March 11, 2016 Dear Pension Industry Stakeholder:

March 11, 2016
Dear Pension Industry Stakeholder:
Re: CAPSA Consultation on the Revisions to the Pension Plan Governance Guideline
On behalf of the Canadian Association of Pension Supervisory Authorities (CAPSA), we are
pleased to release the enclosed drafts of the revised CAPSA Guideline No. 4: Pension Plan
Governance, and the related Self-Assessment Questionnaire and FAQ Document, for your
consideration.
This consultation is part of CAPSA’s strategic initiative to review and determine if revisions are
necessary to CAPSA’s pension plan governance guidance, which is intended to assist plan
administrators to implement and maintain good governance practices.
CAPSA invites comments on the revised guidelines, self-assessment questionnaire and FAQ
document from all pension industry stakeholders.
Background
Published in October 2004, the CAPSA Guideline No. 4: Pension Plan Governance and SelfAssessment Questionnaire, were developed to assist plan administrators across Canada to
implement and maintain effective pension plan governance processes. The governance
guideline has become the most requested and utilized CAPSA publication by plan
administrators.
In their development, CAPSA undertook significant consultation with pension industry
stakeholders to ensure the guidance was clear, understandable and usable for all plan
administrators. Between 2001 and 2005, this involved engaging an Industry Task Force during
each stage of drafting, conducting a “road-testing” exercise with dozens of plan administrators
for sample implementation, and incorporating feedback from a public comment period.
As part of CAPSA’s 2012-15 Strategic Plan, the governance guideline was identified for periodic
review and the Pension Plan Governance Committee was re-established with a mandate to
examine related industry and regulatory developments, to review established international
best practices, and to advise CAPSA on potential revisions to the governance guideline.
CAPSA Secretariat, 5160 Yonge Street, 18th Floor, Box 85 Toronto, Ontario M2N 6L9
Tel: (416) 590-7081 Fax: (416) 226-7878 Email: [email protected]
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In April 2014, the Committee established an Industry Working Group, composed of pension
governance experts nominated by a number of national industry associations. Working in
tandem, members of the Committee and the Industry Working Group have prepared the draft
revisions to the CAPSA Guideline No. 4: Pension Plan Governance, and the related SelfAssessment Questionnaire and FAQ Document, included in this consultation. CAPSA wishes to
express its gratitude to the Industry Working Group for the dedication and insight that it
brought to this task.
Overview of Draft Revisions
The draft revisions to the CAPSA Guideline No. 4: Pension Plan Governance, and the related SelfAssessment Questionnaire and FAQ Document, are intended to assist plan administrators by:
-
Clarifying when a fiduciary relationship exists and what obligations flow from such
relationships, including that fiduciary responsibility is retained when any activities are
delegated to third parties;
Encouraging the establishment of a governance framework, through which information
on governance methods and activities are documented;
Equipping them with additional tools to identify the various roles and assign
responsibilities to appropriate participants;
Broadening the scope of performance measurement to include all participants in the
plan administration; and,
Capturing best practices as they relate to the identification and management of the
plan’s risks.
Stakeholder Comments
Your feedback on the draft revised CAPSA pension plan governance documents is appreciated.
We request that your commentary be as specific as possible. Please direct your submissions
(electronic are preferred) to the CAPSA Secretariat:
Neil Mohindra
A/Policy Manager
CAPSA Secretariat
5160 Yonge Street, Box 85
Toronto ON M2N 6L9
E-mail: [email protected]
We look forward to receiving your comments by June 10, 2016.
All submissions received will be publicly released on the CAPSA website at the end of the
consultation period. Any questions regarding this consultation may be directed to the CAPSA
Secretariat at the contact information noted above.
CAPSA Secretariat, 5160 Yonge Street, 18th Floor, Box 85 Toronto, Ontario M2N 6L9
Tel: (416) 590-7081 Fax: (416) 226-7878 Email: [email protected]
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Please note that these draft documents do not reflect the official position of any provincial or
federal government or agency.
We appreciate your participation in this consultation. All comments will be fully considered as
CAPSA works toward finalization of the revised draft pension plan governance guidance.
Sincerely,
Angela Mazerolle
Chair, CAPSA
Superintendent of Pensions,
New Brunswick
Tamara DeMos
Chair, CAPSA Pension Plan Governance Committee
Managing Director, Private Pension Plans Division,
OSFI
CAPSA Secretariat, 5160 Yonge Street, 18th Floor, Box 85 Toronto, Ontario M2N 6L9
Tel: (416) 590-7081 Fax: (416) 226-7878 Email: [email protected]
CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft - Guideline
Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Guideline (March 2016)
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft - Guideline
Context for the Guidelines
The Canadian Association of Pension Supervisory Authorities (CAPSA) has designed these guidelines and
associated reference tools to help plan administrators meet their governance * responsibilities.
Published originally in 2004, these guidelines have been used widely by pension plans in Canada. The
current version includes updated and clarified principles and guidance on implementation of the principles.
Pension Plan Governance
Pension plan governance is about delivering on the pension promise consistent with the pension plan
documents and pension legislation. Pension legislation defines the pension plan administrator as the body
responsible for the governance of the pension plan.
Pension plan governance refers to the structure and processes in place for the effective administration of
the pension plan to ensure the fiduciary and other responsibilities of the plan administrator are met. CAPSA
believes that good pension plan governance is essential if plan members and beneficiaries are to receive
the benefits they are entitled to, and to understand their rights and responsibilities under the pension plan.
Pension Plan Administrator
Pension legislation specifies who may be a plan administrator and identifies the plan administrator’s
responsibilities. The plan administrator may be any of the following:






the employer who established the plan,
a pension committee,
a board of trustees,
an insurance company,
a bargaining agent, or
another body established or permitted by law.
The party appointed as the plan administrator is usually stated in the plan documents.
The plan administrator may use delegates to help carry out governance responsibilities. Delegates may
include employees of the plan administrator and external third party service providers .
* Please note that defined terms are italicized and bolded when first used. Definitions are in the Glossary of Terms,
contained at the end of the guidelines.
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
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Pension Governance System
An effective pension governance system:



establishes a framework for defining the duties, associated responsibilities and accountabilities
for all participants in the governance process,
covers all facets of pension plan management, including communication, funding, investments
and benefit administration, and
provides careful oversight while enhancing protection for plan members and beneficiaries.
