What can DC pension committees learn from DB plan governance?

For the DB plan, which meets three times a year, committee members dig into the investment and de-risking strategy. And for the DC plan, which meets just once annually, they’re looking to assess whether the investment options will provide members with a sufficient income replacement ratio at retirement and determine if there are any new funds to include in the plan.

Read: 2025 DC Plan Summit: How Bell Canada incorporated plan sponsor guidance into DC plan design

“On the DB side, [for] every risk we have, we have a solution that [addresses] at least part of the risk. Certainly, it’s education around the risk that [committee members] learn from a DB plan and apply it to a DC perspective.”

CAPSA guiding the way

With the Canadian Association of Pension Supervisory Authorities’ updated capital accumulation plan guidelines putting an increased focus on stronger DC plan governance, there’s plenty DC plan committees can learn from their DB counterparts.

“When I think about the DC plan committees we work with that are great, effective and take their jobs seriously, I can’t tell the difference between how they operate and a good DB plan committee,” says Brendan George, a partner at Convyta Partners LP.

With the shift from DB to DC, a lot of DC plans were set up to move away from the governance involved with DB and target-benefit plans, he adds. “Often, the view might be, ‘We’ll set up this plan, we can meet once a year and get a presentation from the insurance company, . . . they handle the fund options, the communications with members and the administration [and] we just get a little report from them.’ The good committees don’t do that.”

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

In addition, while most DB committees follow the CAPSA’s guideline 4 on pension plan governance very closely, not all DC committees do, says George. But well-run DC pension committees spend a fair amount of time and effort on these governance practices, he adds, including meeting consistently, completing the CAPSA’s self-assessment questionnaire for plan administrators every year or two and establishing governance policies and procedures, terms of references and documentation of roles and responsibilities. They also have a clear understanding of contracts with providers, including service standards and fees.

Investment lineups, communications

One of the main focuses of DB and target-benefit plan committees is reviewing investment performance against objectives, says George, which is less common in the DC space, where committees often rely on the record-keeper’s offering, pick a fund lineup and make infrequent, if any, changes.

Well-run DC committees have specific return objectives for each fund in their lineup, review them at least annually, if not quarterly, and are heavily involved in any lineup changes, he notes. And while target-date funds, now the primary investment vehicle in DC plans, take care of the complicated work of asset allocation for plan members, George says committees should still be doing due diligence.

Read: 2025 DC Plan Summit: A look at the history and beneficial characteristics of target-date funds

“There are more changes being made to those over time — changes in asset allocation, changes in glide path, the introduction of illiquid assets, like real estate, infrastructure and private debt. Target-date funds and their structure have changed a lot over the last 10 years. Knowing what’s inside them and understanding them so you can make a decision you think is best for members [is important].”

DB committees have historically taken ongoing education for plan members quite seriously, he notes, bringing in experts for education sessions and sending committee members to relevant conferences or other learning opportunities. On the DC side, he adds, committees are starting to invest in this as well.

The decumulation phase

The next frontier for engaged DC committees is providing the option for employees to draw down their pensions from within the plan.

Indeed, an increasing number of George’s plan sponsor clients are considering in-plan decumulation options, which involve due diligence on group registered retirement income funds, life income funds or annuities, instead of leaving members on their own to navigate individual options. “In a traditional [DB] pension plan, members are [in it] until they die.”

Read: Head to head: Are DC plan sponsors actually interested in variable benefits?

Bell Canada introduced in-plan variable benefits in 2019, which offers members a familiar administrative platform, sophisticated investment options, low fees and an easy transition. It’s also exploring the possibility of adding a mortality pooling option for DC members in the future, says Marchessault, but he isn’t sure what form that will take yet.

The company has stepped up its DC plan governance in recent years. In addition to using an external firm to validate its policies and practices every two years, it was prompted by the CAPSA’s updated guidelines to apply its pension governance to its group registered retirement savings plan, tax-free savings account, first home savings account and employee share ownership plan. This involves increased communications to members around topics like their account balances and whether they’re approaching their annual contribution limits.

“When we saw [the guidelines], we said, ‘They’re right. All accumulation plans should have good governance around them.’ So that’s what we’ve done.”

Kelsey Rolfe is a Toronto-based freelance writer.