The Canadian Association of Pension Supervisory Authorities is conducting a number of reviews this summer, looking into retirement projections and decumulation options for defined contribution pension plans, as well as developing guidance for plan administrators around missing members.
The review into possible amendments to CAPSA’s guideline No. 8 on defined contribution pension plans, as well as other capital accumulation plans, will begin this summer, CAPSA noted in a bulletin published last week.
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One of the current recommendations in guideline No. 8 is for plan sponsors to provide retirement income projections to members. But some plan sponsors are nervous to do that because “the world changes, interest rates change, . . . annuity purchase rates change significantly,” says Janice Holman, principal and defined contribution practice leader at Eckler Ltd.
“So if we can be clearer in how you provide projections and what is deemed acceptable, then I think you’ll remove some of the anxiety and fear from plan sponsors to provide those projections. It will also make it more uniform.”
There’s also a need for more clarity around the assumptions used for the projections in order to create a level playing field across all providers, she adds.
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While the guideline currently outlines expectations for plan sponsors around providing information to plan members who are about to retire, they offer limited guidance on decumulation options, says Stephanie Kalinowski, a partner in the pension, benefits and executive compensation group at Hicks Morley Hamilton Storie LLP.
“They talk about if the plan offers a variable benefit, but they don’t outline any other expectations, so I wonder whether they’re going to think about decumulation more closely?” she adds.
Holman believes there should be clarification on exactly what plan sponsors should provide when it comes to decumulation options. “Right now, it’s mostly people that are selling those products that provide the information, so there might be some guidance on who should be providing that information, not from someone who has a potential conflict,” she adds.
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CAPSA’s bulletin also notes a review is already underway to look at the issues related to missing pension plan members. It says a committee is reviewing the practices of various national and international jurisdictions and expects to recommend next steps that include developing guidance for pension plan administrators around options for members they can’t track down.
Kalinowski notes it’s a big issue for plan sponsors, particularly in Ontario, which currently has no regulatory guidance to deal with missing members. “Some jurisdictions have taken some steps to put something in place that’s available to plan administrators, but Ontario is still looking at it,” she says, noting the province’s 2017 budget directed the superintendent of financial services to prepare a policy.
The budget stated the superintendent would have power to waive the requirement for plan administrators to send periodic statements to beneficiaries if they can prove they’re missing. It also noted the Ontario government is looking at creating a registry of information about missing members and their benefit entitlements.
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“So they’re clearly going to develop some guidelines for administrators on perhaps what steps to take,” says Kalinowski. “One of the questions I always get is: ‘How far do you have to go? How much money do you have to spend to find someone who may have a very small benefit?’ It will be interesting to see if they provide any regulatory comment on that issue.”
Holman agrees it’s a big challenge for plan sponsors that entails significant effort and cost. She also expects to see some guidance around what steps plan administrators need to go through to show they’ve done their due diligence in trying to locate members and when they can move to alternative solutions.
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