Good pension plan governance:

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



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is essential for meeting fiduciary and other responsibilities,
minimizes risks and maximizes efficiency,
promotes accurate, timely and cost-effective delivery of pension benefits,
promotes administration of the plan in the best interests of plan members and beneficiaries,
requires control mechanisms that encourage good decision-making, proper and efficient
practices, clear accountability, and regular review and evaluation,
contributes to positive pension plan performance, and
helps to demonstrate due diligence on the part of the plan administrator.
Governance Guidelines
This CAPSA Guideline on Pension Plan Governance provides a broad, flexible outline of key pension plan
governance principles. Different types and sizes of plans, however, may require different governance
practices. Although pension plan administrators need to adapt their governance practices to specific
circumstances and resources, we strongly recommend that all plan administrators adopt a governance
structure and processes consistent with the principles that follow.
The Guidelines recommend principles for effective pension plan governance. They outline the appropriate
roles and responsibilities of the plan sponsor only when the plan sponsor is acting as plan administrator.
They do not cover the roles and responsibilities of the plan sponsor under general corporate governance
principles. Many individuals who have pension plan governance responsibilities also have responsibilities to
the plan sponsor. Consequently, those with governance responsibilities must clearly understand the
different roles and responsibilities for each. Further, when taking actions that affect the pension plan, they
must carefully document the actions for both sets of responsibilities. In particular, whenever the two roles
are in a conflict of interest, the administrator must act in the best interests of plan members and
beneficiaries.
CAPSA encourages all pension plan administrators in Canada to assess whether their current pension plan
governance structures and processes are effective and to strive for the best practices set out in the
Guidelines.
Note, however, that the Guidelines are not intended to create additional rights and responsibilities for any
party to a pension plan. Though voluntary, they are meant to help plan administrators achieve and maintain
good pension plan governance.
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft - Guideline
CAPSA Guidelines
This CAPSA Guideline on Pension Plan Governance provides overall guidance to assist plan administrators
of all types and sizes of pension plans in achieving and maintaining good governance. Plan administrators
and other governance participants may also wish to reference other CAPSA Guidelines and publications
that are appropriate to the plan’s circumstances.
Each of the CAPSA Guidelines and other publications can be obtained through CAPSA’s website
(www.capsa-acor.org) under “CAPSA Guidelines”.
CAPSA Pension Plan Governance Principles
Principle 1: Fiduciary responsibility
The plan administrator has fiduciary responsibilities to plan members and beneficiaries. The plan
administrator may also have other responsibilities to other stakeholders.
Principle 2: Governance framework
The plan administrator should establish and document a governance framework for the administration of
the plan.
Principle 3: Roles and responsibilities
The plan administrator should clearly describe and document the roles, responsibilities, and accountabilities
of all participants in the pension plan governance process.
Principle 4: Performance monitoring
The plan administrator should establish and document performance measures to monitor the performance
of participants in the governance and administration of the plan.
Principle 5: Knowledge and skills
The plan administrator, directly or with delegates, has a duty to apply the knowledge and skills needed to
meet the plan administrator’s responsibilities.
Principle 6: Access to information
The plan administrator should establish and document a process to obtain and provide appropriate
information to meet its fiduciary and other responsibilities.
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Principle 7: Risk management
The plan administrator should establish and document a framework and ongoing processes, appropriate to
the pension plan, to identify and manage, to the extent possible, the plan’s risks.
Principle 8: Oversight and compliance
The plan administrator should establish and document appropriate processes to ensure compliance with the
legislative requirements and pension plan documents.
Principle 9: Transparency and accountability
The plan administrator should establish and document a communication process with the aim to be
transparent and accountable to plan members, beneficiaries and other stakeholders.
Principle 10: Code of conduct and conflict of interest
The plan administrator should establish and document a code of conduct, including a policy to manage conflicts
of interest.
Principle 11: Governance review
The plan administrator should establish and document a process for the regular review of the pension plan’s
governance framework and processes.
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CAPSA Pension Plan Governance Guidelines
Principle 1: Fiduciary responsibility
The plan administrator has fiduciary responsibilities to plan members and
beneficiaries. The plan administrator may also have other responsibilities to other
stakeholders.
A fiduciary relationship is one of trust between two or more parties where one (or more) person(s) (the
fiduciary[ies]) has an obligation to act in the best interests of the other party.
(a) Fiduciary responsibilities
Fiduciary obligations are owed when legislation imposes such duties or when:
i.
a plan administrator and/or any delegates can exercise discretionary power to affect the interests
of members or beneficiaries;
a plan administrator and/or any delegates can unilaterally exercise that power so as to affect the
interests of the members or beneficiaries; and
the members and/or beneficiaries are in a position of vulnerability at the hands of the plan
administrator and/or any delegate.
ii.
iii.
The plan administrator and delegates must act honestly, in good faith and in the best interests of plan
members and beneficiaries of the pension plan as part of their fiduciary responsibilities.
In its fiduciary role, the plan administrator’s responsibilities include:





treating members and beneficiaries impartially,
acting with the care, skill and diligence of a prudent person,
interpreting the plan terms fairly, impartially and in good faith,
managing conflicts of interest, and
within the scope of such duties and its authority, ensuring that members and beneficiaries
receive promised benefits.
The pension governance process should help the plan administrator carry out its fiduciary and other
responsibilities. Although plan administrators may delegate certain tasks of the plan administrator to third
parties, the administrator retains fiduciary responsibility.
(b) Other responsibilities
The plan administrator may also have other responsibilities to other stakeholders.
When employers, bargaining agents, or their nominees act as plan administrators, they must understand the
difference between their plan administrator and other roles, and act accordingly. Employers and bargaining
agents should follow the principles in these Guidelines when acting as plan administrator.
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Principle 2: Governance framework
The plan administrator should establish and document a governance framework for
the administration of the plan.
The governance framework should:
i. identify the duties and functions that need to be performed for the plan administrator to meet its
fiduciary and other responsibilities; and
ii. determine and demonstrate on an on-going basis how the plan administrator will meet such fiduciary
and other responsibilities.
Principle 3: Roles and responsibilities
The plan administrator should clearly describe and document the roles,
responsibilities, and accountabilities of all participants in the pension plan
governance process.
