CAPSA, the association of pension regulators across Canada, issued a new guideline on searching for un-locatable members and updated its guideline on defined contribution (DC) pension plans in February. The guideline on un-locatable members is relevant to all types of pension plans while the guideline on DC pension plan is relevant only to a pension plan which has a DC component. CAPSA has also issued a communique on its working group’s review of leverage use within pension plans and recommendations regarding the funding of plans other than DC plans.
New Guideline on Searching for Un-locatable Members of a Pension Plan (Guideline No. 9)
Missing plan beneficiaries is a practical problem encountered by plan administrators. This problem is aggravated in a plan wind-up situation since a plan wind-up cannot be completed unless all pension benefits are properly paid or transferred out of the pension fund. Currently, some pension benefits legislation contains statutory provisions regarding un-locatable members and available options after unsuccessful searches. The purpose of the new Guideline is to outline best practices and options expected by pension regulators with respect to searching for un-locatable members.
The Guideline includes a clear statement that both plan members and plan administrators have responsibilities in keeping member contact information up-to-date. Members should notify the plan administrator when there is a change to contact information, changes to spousal declarations and beneficiary designations. Plan administrators are responsible for maintaining accurate plan records. Co-ordination and sharing of information between stakeholders could be a way for keeping member information current. CAPSA also encourages plan administrators to maintain a comprehensive records management and retention policy and, possibly, a separate policy on the processes for managing member contact information.
It is the plan administrator’s responsibility to conduct searches for missing members and administrators are encouraged to use all reasonable methods in their searches. CAPSA also recommends the development of a fulsome search policy, subject to periodic review. Compliance with the privacy law is an important consideration in developing a search policy and in all search efforts.
Updated Defined Contribution Pension Plans Guideline (Guideline No. 8)
This Guideline is an update of the 2014 Guideline. Below are the key differences in the updated Guideline.
- It is clarified that the Guideline applies to DC plans where members or the plan administrators direct the investment of plan contributions although some of the recommendations are relevant only to plans where members direct the investment.
- There is additional guidance for the responsibilities of administrators and members of DC plans that provide for variable benefits, as permitted by the applicable pension benefits legislation. The guidance relates to the tools and information to be provided by administrators to members and clarifies the responsibility of members to make decisions on various matters.
- Plan administrators should make enhanced disclosure of fees and expenses to be borne by plan members at different key stages, including their impact on investment returns.
- The Guideline includes more guidance on a plan administrator’s responsibility to provide plan members the estimated value of their accounts at retirement, including the assumptions used for calculation.
- The selection and monitoring of default investment options are clearly stated as the plan administrator’s responsibility.
Communique on Review of Leverage Use within Pension Plans
The Communique is a report of the working group formed by CAPSA to study the use of leverage by pension plans. The key findings include the forms of leverage and the key risks associated with its use. The communique recognizes that while a plan’s use of leverage must be considered in assessing the riskiness of its investment activities, a more holistic analysis of the overall quality of a pension plan’s risk management strategy is required. CAPSA will consider whether further research is required and the working group will make recommendations to CAPSA on the form and nature of guidance.
Recommendations on the Funding of Benefits for Plans other than Defined Contribution Plans
CAPSA has made a number of recommendations for developing a common standard and set of funding rules to mitigate the concerns of sponsors and members of multi-jurisdictional pension plans. Although the paper is made public, the primary audience is the policy makers across Canada.