A few years back, we held a session at the annual Avantages Montreal DC conference and asked the sponsor audience how likely they would get involved in helping DC members optimize their retirement income, post-accumulation. Sadly, only two out of the 50 or so sponsors present said they would. But it looks like things are changing.
Replacement income levels generated by capital accumulation plans declined to 63% in the first quarter of 2014, according to Eckler’s Capital Accumulation Plan Income Tracker.
With funding risk in a DB pension plan borne by the employer, DB plan sponsors have little need or incentive to engage members—beyond annual statements—until they terminate plan membership or retire. In contrast, the shifting of investment responsibility and risk to members in a DC plan means those members need access to more information about investments, as well as education around the options available through the plan and how to select those options.
The Canadian Association of Pension Supervisory Authorities (CAPSA) has released a draft Defined Contribution Pension Plans Guideline for comment from the pension industry.
Pension standards legislation in Canada allows an employer to act as the administrator of its single employer pension plan. However, as a plan administrator, an employer must remember two points: do no harm and take no advantage, says Randy Bauslaugh, a partner in the Pensions, Benefits & Executive Compensation Group with McCarthy Tétrault, LLP.