The plan administrator:





is ultimately responsible and accountable for managing the plan;
may delegate operational management tasks, but should provide oversight to ensure
responsibilities are fulfilled;
is responsible for selecting the delegates and monitoring the actions of delegates;
is responsible for managing any conflicts of interest that arise; and
should ensure that the pension governance structure, roles and responsibilities, accountabilities
and reporting relationships (i.e. chain of delegation) are clearly documented and communicated
to all participants in the pension plan governance process.
When the same person or entity performs both pension plan governance and corporate functions, there
must be a clear recognition, understanding, and documentation of the different roles and responsibilities of
each function. When a decision is made, it should be clearly documented, and its rationale and the role
under which it is taken should be included.
Principle 4: Performance monitoring
The plan administrator should establish and document performance measures to
monitor the performance of participants in the governance and administration of the
plan.
The plan administrator is responsible for:


establishing and documenting appropriate performance measures;
regularly monitoring the performance of all participants in the governance process, including
the plan administrator, internal staff and delegates;
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft - Guideline


regularly reviewing the appropriateness of such performance measures; and
establishing procedures and taking follow-up actions to correct inadequate performance.
Since performance evaluations need to be based on objective, impartial assessments, the plan administrator
may require independent professional assessments.
Principle 5: Knowledge and skills
The plan administrator, directly or with delegates, has a duty to apply the knowledge
and skills needed to meet the plan administrator’s responsibilities.
The plan administrator is ultimately responsible for the governance and the administration of the pension
plan. The plan administrator should either obtain appropriate support to directly fulfill the administration
role or delegate the function to external experts.
The plan administrator and delegates in the governance structure should together possess and apply the
knowledge and skills to fulfill the plan administrator’s responsibilities.
The plan administrator should, on appointment and on an ongoing basis, consider whether all delegates
have the relevant qualifications, resources and experience to carry out their function and provide access to
appropriate education.
Principle 6: Access to information
The plan administrator should establish and document a process to obtain and
provide appropriate information to meet its fiduciary and other responsibilities
Processes should exist so that the plan administrator obtains the necessary information to meet its fiduciary,
decision-making and other responsibilities.
The plan administrator should provide any delegates with appropriate information needed to carry out their
responsibilities.
Principle 7: Risk management
The plan administrator should establish and document a framework and ongoing
processes, appropriate to the pension plan, to identify and manage, to the extent
possible, the plan’s risks.
A plan’s risk management framework should provide reasonable assurance for the achievement of the plan’s
objectives through:
a)
b)
c)
d)
identifying the risks;
assessing and prioritizing the risks;
ensuring a clear understanding of the responsibilities for the management of the risks;
accepting the risk or designing and implementing an appropriate risk-mitigating response;
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
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e) monitoring and evaluating the risks and effectiveness of the responses and risk management
processes generally; and
f) documenting the risk management processes.
Principle 8: Oversight and compliance
The plan administrator should establish and document appropriate processes to
ensure compliance with the legislative requirements and pension plan documents.
Every pension plan needs documented processes to enable compliance with legislative requirements and to
ensure functions related to the administration and governance of the pension plan fall within the plan terms,
plan administrative policies, and legislative requirements.
Principle 9: Transparency and accountability
The plan administrator should establish and document a communication process
with the aim to be transparent and accountable to plan members, beneficiaries and
other stakeholders.
The plan administrator should establish a communication process, taking into account both fiduciary and
other responsibilities, so that plan members, beneficiaries and other stakeholders have access to legislated
and other appropriate information about the plan.
Plan administrators should inform pension plan members and beneficiaries of the process for asking
questions and raising concerns.
When communicating with plan members, the plan administrator should:
a) communicate how important decisions about the plan are made; and,
b) inform them of the risks, benefits, options, and responsibilities of membership in the plan.
Principle 10: Code of conduct and conflict of interest
The plan administrator should establish and document a code of conduct, including
a policy to manage conflicts of interest.
In order to manage both actual and perceived conflicts of interest, the plan administrator should establish
and periodically review a documented code of conduct. The code of conduct should set out expected
behaviours and establish procedures to identify, monitor and address material conflicts of interest.
Plan administrators should ensure delegates have an appropriate code of conduct that includes a policy to
manage conflicts of interest, as well as processes to disclose any conflicts and any breaches of the code of
conduct.
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
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Principle 11: Governance review
The plan administrator should establish and document a process for the regular
review of the pension plan’s governance framework and processes.
The attached Pension Plan Governance Self-Assessment Questionnaire has been developed to assist the plan
administrator in carrying out a governance review.
The governance review may result in the plan administrator setting goals and objectives for the future and
methods to correct any shortfalls in governance. Based on the governance review, the plan administrator
may modify its policies and practices to improve overall pension plan governance.
The plan administrator may wish to communicate the result of the governance review to plan members,
beneficiaries and other stakeholders.
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft - Guideline
Glossary of Terms
administration
the oversight, management and operations of the pension plan and its
pension fund including the investment of the assets of the pension fund.
beneficiaries
individual, group, body or entity entitled to a benefit under the terms of
a pension plan other than plan members.
delegate ∗
any party who carries out aspects of the administration of the pension
plan and investment of the pension fund (including a committee).
plan administrator
the individual, group, body or entity that is responsible for the oversight,
management and operations of the pension plan and pension fund.
plan member(s) or member(s)
all current and former employees, including retired employees, entitled
to benefits under the pension plan.
plan sponsor
the individual or entity that is responsible for determining the design of
the pension plan, setting the benefit structure for various classes of
members, and establishing, amending or terminating the pension plan.
third party service provider
the entity (or entities) or individual(s) that is/are retained by the plan
administrator to perform some or all of the delegated duties associated
with the pension plan and the pension fund that the administrator is
required to perform.
stakeholder
a party who has an interest in decisions and actions about the pension
plan. It includes plan members and beneficiaries, and may include others
who may be entitled to pension plan benefits in circumstances such as
marriage breakdown. Depending on the circumstances of the pension
plan, it may also include the plan administrator, employers, collective
bargaining agents, employee and employer associations, and others.
∗
In Québec, there is also the notion of "delegatee", which is distinct from that of the "delegate". The delegatee has, with
respect to delegated functions, the same responsibilities as the plan administrator.
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Self-Assessment Questionnaire
Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Self-Assessment Questionnaire (March 2016)
CAPSA has prepared the Pension Plan Governance Self-Assessment Questionnaire to help you
assess how successfully your plan follows best practice governance principles.
