While the Canadian Association of Pension Supervisory Authorities’ updated capital accumulation plan guideline contains several key updates with regard to plan sponsor and member responsibilities, smaller plan sponsors may face administrative challenges in applying the guidance, says Jordan Fremont, a partner at Stikeman Elliott LLP’s pensions and benefits group.
“Because [the guideline] is so detailed, I would characterize it as an idealized view as to how to operate and oversee a CAP. The reality is that for many employers, it will probably be difficult to implement the CAP guidance without incurring additional staffing costs or seeking out additional assistance through outside advice.”
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The guideline, last updated in 2004, defines several plan sponsor responsibilities, including maintenance of records and providing ongoing education and communication to members, which may put an added financial burden on employers.
“Many [plan sponsors] have adopted these plans because they’re looking for low-cost [retirement savings] vehicles without all the additional trappings that come along with a more complex arrangement,” he says.
On the plan member side, the guideline establishes responsibilities such as understanding their CAP and its features, including contributions and investment options, which may mitigate increased engagement requirements on the part of plan sponsors, says Marc-Antoine Morin, assistant vice-president of product development for group retirement solutions at Manulife Financial Corp.
“Plan sponsors have been trying very hard [to engage members] in recent years. As a CAP sponsor, you need to provide the information, but once you’ve done that, if the member doesn’t engage and they don’t make the effort, then the burden falls back on them at this point.”
The guideline also categorizes CAP sponsors by plan types and has expanded the definition of a CAP to include first-home savings accounts. While group FHSAs are yet to be made available to plan sponsors, many employers are currently watching how employees take up individual FHSAs ahead of the potential rollout of a group product, says Morin.
Other CAP sponsors have chosen to not add supplemental savings programs in order to streamline their offerings, notes Fremont.
“Those kinds of [savings] vehicles come up for discussion routinely among many [plan sponsor] clients that I’ve dealt with. But some have also chosen intentionally not to add other vehicles under their programs, just to try to keep things simple. There are certainly different philosophies as to how to go about approaching those options.”
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