Skip to content

Pension update – CAPSA releases consultation draft of CAP Guideline No. 3 for comment

Level Chan and Annelise Harnanan


On May 13, 2022 the Canadian Association of Pension Supervisory Authorities (CAPSA) released and invited feedback on a Consultation Draft of revisions to CAPSA Guideline No. 3 – Guidelines for Capital Accumulation Plans (“CAPs”). The guidelines proposed in the Consultation Draft (the “Proposed Guidelines”) update the 2004 Guidelines for Capital Accumulations Plans (the “Original Guidelines”) issued by the Joint Forum of Financial Market Regulators. Below we discuss some of the significant changes proposed.

Updates to the definition of CAP

The Proposed Guidelines have been updated to incorporate new (and some existing) plan types that were not directly addressed in the Original Guidelines. According to the Original Guidelines, CAPs can be established by employers, trade unions, and associations. The Proposed Guidelines clarify that CAPs can also be established by boards of trustees and licensed administrators of Pooled Registered Pension Plans or Voluntary Retirement Savings Plans.

In addition, the Proposed Guidelines include the following workplace plans or arrangements as examples of CAPs:

  • Locked-in retirement accounts (LIRAs)
  • Registered retirement income funds (RRIFs)
  • Life income funds (LIFs)
  • Pooled Registered Pension Plans (PRPPs)
  • Voluntary Retirement Savings Plans (VRSPs)
  • Tax Free Savings Accounts (TFSAs)

Clarification of definition of CAP sponsor

The Proposed Guidelines provide the following breakdown of sponsors by common plan types:

  • Defined benefit contribution plans (DCPPs), Registered retirement savings plans (RRSPs), TFSAs and registered education savings plans (RESPs): the CAP sponsor may be the employer, former employer, trade union or other association.
  • RRIFs, LIFs and other retirement income drawdown options: the CAP sponsor may be the former employer, trade union or other association or a licensed administrator.
  • Deferred Profit Sharing Plans (DPSPs): the CAP sponsor is the employer.
  • PRPPs/VRSPs: the CAP sponsor is the licensed administrator.

Added factors that may affect CAP sponsor’s fiduciary duties

The Proposed Guidelines specify that all CAP sponsors have a common law fiduciary responsibility towards CAP members. The following are some of the factors that may affect the CAP sponsor’s fiduciary duties:

  • whether members contribute;
  • the discretionary authority of the sponsor to make decisions on behalf of CAP members;
  • the imbalance between the sponsor and members in their ability to negotiate terms with and access information from service providers; and
  • the varying levels of financial literacy among members.

Added recommendations

The Proposed Guidelines set out new recommendations for CAP sponsors.

Of note, they recommend that CAP sponsors establish and document a governance framework for the administration of the plan. The governance framework can include a description of the roles, responsibilities, and accountabilities of all participants in the plan, a communication process, a code of conduct for managing conflicts of interest, and a risk management framework. The Consultation Draft also recommends the establishment of a process for the regular review of the CAP’s governance process.  While becoming a more common requirement for administrators of more regulated plans like registered pension plans, this would expand the practices for sponsors who do not have such plans.

In addition, the Proposed Guidelines recommend that CAP sponsors establish automatic features as part of the CAP. These automatic features have the potential to increase participation in plans, encourage earlier and greater contributions, and encourage appropriate investment selection (which could lead to greater positive member outcomes).

Some proposed automatic features are:

  • automatic enrolment;
  • automatic escalation of CAP member contributions; and
  • default investment options.

The Proposed Guidelines also suggest that CAP sponsors consider entering into an agreement with (or referring members to) service providers who are qualified to provide investment planning. CAP sponsors that enter into such agreements should clearly communicate to CAP members the nature of the advice from the service provider, how the advisor is compensated, and who is paying for their services. The new guidelines also recommend that CAP sponsors develop criteria for selecting service providers. Factors to consider when establishing criteria include:

  • any conflict of interest of the service provider relative to other service providers, the CAP sponsor and its members that may impact the investment advice provided;
  • the quality of any asset allocation or financial planning model employed; and
  • knowledge of CAPs and related tax and regulatory requirements.

Other Changes

The Proposed Guidelines provide further detail regarding many of the recommendations in the Original Guidelines. For instance, the new guidelines suggest that CAP sponsors provide CAP members with additional information regarding the nature and features of the CAP, including:

  • enrolment information;
  • automatic features, if any;
  • how to terminate membership;
  • the decumulation options (as applicable) and their benefits and risks; and
  • how to withdraw or transfer money to available decumulation options and/or generate periodic retirement income.