You can use the questionnaire to determine which principles you have already instituted and which
steps to take to improve the governance of your pension plan. To make the best use of the
questionnaire, when you answer a question Yes, document the sources of the answer. When you
answer No, note the areas that need more work and what you need to do to change the response to
Yes.
Plan administrators may adapt the questionnaire to suit the needs of their pension plans.
The questionnaire should be completed and then reviewed regularly for purposes of continuous
improvement. You may wish to appoint an individual to co-ordinate the completion of the
questionnaire. This individual may wish to get help from those who have the best knowledge of
particular issues. The primary responsibility for completing the questionnaire remains with you. You
should approve the completed questionnaire. We recommend you complete or review and update
the questionnaire annually.
The completed questionnaire does not have to be filed with the regulator of your pension plan, but
should be kept on file for your future reference.
(In this questionnaire, “you” refers to the plan administrator.)
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Self-Assessment Questionnaire
Self-Assessment Questionnaire
Principle 1: Fiduciary responsibility
Comments /Actions /
Response
Where Documented
a) Have you identified your fiduciary and other
responsibilities to plan members and
beneficiaries?
 Yes
 No
b) Have you identified any responsibilities to
other stakeholders?
 Yes
 No
c) Do any delegates have fiduciary duties?
 Yes
 No
If yes, has the fiduciary role been clearly
identified?
 Yes
 No
d) Is there a clear delineation between the plan
administrator and other roles?
 Yes
 No
Principle 2: Governance framework
Response
Have you established and documented a
governance framework for the administration of
the pension plan?
 Yes
 No
Principle 3: Roles and responsibilities
Response
a) Have you identified your roles and
responsibilities, including any necessary
delegation, for the effective governance of
the pension plan?
 Yes
 No
b) Have you clearly documented expectations
for yourself and each of your delegates?
 Yes
 No
Timeframes:
Implemented /
Last Reviewed
Comments /Actions /
Where Documented
Timeframes:
Implemented /
Last Reviewed
Comments /Actions /
Where Documented
Timeframes:
Implemented /
Last Reviewed
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Self-Assessment Questionnaire
Principle 4: Performance monitoring
Comments /Actions /
Response
Where Documented
a) Have you established and documented clear
measures for assessing the performance of
all participants in the governance process?
 Yes
 No
b) Do you have a regular performance
monitoring, review and remedial process for
all participants in the governance process?
 Yes
 No
Comments /Actions /
Response
Where Documented
Principle 5: Knowledge and skills
a) Have you established an ongoing process to
identify and fill any gaps in the knowledge
and skills needed for the effective
governance of the pension plan?
 Yes
 No
b) Have you considered whether all delegates
have and continue to have the qualifications,
resources and experience to fulfill their
delegated functions?
 Yes
 No
Principle 6: Access to information
Comments /Actions /
Response
Where Documented
Have you established and documented a process  Yes
to obtain and provide appropriate information
 No
to carry out your fiduciary and other
responsibilities?
Principle 7: Risk management
Response
a) Have you identified, assessed and prioritized
the pension plan’s risks?
 Yes
 No
b) Do you have a continuous process to
monitor and manage these risks?
 Yes
 No
Comments /Actions /
Where Documented
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Timeframes:
Implemented /
Last Reviewed
Timeframes:
Implemented /
Last Reviewed
Timeframes:
Implemented /
Last Reviewed
Timeframes:
Implemented /
Last Reviewed
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Self-Assessment Questionnaire
Principle 8: Oversight and compliance
Comments /Actions /
Response
Where Documented
a) Have you identified the legislative
requirements, plan documents and any
regulatory or plan-specific policies that apply
to the pension plan?
 Yes
 No
b) Do you have a documented process to
ensure you comply with legislative
requirements and pension plan documents
and policies?
 Yes
 No
If yes, does this process include a regular
review to monitor changes to support future
compliance?
Timeframes:
Implemented /
Last Reviewed
 Yes
 No
Principle 9: Transparency and accountability Response
Comments /Actions /
Where Documented
Have you established and documented a
communication process that:
a) provides plan members, beneficiaries and
other stakeholders with access to legislated
or other appropriate information about the
pension plan?
 Yes
 No
b) informs plan members and beneficiaries
about the process for asking questions and
raising concerns?
 Yes
 No
c) communicates how important decisions are
made?
 Yes
 No
d) informs members about the risks, benefits,
options and responsibilities of membership
in the pension plan?
 Yes
 No
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Timeframes:
Implemented /
Last Reviewed
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Self-Assessment Questionnaire
Principle 10: Code of conduct and conflict of
interest
Comments /Actions /
Response
Where Documented
a) Do you have a code of conduct that sets out
the expected behaviours for you as the plan
administrator and your delegates?
 Yes
 No
b) Does your code of conduct include a
conflict of interest policy that identifies and
addresses potential conflicts of interest that
may arise in particular circumstances of your
pension plan, whether actual or perceived?
 Yes
 No
c) Do your delegates have a code of conduct
that includes a conflict of interest policy?
 Yes
 No
Are there appropriate processes in place to
disclose to you any conflicts and any
breaches of the code of conduct?
 Yes
 No
Principle 11: Governance review
Response
Comments /Actions /
Where Documented
Have you established and documented a process  Yes
for a regular review of your pension plan’s
 No
governance?
Completed by:
Approved by: (if different)
Name
Name
Title
Title
Date
Date
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Timeframes:
Implemented /
Last Reviewed
Timeframes:
Implemented /
Last Reviewed
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Frequently Asked Questions
Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Frequently Asked Questions (March 2016)
The following frequently asked questions (FAQ) and responses have been developed by the CAPSA
Pension Plan Governance Committee with the assistance of its Industry Working Group.
The purpose of the FAQ is to provide pension plan administrators with general guidance, additional
clarification and examples related to the revised CAPSA Guideline No. 4: Pension Plan Governance,
published for consultation in March 2016.
The FAQ may be updated periodically to incorporate additional questions received from
stakeholders.
Additional questions related to the CAPSA Guideline No. 4: Pension Plan Governance should be referred
to:
CAPSA Secretariat
5160 Yonge Street, P.O. Box 85
Toronto ON, M2N 6L9
email: [email protected]
phone: 416-590-7081
fax:
416-226-7878
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CAPSA Guideline No. 4: Pension Plan Governance (Revised)
Consultation Draft – Frequently Asked Questions
Principle 1: Fiduciary responsibilities
The plan administrator has fiduciary responsibilities to plan members and beneficiaries.
The plan administrator may also have other responsibilities to other stakeholders.
