The Pension Investment Association of Canada is concerned draft legislation on variable payment life annuities doesn’t do enough to help small defined contribution pension plans use them.

In a letter to Finance Minister Bill Morneau, the PIAC noted VLPAs, which were introduced in the 2019 federal budget, are a solution of great interest to its membership. But while larger DC plans may opt to use them, the letter said it’s unlikely smaller DC plan sponsors will be able to establish and administer an in-plan VPLA.

Read: Industry praises budget proposals to allow variable annuities for CAP members

The PIAC suggested that these smaller DC plans establish programs with third-party providers so they can serve as aggregators of smaller pools. “This model is more likely to succeed if there is a broader scope of permitted aggregation structures beyond the PRPP, which is the only other structure permitted outside of a registered pension plan based on the draft legislation.”

In June, the PIAC wrote to the Finance Minister indicating the PRPP model has so far failed to gain much traction in the Canadian marketplace, although it said the model has potential merit.

The association is encouraging the federal government to revisit the draft legislation to allow for more suitable solutions for smaller DC plans.

Read: Feds proposals for variable benefits present opportunity to revisit PRPP rules: PIAC

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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