The Canadian Association of Pension Supervisory Authorities is developing a framework for defined contribution pension plans to offer variable payment life annuities.
In developing the framework, the CAPSA said it will address topics such as plan design and conversion options, as well as member disclosure, spousal consent, plan termination, investment rules and regulatory oversight for plans that offer VPLAs, including the filing of actuarial valuation reports.
The framework will be harmonized, to the extent possible, across jurisdictions and will include rules that the CAPSA feels should be encompassed in legislation and those that should be left for plan sponsors to determine, according to a press release.
After the framework has been developed, the CAPSA’s decumulation committee will consider developing guidance for plan sponsors, administrators and members, said the release, noting the committee will also determine the appropriate timing for the development and release of such guidance and whether to recommend appropriate changes to the multilateral agreement to provide for a more harmonized framework.
The 2019 federal budget introduced VPLAs after a coalition led by the National Institute on Aging — which includes the Association of Canadian Pension Management, the CARP, the Canadian Institute of Actuaries, the Canadian Life and Health Insurance Association, Common Wealth and the Pension Investment Association of Canada — requested in December 2018 that the federal government make these annuities a reality.
Todd Saulnier, vice-president of the board of directors at the ACPM, says a multi-jurisdictional VPLA framework is a key consideration for the organization. “One of the ACPM’s primary principles is harmonization. . . . If there’s different requirements for different jurisdictions, it’s harder to implement a VPLA plan successfully that covers people from different regions.”
And with administration costs ultimately borne by VPLA participants, “there might be arguments to require simplified valuation reports or reports produced less frequently than annually.”
Overall, VPLAs are going to see the most interest from large DC plans, says Saulnier. “Given the need for a larger pool [of participants], most small plans and many single-employer plans aren’t going to be as enthusiastic.”