Question 1.1
What is a fiduciary relationship? As a plan administrator, what are my fiduciary responsibilities?
Answer:
Generally, a fiduciary relationship exists whenever one party (the plan administrator) has
discretionary power over the interests of the other party (plan member or beneficiary) and has an
obligation to use that power in the other’s best interests. The party with the discretionary power is
the fiduciary. The hallmarks of a fiduciary relationship are the fiduciary’s discretionary power and the
beneficiary’s vulnerability to the abuse of that power. Fiduciary law regulates the fiduciary’s use of its
discretionary power to ensure it is not abused by imposing a strict standard of conduct often
referred to as the fiduciary’s responsibilities or duties.
Two primary responsibilities flow from a fiduciary relationship: the duty of care and the duty of
loyalty. An administrator’s duty of care is set out in Canadian pension benefits standards legislation
and generally requires that the administrator exercise the same degree of care that a person of
ordinary prudence would exercise in dealing with the property of another person. A fiduciary is
expected to be more prudent in dealing with another person’s property than in dealing with his or
her own.
The administrator’s duty of loyalty means that the administrator must act solely in the best interests
of the plan members and beneficiaries, and be impartial and even-handed. The responsibility to be
impartial and even-handed includes that the administrator treat members and beneficiaries fairly
with due regard to their different interests and not personally favour some beneficiaries over others;
however, it does not mean equal treatment.
In summary, as a fiduciary, it is a plan administrator’s responsibility to:
•
•
•
•
•
•
•
Exercise the same degree of care that a person of ordinary prudence would exercise in
dealing with the property of another person;
Act in the best interests of all plan members and beneficiaries;
Be impartial and even-handed in the treatment of all plan members and beneficiaries;
Retain expert advisors or agents to carry out tasks for which the administrator is unsuited or
unqualified;
Manage conflicts of interest;
Give due regard to different members’ and beneficiaries’ interests; and
Ensure the administrator is not influenced by personal favouritism.
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Question 1.2
I am both the employer and the plan administrator of my company’s pension plan. What are some
examples of my responsibilities regarding the pension plan in my role as the employer and in my role
as the plan administrator?
Answer:
As the employer, on the one hand, you would normally:
•
•
•
Determine the provisions of the pension plan
Make any necessary amendments to the plan provisions
Make contributions to the pension plan
On the other hand, as the plan administrator, you would:
•
•
•
Ensure that the plan is administered in accordance with its provisions and in compliance
with legislative requirements and plan policies, including funding policies
File any amendments made to the plan and any prescribed documents with the appropriate
regulatory authorities
Ensure contributions required to be made to the pension plan are paid on a timely basis
See also Question 10.1.
Principle 2: Governance framework
The plan administrator should establish and document a governance framework for the
administration of the plan.
Question 2.1
What is a governance framework?
Answer:
A governance framework is a documented structure that (i) clearly sets out what areas the plan
administrator needs to address in the administration of the plan in order to meet its fiduciary and
other responsibilities, and (ii) demonstrates how the administrator intends to meet those
responsibilities.
One approach to documenting the governance framework involves the plan administrator creating
and maintaining an electronic governance binder that stores plan related material under various
folders. The following folders could be established:
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1.
2.
3.
4.
5.
6.
7.
Background
Plan Documentation
Governance Reference Material (including CAPSA Guidelines)
Minutes of Meetings
Contracts with Service Providers
Communications with Plan Beneficiaries
Governance Policies and Procedures
a. Fiduciary Responsibility
b. Roles and Responsibilities
c. Performance Monitoring
d. Knowledge and Skills
e. Access to Information
f. Risk Management
g. Oversight and Compliance
h. Transparency and Accountability
i. Code of Conduct and Conflict of Interest
j. Governance Review
Under each of the governance sub-folders it would be expected that the plan administrator would
adopt and document a process, procedure or policy and other related material to assist it in meeting
the stated Principle.
Principle 3: Roles and responsibilities
The plan administrator should clearly describe and document the roles, responsibilities, and
accountabilities of all participants in the pension plan governance process.
Question 3.1
Please provide a sample assessment tool outlining the various responsibilities and accountabilities by
role that my organization can use as a starting point.
Answer:
Below is a sample tool for single employer defined benefit plans and defined contribution plans to
review roles and responsibilities. As noted in the Guideline, when the same person or entity
performs both pension plan governance and corporate functions, there must be a clear recognition,
understanding, and documentation of the different roles and responsibilities of each function. When
a decision is made, it should be clearly documented, and its rationale and the role under which it is
taken should be included. Although the plan administrator may not perform all tasks related to the
governance of the pension plan, it remains ultimately responsible and accountable for the
management of the plan.
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Sample Roles and Responsibilities Tool for Single Employer Plans1
Function 2,3
Record
keeper
Legal
Advisor
Custodian
or Trustee
Actuary
Investment
Advisor/
Investment
Manager
HR
Dept.
Finance
Dept.
Pension
Committee
Board of
Directors
(1) Plan Design
- Establishment/termination of plan
- Plan amendment (substantive)
- Plan amendment
(housekeeping/regulatory
compliance)
(2) Plan Funding
- Reconciliation of contributions
payable and paid to the plan
- Actuarial methods and assumptions
- Funding Policy
In each applicable column, indicate whether the position, department, committee or board (as applicable to the particular governance structure) is either responsible (R),
accountable (A), consulted (C), or informed (I).
2 The plan-related functions listed in this tool reflect both sponsor (non-fiduciary) and administrator (fiduciary) functions. They are for illustrative purposes only and are not
exhaustive. The functions will differ depending on the nature of the different plans being sponsored and administered (i.e. defined contribution, defined benefit, target benefit,
etc.)
3 Please note that the references to HR and Finance departments listed above are for illustrative purposes only. The table should be modified to reflect the departments,
positions (e.g. legal or investment advisor, the chief financial officer or human resources director), committees and bodies within the particular governance structure that have
roles in ensuring the proper administration and sponsorship of the pension plan.
1
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Function
Record
keeper
Legal
Advisor
Custodian
or Trustee
Actuary
Investment
Advisor/
Investment
Manager
HR
Dept.
Finance
Dept.
