The Pension Investment Association of Canada is providing feedback on the consultation draft of revisions to the Canadian Association of Pension Supervisory Authorities’ guidelines for capital accumulation plans.

If the guidelines are to be considered a minimum standard for plan administration, the increased responsibilities may act as a deterrent to employers choosing to make a CAP available to their employees, wrote Sean Hewitt, chair of the PIAC, in an open letter to the CAPSA. “Careful consideration should be given to separate suggested best practices, which may not currently be available to all CAP sponsors in today’s marketplace, from minimum standards.”

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He suggested there may also be opportunities to simplify the document by removing references to laws applicable to only certain types of CAPs. “Given that the laws and regulations change in all Canadian jurisdictions, including the creation of new types of CAPs, keeping the CAP guidelines up to date with those references will be difficult and, when a specific applicable law is not referenced in the CAP guidelines or the reference is outdated or deprecated, that can create legal ambiguity.”

While the PIAC agreed that having a large number of investment options may hamper plan member decision-making, Hewitt said it’s more appropriate to guide CAP sponsors to strike an appropriate balance between simplicity and providing members with sufficient investment options to allow members to customize risk/return while building an effective long-term portfolio.

“Diversity of the employee workforce by earnings and retirement needs, level of engagement with the CAP and the employees’ level of understanding of financial matters can justify a higher number of investment options,” he wrote.

In addition, he suggested CAP members be clearly informed of their rights and responsibilities, which should be clearly set out in the guidelines. “While many service providers include a member’s personal rate of return on quarterly statements, we question the value of this to the CAP member, as past returns are not indication of future returns nor can they be easily used to assess the validity of current asset allocation.”

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