2025 CAP Suppliers Report: How are Canadian plan sponsors complying with the CAPSA’s updated guideline?

Those areas include the CSS’ approach to providing financial and investment advice to plan members.

Read: How CAPSA’s updated CAP guideline will impact plan sponsors, members

Following the CAP guideline update, the plan sponsor, which has four in-house financial advisors, revisited its advisory model to draft a statement of practices and principles for advice. “[The CSS’ financial advisors] have been around for about eight years, but we wanted to flesh that out and really build a framework for them,” says Dove. “We’ve moved the needle on that one.”

Good governance

The CAPSA’s guideline, which was last updated in 2004, defines regulators’ views on the responsibilities of CAP sponsors, administrators and service providers in the current marketplace, including maintenance of records and the provision of ongoing education and communication to members.

Jordan Fremont, a partner in Stikeman Elliott LLP’s pensions and benefits group, says his CAP clients are largely paying attention to the guideline in terms of compliance issues and best practices. “They’re seeking input on what they should be thinking about and how best to address things that may impact the governance and administration of their plans. They’re thinking about these issues and making changes where they’ve determined them to be appropriate, which is the right course of action.”

While some plan sponsors have made practical changes, mainly in terms of member experience, the main focus for many has been CAP governance, says Marc-Antoine Morin, assistant vice-president of product development for group retirement solutions at Manulife Financial Corp.

Read: Sounding Board: What employers need to know about CAPSA’s 2024 CAP guideline

The vast majority of his large-size CAP sponsor clients were already practicing good governance in accordance with the guideline. “Some were ready on day one and were more in the process of asking questions to their different service providers, whether that was Manulife as a record keeper or, in some cases, their consulting firms — a lot of large plan sponsors rely on their consultants, who were very much ready to support their clients in this process.”

Engaging plan members

On the plan member side, the guideline establishes responsibilities such as understanding their CAP and its features, including contributions and investment options.

At the CSS, member engagement and education are key, says Dove, adding the organization is working on integrating these two responsibilities in compliance with the updated guideline. “We’ve always had a very strong engagement program and a strong education program, but now we’re making [the programs] more integrated, so they all work together. We’ve found some really meaningful opportunities to dig deeper into the member experience aspect.”

However, member engagement on financial and investment topics remains a challenge for many plan sponsors. While this information is often included in communications to members, a passive approach is unlikely to translate to action, cautions Morin.

“[Financial information] is more often disclosed than communicated to members. For plan members to actually react and say, ‘Oh, I’m going to change my behaviour based on that communication that I’ve received’ is a little bit of a stretch from a human behaviour perspective. I would argue that any change in member responsibilities [requires] more of a [formal approach], in the sense of presenting the new responsibilities directly to members.”

Read: 2024 CAP Suppliers Report: How can employers, pension industry support retirement needs of gig workers?

Similarly, use of the word ‘retirement’ in communications is enough to make some members tune out, particularly younger members who have more pressing financial concerns, says Mike Werbowecki, senior vice-president of group retirement at NFP Canada.

“I think we in the industry would all like [member engagement] to be higher. . . . Newer [plan members] are dealing with things like student debt and trying to save for a home, so the concept of retirement to them is too distant to get engaged with. That changes as people get to age 50 to 55, but we’re trying to get earlier adoption and engagement because it pays dividends later on.”

As the pension landscape continuesto shift away from defined benefit pension plans in favour of CAPs, plan sponsors can further support members’ retirement outcomes through the use of income projection tools, he adds. “We want [members] to know their savings are on track at age 45, not age 65, when it might be too late to make a change. That’s the biggest shift we’ve seen from DB to defined contribution plans — risk has been transferred to the employees.”

Value for investment fees

The updated guideline also states that CAP sponsors should provide members with information about the level of fees and expenses payable by the member or through the member’s account, including asset-based fees and operating expenses that are payable with respect to each investment option.

“This information should be provided or made available upon the introduction of the CAP, when there’s a material change to the fees and expenses and at least annually thereafter,” notes the guideline.

Read: How CAPSA’s fee transparency guidance is impacting plan sponsors

These fees include transaction fees incurred when investments are bought, sold/redeemed or transferred; costs associated with accessing or using any of the investment information or decision-making tools or investment advice the CAP sponsor arranges; investment management fees; operating expenses, including fund costs associated with administration, audit, legal, custody, financial statement and other reporting, filings, taxes and transfer agency fees; and service provider fees and expenses, including account, trustee, brokerage, custodial and record-keeping fees.