Pension
Committee
Board of
Directors
(3) Investment of Pension Assets
- Statement of Investment Policy and
Procedures/Guidelines
- Selection of investment advisor(s)
- Selection of Investments and DC
Options
- Monitoring of investment
performance (including review of
reports)
(4) Administration
- Appointment of investment
advisor(s)
- Appointment of legal counsel
- Appointment of actuary
- Appointment of record
keeper/administrators/custodian
- Monitoring of investment advisor(s)
- Monitoring legal counsel
- Monitoring actuary
- Monitoring of record
keeper/administrator/custodian
- Communications strategy
- Communications content
- Plan documentation – service
provider agreements
- Plan documentation/retention
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Function
Record
keeper
Legal
Advisor
Custodian
or Trustee
Actuary
Investment
Advisor/
Investment
Manager
HR
Dept.
Finance
Dept.
Pension
Committee
Board of
Directors
- Monitoring case law/legislative
compliance
- Interpretation of plan provisions
- Fiduciary education
- Fiduciary insurance
- Treatment of unusual cases
- Member inquiries
- Enrolment
- Payment of benefits
- Payroll deductions
- Other filings (Annual Information
Return)
- Audited pension plan financial
statements
(5) Governance
- Governance structure review
- Compliance with CAPSA
Guidelines
- Governance Report to Board
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Question 3.2
What are the “typical” roles and responsibilities that plan administrators should anticipate being
accountable for?
Answer:
The participants in the governance process, and their roles and responsibilities, may vary depending
on the type of pension plan and how it is administered. The following are examples of “typical”
roles in the governance process for a standard defined benefit, defined contribution and multiemployer pension plan and are not exhaustive.
A) Defined Benefit Plan
For a defined benefit plan, the roles and responsibilities may include:
Role: High level duties in the administration of the pension plan
•
•
•
•
•
•
•
Obtain appropriate training and ongoing education to carry out fiduciary and other
responsibilities
Establish, implement and maintain the governance framework for the administration of the
pension plan
Allocate roles and responsibilities to various participants in the administration of the plan
Select, appoint and monitor service provider(s)
Report to the plan administrator, typically the Board of Directors, on the administration of
the plan and the investment of the plan’s assets
Ensure the plan text and administration is compliant with applicable legislation
Refer to applicable CAPSA and regulatory guidelines and policies
Role: Oversee the investment of the assets of the pension plan
•
•
Establish and regularly review (at least annually) the investment policy for the investment of
the assets, updating as required, and ensuring the policy is provided to interested parties
(such as a plan actuary)
Select and retain investment managers, monitor their performance and recommend /
oversee changes in managers if and when appropriate
Role: Day-to-day responsibilities for the administration of the pension plan (various tasks may
be performed by delegates)
•
•
•
Ensure all required documents and forms are filed with the regulatory authorities (such as
Annual Information Returns, actuarial valuation reports and plan amendments)
Ensure required contributions are made to the pension plan when due
Calculate members’ benefits accurately and in a timely manner
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•
•
Ensure administrative timeframes established in relevant pension legislation are adhered to
Respond to members’ and beneficiaries’ inquiries
Role: Provide services or advice required in the administration of the plan (various tasks are
likely to be performed by delegates; pension legislation may limit the parties who can provide certain services or advice)
•
•
•
•
•
•
•
Ensure periodic actuarial valuations of the plan are prepared
Draft amendments and related regulatory form filings to be made to the plan
Hold and/or invest the plan assets
Maintain plan records
Pay members’ benefits accurately and in a timely manner
Prepare and provide required statements to members at least annually
Provide information necessary for completing the Annual Information Return
B) Defined Contribution Plan
For a defined contribution pension plan, the roles and responsibilities may include:
Role: High level duties in the administration of the plan
•
•
•
•
•
•
•
Obtain appropriate training and ongoing education to carry out fiduciary and other
responsibilities
Establish, implement and maintain the governance framework for the administration of the
pension plan
Allocate roles and responsibilities to various participants in the administration of the plan
Select, appoint and monitor service provider(s)
Report to the plan administrator, typically the Board of Directors, on the administration of
the plan and the performance of the plan’s investment options
Ensure the plan text and administration is compliant with applicable legislation
Refer to applicable CAPSA and regulatory guidelines and policies
Role: Oversee the investment of the assets of the pension plan
•
•
Establish and regularly review (at least annually) the investment policy for the investment of
the assets, updating as required, and ensuring the policy is provided to interested parties
(such as the plan’s investment advisor)
Select investment options, monitor their performance and recommend / oversee changes in
options if and when appropriate
Role: Day-to-day responsibilities for the administration of the pension plan (various tasks may
be performed by delegates)
•
Ensure all required documents and forms are filed with the regulatory authorities (such as
the Annual Information Return and plan amendments)
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•
•
•
Ensure that calculation of employer and member contributions are consistent with the terms
of the plan and are deposited to the pension fund when due
Ensure administrative timeframes established in relevant pension legislation are adhered to
Respond to members’ and beneficiaries’ inquiries
Role: Provide services or advice required in the administration of the plan (various tasks are
likely to be performed by delegates; pension legislation may limit the parties who can provide certain services or advice)
•
•
•
•
•
•
•
•
Receive employer and member contributions
Draft amendments and related regulatory form filings to be made to the plan
Hold and/or invest the plan assets
Maintain plan records
Pay members’ benefits accurately and in a timely manner
Prepare and provide required statements to members at least annually
Provide information necessary for completing the Annual Information Return
Provide investment information and decision-making tools to members of plans in which
members make investment decisions
C) Multi-Employer Pension Plan
For a multi-employer pension plan, roles and responsibilities may include:
Role: High level duties in the administration of the plan
•
•
•
•
•
•
•
•
•
Obtain appropriate training and ongoing education for members of the Board of Trustees to
assist them in carrying out their fiduciary and other responsibilities
Establish, implement and maintain the governance framework for the administration of the
pension plan
Provide members of the Board of Trustees with current versions of all key documentation
including plan texts, trust agreements and actuarial valuation reports
Select and appoint delegates and third party service providers and, if appropriate, hire staff
to carry out the administration of the plan
Review performance of delegates, plan staff and service providers against established
standards
Monitor the funding of the plan
Take action where employers are delinquent in making required contributions
Ensure the plan text and administration is compliant with applicable legislation
Refer to applicable CAPSA and regulatory guidelines and policies
Role: Oversee the investment of the assets of the pension plan
•
Establish and regularly review (at least annually) the investment policy for the investment of
the assets, updating as required, and ensuring the policy is provided to interested parties
(such as a plan actuary)
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•
•
Select and retain investment managers, monitor their performance and recommend /
oversee changes in managers if and when appropriate
Invest the assets of the plan in accordance with the investment policy established by the
Board of Trustees and in compliance with legal requirements
Role: Day-to-day responsibilities for the administration of the pension plan (various tasks may
be performed by delegates)
•
•
•
•
•
•
Ensure all required documents and forms are filed with the regulatory authorities (such as
the Annual Information Return and plan amendments)
Monitor required contributions paid by employers and, where employers are delinquent in
making required contributions, follow the established delinquency control process which
should include bringing them to the attention of the Board of Trustees
Calculate members’ benefits accurately and in a timely manner
Provide monthly and lump sum pension payments to members or beneficiaries
Ensure administrative timeframes established in relevant pension legislation are adhered to
Respond to members’, beneficiaries’ and other stakeholders’ inquiries
Role: Provide services or advice required in the administration of the plan (various tasks are
likely to be performed by delegates; pension legislation may limit the parties who can provide certain services or advice)
•
•
•
•
•
•
Periodically perform actuarial valuations of the plan and report the results to the Board of
Trustees
Draft amendments and related regulatory form filings to be made to the plan
Hold plan assets
Maintain plan records
Prepare and provide required statements to members at least annually
Provide information necessary for completing the Annual Information Return
Question 3.3
Would the participants in the governance process and their roles and responsibilities also vary
depending on the legislative requirements applicable to the plan?