The Proposed Guidelines also highlight that many of the decision-making tools that assist members in making investment decisions within the plan, such as asset allocation tools and retirement planning tools, require the use of assumptions. Consequently, the Proposed Guidelines suggest that plan sponsors periodically review these assumptions for reasonability. These assumptions should also be described and disclosed to plan members.

Finally, the Proposed Guidelines state that member statements (provided by CAP sponsors) should contain additional information, including:

  • notice of any upcoming requirement or ability for a CAP member to commence retirement income;
  • a reminder of any plan features that the member is not currently taking advantage of; and
  • information regarding the total level of fees and expenses payable by the member with respect to each investment option elected by the member.

Submitting feedback

CAPSA is seeking feedback on the Proposed Guidelines.  It requests that comments be as specific as possible and that they be provided by August 15, 2022. Please contact a member of our Pensions and Benefits team for assistance in making a submission.

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Pensions and Benefits group.

Click here to subscribe to Stewart McKelvey Thought Leadership.



Search Archive

Generic filters


Nova Scotia municipality plans changes to wind turbine regulations

June 27, 2022

By Nancy Rubin & Colton Smith    Wind turbine regulations in the Municipality of Cumberland are set to change.   On June 22, 2022, Cumberland Council approved a second reading of amendments relating to their…

Read More

Discovery: Atlantic Education & the Law – Issue 10

June 24, 2022

We are pleased to present the tenth issue of Discovery, our very own legal publication targeted to educational institutions in Atlantic Canada. As we settle into a summer having rounded out the end of another…

Read More

Pay Transparency: Recent Changes to PEI’s Employment Standards Act

June 10, 2022

Murray Murphy and Kate Profit Changes to Prince Edward Island’s Employment Standards Act (“ESA”) regarding pay transparency received royal assent on November 17, 2021 and has recently come into force as of June 1, 2022.…

Read More

Discovering a Denial: Recent Ontario decision sheds light on discoverability of claims against LTD insurers

June 3, 2022

Michelle Chai & Jennifer Taylor1   A recent Ontario case offers insight on when the limitation period starts to run for an action against a disability insurer. In Kumarasamy v Western Life Assurance Company, the…

Read More

Pension update – CAPSA releases consultation draft of CAP Guideline No. 3 for comment

May 30, 2022

Level Chan and Annelise Harnanan Background On May 13, 2022 the Canadian Association of Pension Supervisory Authorities (CAPSA) released and invited feedback on a Consultation Draft of revisions to CAPSA Guideline No. 3 – Guidelines…

Read More

The winds of change – Newfoundland and Labrador Government signaling major shift in energy policy

May 17, 2022

John Samms and Matthew Craig In uncertain economic times like these, “open for business” is a welcome phrase by leading Ministers in Newfoundland and Labrador. For years, Newfoundland and Labrador’s wind generation policy was, for…

Read More

Accountability and Oversight: Nova Scotia’s new Powers of Attorney Act

May 9, 2022

Richard Niedermayer, QC, TEP, Sarah Almon, TEP, and Madeleine Coats Long-awaited amendments to the Province’s currently short-and-sweet Powers of Attorney Act1 received Royal Assent on Friday, April 22, 2022.  While not yet proclaimed into effect, the…

Read More

Prince Edward Island’s new Non-Disclosure Agreements Act

May 5, 2022

Jacob Zelman and Kate Profit Prince Edward Island’s Non-Disclosure Agreements Act (“Act”) received royal assent on November 17, 2021 and is set to come into force on May 17, 2022. The purpose of the Act…

Read More

New Brunswick’s new Intimate Images Unlawful Distribution Act

April 28, 2022

Chad Sullivan and Tiffany Primmer Increasingly, employers are finding themselves faced with addressing the uncomfortable situation of an employee who has shared an intimate image of another employee. While not directly applicable to what an…

Read More

Provincial Non-Resident Deed Transfer Tax Guidelines

April 19, 2022

Brian Tabor, QC and Eyoab Begashaw On April 8, 2022, the Nova Scotia Department of Finance and Treasury Board (Provincial Tax Policy and Administration Division) released the Provincial Non-Resident Deed Transfer Tax Guidelines (“Guidelines”) with…

Read More

Search Archive

Generic filters

Scroll To Top