While CAP sponsors may seek to reduce these fees where possible, the guideline takes a position of communicating value for fees and the potential for improved investment returns and retirement outcomes, says Zaheed Jiwani, vice-president of institutional investingat T Rowe Price Canada Inc.

“One of the challenges for a lot of sponsors is if others are going with low fees, then they feel they should too, without really factoring in the impact on the investment side. . . . I think the language of the CAPSA guideline around value for fees . . . allows plan sponsors to take that holistic member outcome view. It means you don’t have to go with the lowest fees, but you need to assess whether the feesare worth it and what they’re giving you.”

When communicating value for fees, plan sponsors may see the best results by incorporating the potential outcomes of various fee levels, he says, such as those for active versus passive management, into projected investment returns.

The communication of fees also ties back to the guideline’s member engagement and transparency aspects, says Joseph Bevilacqua, an associate partner in Aon’s wealth solutions practice. “Historically, things like operating expenses have been issued as a footnote. Members can go find it on their plan’s website, but I think the [guideline’s] expectation for plan sponsors is to just tell members what they’re paying and be very transparent about it. . . . We’re definitely seeing that being called out more when plan members are looking at income projections . . . and how that’s impacting their retirement readiness.”

Implementation challenges

As CAP sponsors bring their plans into compliance with the guideline, these measures may put an added financial burden on smaller employers, says Fremont.

Read: 2025 DC Plan Summit: Governance framework at the core of CAPSA’s updated guidelines

“[Smaller plan sponsors] may be working with a record keeper or broker, but they may not have the bandwidth to pay attention or the resources to deal with these issues, so they’re leaning very heavily on their record keepers.”

According to the CAPSA, the guideline isn’t prescriptive, but rather “reflects best practice in pension management, so each plan has the ability to assess the guideline and determine the priorities, approach and appropriate implementation for their plan. There will always be variations in pension plans, including in the size of plans, their complexity and the resources available to support their administration.”

However, the guideline’s flexibility may also pose a challenge to smaller plan sponsors, adds Fremont. “It could be viewed as a bit of a burden on plan sponsors even just to review and figure out how to implement or whether to implement [these measures], because the guideline is meant to be contextualized. It’s meant to be flexible, so with different needs, sizes and resources, it just means you’re going to see different [priorities].”

Among Manulife’s smaller CAP sponsor clients, Morin notes the record keeper and its brokers have been very proactive in engaging with them to ensure a level of governance that complies with the guideline. “The guideline does provide flexibility in terms of CAP governance based on size and complexity. Some employers may have jumped on that and said, ‘Well, I’m small, what do I really need to do?’”

Read: ACPM focusing on flexible pension models, CAPSA guidelines in 2025

If any particular provision feels too onerous for a CAP sponsor to implement, there might be a leaner way to fulfill it that makes more sense for the plan, says Andrea Schmelcher, a senior consultant in Telus Health’s DC consulting practice. “Maybe it’s an area [in which] the plan is going to rely on their consultant or record keeper for help. For plans that depend on third parties to help them align with the CAP guideline on their behalf, proper selection and monitoring of service providers becomes important.”

Re-defining CAPs

As CAPs continue to evolve in response to the savings needs of several generations of employees, the CAPSA’s updated guideline also categorizes sponsors by plan types while expanding the definition of a CAP to include products like first home savings accounts.

The range of potential CAPs an employer can offer ties back to outcomes and engagement, as well as effective governance, says Werbowecki. “A group tax-free savings account is more aligned with the short-term savings goal. If the goal is to save for a home, they should be in [an FHSA]. And if it truly is for retirement, then we have these other CAPs available. We do think being a little more clear and intentional about the different programs and their intended outcome is important in overall CAP governance.”

Read: Canpotex adds FHSA to savings options to support employee financial well-being

While these products are defined as CAPs in the guideline, the document itself isn’t driving the adoption of innovative savings programs, notes Morin, adding plan design considerations and the net benefit to employees will ultimately determine how employers approach their savings programs.

“[The guideline] will be helpful in that, if an employer decides to add a type of CAP, the document will tell them what to do. . . . Everything that’s covered in the guideline is just common sense — you just change the purpose of the plan, which drives quite a few different things, but it’s the same recipe.”

Blake Wolfe is the managing editor of Benefits Canada and the Canadian Investment Review.

Download a PDF of the 2025 CAP Suppliers Report.