The Association of Canadian Pension Management is cautioning the Canadian Association of Pension Supervisory Authorities on its revisions to guidelines for capital accumulation plans.

The draft guidelines could “change the balance of the existing guidelines in a manner that will give many employers pause about starting or continuing CAP plans that are not defined contribution pension plans,” wrote Ric Marrero, chief executive officer of the ACPM, in an open letter to the CAPSA. He added the ACPM was surprised by many of the changes that were made after the extensive work performed by an industry working group in which the ACPM participated.

Marrero noted the draft guidelines would characterize all CAP sponsors’ actions as subject to fiduciary duty. “The Canada Revenue Agency’s jurisdiction does not extend to fiduciary duty. While guidance is appreciated, CAPSA is not in a position to determine who is or is not a fiduciary, as determining whether a fiduciary relationship exists is a legal test that is the sole purview of the courts.”

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The draft guidelines also direct virtually all compliance obligations to CAP sponsors and, in doing so, they follow the model of pension standards legislation with its embedded concept of an administrator that might or might not delegate its obligations to service providers, he wrote.

“In practice, a few large CAP sponsors may be capable of operating their CAP without external service providers. But that top-down model from the pension world need not be the model for non-pension CAPs. The vast majority of CAP sponsors rely heavily on the service provider and, in many cases, are a consultant to the plan sponsor. For those plans, the model is a three-pointed triangle among sponsor, service provider and consultant.”

The guidelines also suggest the CAP sponsor should be continuously engaged in fostering the achievement of the intended member outcomes. “If the sole activity of the sponsor is operating the CAP, we agree. But such a sponsor is rare. For all other employers, it is important to recognize continuous engagement is not possible. It is for that reason that employers hire service providers and consultants.”

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Marrero noted requirements for CAP sponsors to establish a risk management framework and a dispute resolution process may cause small CAP sponsors to rethink their offerings and disincentivize the establishment of new CAPs due to cost and added burden.

Regarding the maintenance and retention of records, he suggested the CAPSA also articulate what records should be retained and that who retains them should be determined by who creates them, with further input from the CAPSA as to how long they should be retained and by whom they should be accessible.

Marrero also suggested the guidelines stress the importance of decumulation to plan members, to ensure decumulation options are considered when CAP sponsors review and assess the appropriateness of plan features.

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