement Income Funds (RRIFs), Life Income Funds (LIFs), Pooled Registered Pension Plans (PRPPs), Voluntary Retirement Savings Plans (VRSPs), and Tax-Free Savings Accounts (TFSAs).  The final revised Guideline expanded this definition to additionally include First-Home Savings Accounts (FHSAs).

The revised Guideline categorize CAP sponsors by common plan types – this includes employers sponsoring any of the above plans, who may not previously have been subject to any such Guideline.  To supplement the breakdown in the draft, the final revised Guideline also notes that some common types of plans may be sponsored by financial institutions and trustee boards / pension committees.

While the draft revised Guideline had noted that all CAP sponsors have some level of common law fiduciary responsibility, this was rephrased in the final revised Guideline to reference responsibilities, which may in some instances include fiduciary responsibility.  The list of factors that the draft revised Guideline set out affecting a CAP sponsor’s fiduciary duties was largely removed in the final version.

The final revised CAP Guideline features an enhanced section on a service provider’s responsibilities, including remaining compliant with the Guideline and with applicable laws, clearly communicating to members as to whether the service provider is providing investment advice, and informing the sponsors (and, where appropriate, members) about monetary benefits to the service provider from decisions made by the sponsor or members, beyond the fees disclosed.

Further recommendations for CAP members have also been enunciated, including that they should obtain investment advice from a qualified individual, in addition to using the resources provided by the sponsor.  This reflects the recommendations in the draft revised Guideline that members be provided access to such tools and information.  The final revised Guideline also features a greatly enhanced list of members’ responsibilities, which are recommended to be clearly communicated to members.

Other changes in the draft revised Guideline include setting out recommendations regarding establishing a governance framework, and adding automatic features to the CAP, including default investment options.  Additionally, the final version recommends reasonable advance notice where an automatic feature impacts a member.

New Risk Management Guideline

CAPSA has also simultaneously published its new Risk Management Guideline which consolidates its recommendations on approaches to a number of risks for pension plans under a risk management framework to identify, evaluate, manage and monitor material risks.  Specific risks addressed, which can be supplemented in future updates as risks develop, include:

  • cybersecurity;
  • use of leverage;
  • third-party advisors or service providers;
  • investment governance; and
  • environmental, social and governance (ESG).

Notable changes since the prior draft Guideline include replacing “risk capacity” (e.g. ability to withstand volatility) with “risk limits” (a threshold not to be crossed), as one of three key considerations recommended to inform the plan sponsor’s overall risk assessment.  Further, the final Guideline now includes no guidance on “target pension arrangements” related risk, although that had been part of an earlier draft.

Implementation

Because of the large volume of revisions to the CAP Guideline, including their enhanced scope, CAPs and their plan sponsors are recommended to review policies and practices regarding governance, plan structure, options, communications, record-keeping, and service provider agreements, as well as any applicable laws, in light of the revised recommendations.  Similarly, pension plans should additionally review and incorporate the Risk Management Guidelines recommendations into their risk management frameworks.  Both guidelines recognize that appropriate measures will be proportional with the risks associated with a plan and the approaches to implement such recommendations will depend on the size and sophistication of the plan.  Some key takeaways include:

  • Establish and periodically review a governance and risk management framework with processes and controls that are proportional with the risks associated with the plan;
  • Review requirements with service providers to ensure compliance with applicable laws and reasonableness of fees and expenses;
  • Document risks and controls and review them on an ongoing basis.

In the release announcement, CAPSA seems to suggest that some pension plans will have no issue incorporating the above-noted guidelines as of the date of release. However, where IT system changes or process changes are needed to support the guidelines, CAPSA recommends they be implemented by January 1, 2026.


This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Pensions & Benefits Group.

Click here to subscribe to Stewart McKelvey Thought Leadership.

SHARE

Archive

Search Archive


 
 

Court upheld municipality’s refusal to disclose investigation report

May 1, 2024

By Sheila Mecking and Sarah Dever Letson A recent decision out of the Court of King’s Bench of New Brunswick,[1] upheld the Municipality of Tantramar’s decision to withhold a Workplace Assessment Report under section 20(1)…

Read More

Occupational Health and Safety sentencing decision – Nova Scotia

April 29, 2024

By Sean Kelly & Tiegan Scott Earlier this month, the Provincial Court of Nova Scotia issued its sentencing decision in R v The Brick Warehouse LP, 2024 NSPC 26, imposing a monetary penalty of $143,750 (i.e.,…

Read More

Canada 2024 Federal Budget paves the way for Open Banking

April 22, 2024

By Kevin Landry On April 15, 2024, the Canadian federal budget was released. Connected to the budget was an explanation of the framework for Canada’s proposed implementation of Open Banking (sometimes called consumer-driven banking). This follows…

Read More

Reset for renewables: Nova Scotia overhauls energy regulation and governance in advance of influx of renewable energy

April 5, 2024

By Nancy Rubin and James Gamblin The Government of Nova Scotia has embarked on a path to dramatically reshape the regulation and governance of the energy sector with the passage of Bill 404, the Energy…

Read More

An employer’s guide to human rights law in Atlantic Canada

April 2, 2024

By Kathleen Starke and Annie Gray Human rights landscape Human rights legislation prohibits discrimination in specific contexts, including employment and the provision of services. In all Atlantic Provinces, Human Rights Commissions are responsible for enforcing…

Read More

Recognizing subtle discrimination in the workplace: insights from recent legal cases

March 4, 2024

By Sheila Mecking and Michiko Gartshore Subtle discrimination can have a much stronger and longer effect on employees when not properly addressed. It can also result in costly consequences for an employer who does not…

Read More

Immediate changes to travel eligibility for citizens of Mexico

February 29, 2024

By Brittany Trafford and Brendan Sheridan Today Immigration, Refugees and Citizenship Canada (“IRCC”) has announced significant changes to the travel requirements for Mexican citizens. As of February 29, 2024 at 11:30p.m. Eastern Time, all electronic…

Read More

Updated guidance on business reporting obligations under Canada’s supply chain transparency legislation

February 23, 2024

By Christine Pound, ICD.D., Twila Reid, ICD.D., Sarah Dever Letson, CIPP/C, Hilary Newman and Daniel Roth Introduction As we reported on November 30, 2023, the Fighting Against Forced Labour and Child Labour in Supply Chains…

Read More

Trustees beware! New trust reporting and disclosure requirements under the Income Tax Act are here – are you ready for them?

February 21, 2024

By Richard Niedermayer, K.C., TEP  & Rackelle Awad New trust disclosure rules originally announced on February 27, 2018, are now in force, and trusts with taxation years ending on or after December 31, 2023 are…

Read More

Proposed Criminal Interest Rate Regulations: exemptions to the lower criminal interest rate

February 14, 2024

By David Wedlake and Andrew Paul In late December 2023, the Federal Government issued draft Criminal Interest Rate Regulations under the Criminal Code. These proposed regulations follow the Budget Implementation Act, 2023, No. 1 which…

Read More

Search Archive


Scroll To Top