Capital accumulation plans, commonly known as CAPs, are group retirement or saving plans that allow members to select from a variety of investment options. Given that their size and function vary greatly, the Pension and Benefits Law Section of the Canadian Bar Association says proportionality and flexibility should be the key characteristics of CAP best practices. That’s the gist of a letter the CBA Section sent to the Canadian Association of Pension Supervisory Authorities, or CAPSA about proposed changes to CAP guidelines.
By and large the draft CAP guidelines are directed at larger CAPs or employers with vast resources, the Section notes. There needs to be flexibility for small CAPs or CAPs with fewer resources, otherwise the guidelines risk making the offering and maintenance of a CAP less attractive to some employers. “Given the diversity of CAPs and CAP sponsors,” the letter says, “the cost of implementing specific best practices must not outweigh their benefits and must be proportionate to the nature and type of the plan.”
Guidelines also need to recognize that other legislation applies to some plans, for instance insurance and securities laws designed to protect plan members. It is important not to overburden CAPs, especially with safeguards that are already in place because of other applicable legislation. Consultation with industry stakeholders would be beneficial in the drafting of CAP guidelines.
In addition to these general comments, the CBA Section offers detailed suggestions on the fiduciary obligations of CAP sponsors, the role and oversight of service providers, investment options, the maintenance and retention of records and decumulation.