: PRPP Checklist for Employers

As pooled registered pension plans (PRPPs) become available, employers should be mindful of a number of issues prior to establishing or joining a PRPP:

Employer responsibilities in PRPPs – PRPPs do not relieve employers of responsibilities and potential liability. The framework contemplates that plans will be administered by professional administrators, presumably financial institutions, and the legislation provides that employers will not be liable for “acts and omissions of the administrator”. However, like other retirement plans, having a third party administrator does not relieve the employer of obligations. PRPPs will constitute capital accumulation plans (CAPs) and therefore the CAP Guidelines established in 2004 by the Joint Forum of Financial Market Regulators will apply. While not binding, they have been adopted by the Canadian Association of Pension Supervisory Authorities.

Employers who establish PRPPs will meet the definition of “CAP Sponsors” and therefore have responsibilities including:

  • Selection of investment options;

  • Providing investment information and decision-making tools to members;

  • Ongoing communication to members;

  • Managing termination of member participation;

  • Reviewing the plan; and

  • Maintaining records.

Many of these responsibilities may be delegated and be carried out on a day-to-day basis by the PRPP administrator but employers will still have responsibility for oversight of these areas and will also be the first point of contact for employees in the workplace. Having professional PRPP administrators will be beneficial in that they will have expertise and resources to communicate and educate members. However, employers should not think that their responsibilities will be limited to remitting contributions.

Know your administrator – Employer responsibilities will include selecting and monitoring the PRPP administrator. Employers should therefore make sure they do their due diligence on the administrator, including their fees.

Consider all options – Much as personal financial advisors will debate the use of PRPPs versus other tax shelters such as Tax Free Savings Accounts (TFSAs) and RRSPs, employers should look at other options such as group RRSPs and the target benefit plans. The government response of adding more options means more research for employers to decide what plan best fits the business and employees.

Look inside the package – Like other group RRSP and defined contribution plans offered by financial institutions, employers should closely review any “off the shelf” products that will be offered by financial institutions to ensure that a plan is appropriate for their employees and clearly sets out the roles and responsibilities of all stakeholders in the PRPP. One size does not fit all when it comes to PRPPs and employers should ensure the plan is tailored for its business.

Don't forget existing HR documents – If moving to a PRPP, employers should review employment contracts, handbooks and policies to ensure that retirement plan aspects such as plan design, investment options and contribution levels comply with what has been promised in those documents.

Talk to employees – Like any pension and benefits administration, communication with employees will be key. This will include communication with employees before and after implementation of the plan. Employees need to be educated about the plan and investment options.

The above considerations do not mean that employers should avoid PRPPs. There can be significant advantages including access to a professional administrator and pooling of funds to reduce costs to employers and employees. It is simply important that employers do their homework as they become available.

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