Answer:
Yes, for example, where the pension legislation requires that the plan administrator must be a
pension committee, the pension committee is legally responsible for performing all of the functions
related to the administration of the pension plan.
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Principle 4: Performance monitoring
The plan administrator should establish and document performance measures to monitor
the performance of participants in the governance and administration of the plan.
Question 4.1
How might the performance of participants in the governance and administration process be
measured?
Answer:
The following are examples of participants in the governance and administration process and how
their performance might be measured (other participants and performance measures should be
considered as applicable to the plan):
Participants
Performance Measures
Pension Committee or
Board of Trustees
•
•
•
Investment Managers
Benefits Administrator or
Record Keeping
•
•
•
•
•
•
•
•
•
Are all internal or external service providers periodically
monitored against standards and actions taken where
standards are not met?
Does the Committee/Board self-assess (i.e. assess its
own performance)? Have they determined if an
independent review is necessary?
Are terms of reference in place that outline the duties of
the Committee/Board and have these duties been
fulfilled?
Are the plan rules applied in an even-handed manner?
Does the plan comply with legislative requirements?
Have contributions been paid on time?
Has the investment policy for the plan been followed?
Is the manager in compliance with its mandate?
Is investment performance monitored relative to
benchmarks and appropriate action taken?
Are external service providers monitored, including any
contractual service standards, and action taken where
necessary?
Are records maintained and members’ benefits paid in an
accurate and timely manner?
Are regulatory requirements for the operation of the plan
being met?
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Principle 5: Knowledge and skills
The plan administrator, directly or with delegates, has a duty to apply the knowledge and
skills needed to meet the plan administrator’s responsibilities.
Question 5.1
What steps need to be taken to develop an appropriate level of knowledge and skill?
Answer:
Orientation training for individuals new to pension plan governance and administration as well as
ongoing education of all involved parties are important to ensure the adequate knowledge and skills
required to fulfill governance and administration responsibilities. This would include training
(internally provided or by external experts) on concepts such as fiduciary duties, investment
management, funding and actuarial concepts, general finance, governance, and pension legislation.
Relevant documentation to be provided for orientation and training includes plan texts, trust or
insurance agreements, actuarial valuation reports (for defined benefit plans), statement of investment
policies and procedures, guidelines, and audited financial statements.
External advice may be beneficial and could include various professionals such as auditors,
custodians, investment managers, lawyers, actuaries, pensions and benefits consultants and record
keepers.
Principle 6: Access to information
The plan administrator should establish and document a process to obtain and provide
appropriate information to meet its fiduciary and other responsibilities.
Question 6.1
As a plan administrator, what kind of information should I obtain to ensure that I am meeting my
fiduciary and other responsibilities?
Answer:
The following is a list of possible information needed by the plan administrator, depending on the
type (defined benefit, defined contribution, single employer, multi-employer, etc.) and size of the
plan. (The list is illustrative and not exhaustive.)
•
•
•
•
changes in legislation or regulatory and CAPSA guidelines;
design of the pension plan;
membership data and demographic changes in the plan membership;
actuarial valuations;
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•
•
•
•
•
•
•
•
audit reports;
information respecting contributions made to the fund;
investment performance reports;
reports from delegates (including reports respecting compliance);
communication to plan members;
statistics regarding membership (e.g. members missing beneficiary designations, members
invested in the default fund);
escalated member inquiries; and
developments respecting good governance of retirement arrangements.
The plan administrator should establish a process to review information for accuracy and
completeness and provide for appropriate and timely access to information.
Question 6.2
As the plan administrator, how should I ensure that delegates have the information needed to carry
out their responsibilities?
Answer:
The plan administrator should have a process to share important information with its delegates. The
plan administrator should identify what information needs to be shared, who it needs to be shared
with and who is responsible for sharing it. For example, the plan administrator should have a formal
process to distribute the plan’s statement of investment policies and procedures, and any
amendments to it, from time to time to the actuary and each delegate charged with the management
of plan investments.
Principle 7: Risk management
The plan administrator should establish and document a framework and ongoing processes,
appropriate to the pension plan, to identify and manage, to the extent possible, the plan’s
risks.
Question 7.1
What types of risks does a pension plan typically face?
Answer:
Each plan administrator should consider the specific risks faced by the plan and the most
appropriate approaches to manage, to the extent possible, each risk. The following is a list of
examples of different types of pension plan risks. (This list is illustrative and not exhaustive.)
Although some of the items listed are also risks for the employer (e.g. those listed under “Funding”),
it is important that the plan administrator is aware of the impact of these risks, and, to the extent
possible, the plan administrator should manage these risks.
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Funding
•
•
•
•
•
Interest rate or discount rate risk
Asset/liability mismatch risk
Longevity risk
Turnover/retirement risk
Contribution volatility and delinquency risk
Investment
•
•
•
•
•
•
Interest rate or duration risk
Equity risk
Inflation risk
Foreign exchange risk
Liquidity risk
Credit/counterparty risk
Operational
•
•
•
•
•
Benefit processing and payments risk
Risk of inaccurate data or member statements
Systems or business continuity risk
Legal and regulatory risk
Agency and outsourcing risk
Question 7.2
How might a defined benefit (DB) plan’s risk management framework differ from that of a defined
contribution (DC) pension plan?
