Update to CAPSA Guideline No. 3 for capital accumulation plans

On September 9, 2024, the Canadian Association of Pension Supervisory Authorities (CAPSA) released an updated version of Guideline No. 3 for pension and group savings plan administrators and sponsors, as well as Guideline No. 10 on risk management for plan administrators. Although CAPSA reviews Guideline No. 3 every five years, the 2024 version is the first major update in 20 years.

The update reflects the evolving nature of the industry and management practices, as well as the trend towards stronger governance and more effective communication in the management of capital accumulation plans. The major changes of Guideline No. 3 are as follows:

• Setting up a governance framework
  • Plan sponsors will need to set up a structured governance framework for their plans, including a description of roles and responsibilities, a process for communicating with plan members, and procedures for risk management and regular review. This framework should include a periodic assessment and review of the performance of service providers, funds and member services, and may be tailored to meet legal requirements and the size, complexity and scope of the plan.
• Improved communication and financial education
  • Plan sponsors will be required to provide clearer information and decision-making tools to plan members, and to consider whether to provide financial advice services to them. The industry has adapted over the past 20 years in order to support plan sponsors in these respects.
• Increased review and oversight
  • In addition to having to review service providers and investment options, sponsors will now have to regularly review the quality and effectiveness of education materials to ensure plan appropriateness and effectiveness.
  • During the selection and oversight of a service provider for financial advice, sponsors must consider the service provider’s qualifications, the tools at their disposal, their compensation and the independence of the advice given to members.
• Updated guideline
  • The revised guideline updates and replaces the 2004 guideline, incorporating new features such as automatic enrolment, automatic escalation of contributions and automatic rebalancing of investments, as well as the vehicles available for a plan’s decumulation phase.
  • Requirements surrounding the disclosure of fees have also been strengthened. The new guideline requires sponsors to clearly disclose all fees related to investment options, to describe their impact on retirement income and to provide information on expenses in plain language that plan members can understand.

To align your capital accumulation plan governance practices and comply with industry best practices as per CAPSA expectations, follow these key steps:

1. Training: Learn about applicable guidelines and current governance practices for your capital accumulation plan
2. Documentation: Develop an official governance framework and document it
3. Implementation: Initiate required operational, technological and administrative changes
4. Continuous review and monitoring: Develop periodic monitoring processes

Our experts will keep you informed of any developments. Would you like more information on this topic? Contact your Normandin Beaudry expert or email us.