Answer:
Risk sharing and responsibility for managing the risks in different types of plans can vary
significantly. However, the risk management framework for each type will be very similar: each will
require risk identification and analysis, prioritization and development of appropriate documentation
and processes to monitor and manage the risks.
Key differences arise over who is responsible for managing the risks and how the different risks are
mitigated. In a DB plan, the responsibility for managing investment risks rests with the plan
administrator. In a DC plan, that responsibility typically lies with the plan member. While a DC plan
administrator may be responsible for selecting and monitoring the investment options offered to
members, the DC plan member is usually responsible for selecting their investment portfolio among
the available options.
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Further information on DC plan administration is provided in CAPSA Guideline No. 3: Guidelines for
Capital Accumulation Plans and CAPSA Guideline No. 8: Defined Contribution Plans, while specific
information is provided in CAPSA Guideline No. 6: Pension Plan Prudent Investment Practices and
CAPSA Guideline No.7: Pension Plan Funding Policy.
Principle 8: Oversight and compliance
The plan administrator should establish and document appropriate processes to ensure
compliance with the legislative requirements and pension plan documents.
Question 8.1
Where can I find information on pension standards legislation applicable to my plan?
Answer:
Provincial and federal pension standards legislation and regulations are available on the regulators’
websites. Guidance notes and other documents may also be available. Plan administrators should be
aware of which jurisdiction’s (or jurisdictions’) rules apply to the pension plan. Professional guidance
is recommended.
Jurisdiction
Alberta
Applicable Legislation
Employment Pension Plans Act
Pension Supervisor’s Website
www.finance.alberta.ca
British Columbia
Pension Benefits Standards Act
http://www.fic.gov.bc.ca
Manitoba
The Pension Benefits Act
http://www.gov.mb.ca/labour/pension
New Brunswick
Pensions Benefits Act
http://www.fcnb.ca
Newfoundland
and Labrador
Nova Scotia
Pension Benefits Act, 1997
http://www.servicenl.gov.nl.ca
Pension Benefits Act
http://www.novascotia.ca/finance
Ontario
Pension Benefits Act
http://www.fsco.gov.on.ca
Prince Edward
Island
Quebec
Pension Benefits Act (not
proclaimed)
Supplemental Pension Plans Act
http://www.gov.pe.ca/jps
Saskatchewan
The Pension Benefits Act, 1992
http://www.fcaa.gov.sk.ca
Federal
Pension Benefits Standards
Act,1985
Income Tax Act
http://www.osfi-bsif.gc.ca
http://www.rrq.gouv.qc.ca
http://www.cra-arc.gc.ca
In addition, CAPSA has issued a number of guidelines to provide guidance to plan administrators on
regulatory expectations and industry practices. Such documents are available at: http://www.capsaacor.org
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Principle 9: Transparency and accountability
The plan administrator should establish and document a communication process with the
aim to be transparent and accountable to plan members, beneficiaries and other
stakeholders.
Question 9.1
What are some methods of communicating with plan members and beneficiaries?
Answer:
The plan administrator may consider developing a process that could address methods of
communication. The communication should be accurate and clear. The methods of communication
will depend upon the plan’s resources, legal requirements and privacy considerations, whether plan
members are in one place, or in multiple locations and the language(s) spoken by members. Methods
of communicating include:
•
•
•
•
Hard copy
Electronic
In person
o One on one
o In groups
Telephone.
The communication should be in plain language, taking into consideration the need to accurately
communicate complex issues.
The plan administrator should refer to CAPSA Guideline No. 2 Electronic Communication in the Pension
Industry.
Question 9.2
What are components of a process for addressing plan member and beneficiary questions or
requests?
Answer:
Requirements, recommendations and methods for addressing the questions or requests of plan
members and beneficiaries may be prescribed in applicable legislation or in policies released by a
pension regulator.
Processes for addressing plan member and beneficiaries’ questions and requests should include:
•
Advising plan members whom to contact if they have questions or requests;
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•
•
•
•
•
•
•
Identifying the supporting information that may be necessary to support the question or
request;
Documentation of the inquiry;
Timelines for providing responses to inquiries that may depend upon whether the inquiry is
simple or complex;
Documentation of the response;
If the management of plan member inquiries is delegated, the plan administrator receiving
reports about the handling of questions and requests;
A process for escalating plan member questions; and
A process for advising plan members of their options when they disagree with a decision of
the plan administrator, including information to plan members about how to appeal a
decision, where permitted, and the timelines for management of appeals.
Question 9.3
What are examples of important decisions of the plan administrator that should be communicated?
Answer:
Some decisions (for example, changes to the pension plan) must be communicated under applicable
legislation. Other important decisions respecting the plan may not legally be required to be
communicated to plan members, but may help plan members better understand the plan. Such
optional communications might include:
•
•
•
Changes in how the pension plan’s investments are managed;
Changes in delegates or service providers; and
Changes in services provided to plan members and beneficiaries.
Principle 10: Code of conduct and conflict of interest
The plan administrator should establish and document a code of conduct, including a
policy to manage conflicts of interest.
Question 10.1
If the employer is both the plan sponsor and plan administrator, what are some of the issues it
should be aware of?
Answer:
If the employer is the plan administrator, it is important that the employer recognize and separate its
duties and obligations as an employer from those as the plan administrator (see also Question 1.2).
However, when the employer is both the plan sponsor and administrator, conflicts can and do arise
from time to time. It is how a conflict is managed that is key to whether a breach of the plan
administrator’s fiduciary duty to its plan members occurs. Therefore, a conflict of interest policy
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should set out an appropriate procedure to disclose and address conflicts of interest. Participants in
the governance and administration process should receive training on the code of conduct and
conflicts of interest policy.
Principle 11: Governance review
The plan administrator should establish and document a process for the regular review of
the pension plan’s governance framework and processes.
Question 11.1
What would be included in a governance review?
Answer:
A governance review should:
•
•
•
be performed at a high level, but the importance of a regular review of the plan’s governing
documents (such as the plan text, by-laws, trust agreement, and policies, etc) cannot be
overstated;
consider whether the objectives of the plan administrator in respect of the plan governance
are being met; and
include discussion of new legislation or other developments impacting on the pension plan.
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