Plan sponsors offering group savings plans can look forward to more clarity on their role as well as more practical tools from service providers in 2025, thanks to the updated Guideline for Capital Accumulation Plans (CAPs) released in September 2024.
“It was good to see the Guideline expand the scope of a CAP and talk more specifically about things like a governance framework and a process for reviews. It defines everyone’s role better and gives more detail about member education and tools for decision-making,” says Ryan McMurray, Pension and Group Retirement Specialist, Selectpath Benefits & Financial, a member firm of Benefits Alliance.
This is the Guideline’s first update since originally written in 2004. Plan sponsors should be hearing from their group retirement-savings advisor in the coming weeks and months to learn what changes, if any, are needed to be compliant. If changes to information technologies or internal processes are required, plan sponsors and service providers have until January 1, 2026.
“The Guideline reflects the regulators’ views of leading practices specific to CAPs,” says Angela Mazerolle, Chair of the Canadian Association of Pension Supervisory Authorities (CAPSA), which updated the Guideline, and Vice-President, Regulatory Operations for the New Brunswick Financial and Consumer Services Commission of New Brunswick. “There have been significant changes in the financial services industries over the past 20 years, including in relation to CAPs, so this is a very important update to ensure CAP administrators have the tools to properly oversee and administer members’ retirement plans.”
The previous 2004 Guideline focused on traditional CAPs such as defined contribution pension plans (DCPPs) and registered retirement savings plans (RRSPs). The 2024 Guideline cites many other examples of applicable CAPs, including deferred profit-sharing plans (DPSPs), registered retirement income funds (RRIFs), tax-free savings accounts (TFSAs), registered education savings plans (RESPs) and first home savings accounts (FHSAs).
The updated Guideline also builds in flexibility to acknowledge that its application will vary depending on size, complexity and other characteristics of the CAP.
“We tried to weave proportionality into the Guideline so that each plan sponsor and each administrator could see their plan in it,” says Mazerolle. “The next step would be for sponsors to explore how to implement the recommended practices in a manner that works for their membership, for their organization, and for their plan.”
Take 5 for Wellness highlights a few factors to keep in mind during implementation, drawing on additional insights from Mazerolle and McMurray.
You can also learn more from Benefits Alliance’s recent podcast with David Bartucci, Head of Pension Operations and Regulatory Effectiveness at the Financial Services Regulatory Authority of Ontario, plus Benefits Alliance has produced an easy-to-read written comparison between the 2004 and 2024 guidelines.
Expert advice
At the sponsor level, the comprehensiveness of the 2024 Guideline illustrates the need for and value of a trusted, experienced advisor. “No small to mid-size sponsor can be expected to provide education, perform investment oversight or even analyze which carrier is right for them—that’s outside of their scope and capacity. This is exactly what we as advisors are here to do, and this Guideline clarifies my role as an advisor,” says McMurray.
Indeed, McMurray hopes that plan sponsors will come to use the Guideline as part of advisor selection and retention criteria. “The Guideline gives a more articulated view of what services sponsors should be receiving…so they can ask their advisor, ‘Are you doing these things for me? Are you capable of doing these things?’”
At the member level, the Guideline encourages the use of a qualified advisor for personal investment and financial-planning decisions. McMurray was happy to see this called out as part of an expanded list of members’ responsibilities. “Unfortunately, it’s common to see advisors with no investment or financial planning credentials providing direction that will impact the outcome of member’s retirement savings. Most often we see a lack of experienced investment advice in the group retirement space,” he says.
The Guideline further suggests that CAP sponsors “may consider whether to enter into an arrangement with or refer CAP members to one or more service providers who are appropriately qualified to provide investment or financial planning advice.”
McMurray agrees that this is a sound recommendation, and its inclusion in the Guideline will hopefully accelerate adoption. “There’s a strong appetite for advice but people often don’t know who to go to and where to get it from. Based on recent research and what I’m hearing anecdotally from members, they like the idea of getting it through their employer,” says McMurray.
Fiduciary responsibility
It’s worth noting that the 2024 Guideline raises the topic of fiduciary responsibility, or the sponsor’s legal obligation to act in members’ best interests. The 2004 Guideline did not specifically address fiduciary responsibility, whereas the 2024 Guideline states that sponsors’ responsibilities “may in some instances include fiduciary responsibilities.”
“The Guideline clearly states that all CAP sponsors have responsibilities to CAP members…but it’s a legal determination whether a responsibility reaches the level of a fiduciary responsibility,” explains Mazerolle.
For example, pension legislation states plan sponsors have fiduciary responsibilities. “But the CAP Guideline doesn’t just apply to pension plans so we couldn’t go so far as to say that every plan sponsor or every CAP administrator has fiduciary responsibilities. That would be for the courts to determine for CAPs that are not pension plans,” says Mazerolle.
Both Mazerolle and McMurray recommend sponsors enlist their advisors to determine if their CAPs legally require fiduciary responsibility.
Education and responsibilities
The new Guideline gives considerably more detail on recommended member-education strategies, such as addressing different levels of financial literacy and tailoring information for different groups (e.g., new parents and employees approaching retirement).
The expansion of this section is partly in response to requests received from sponsors during CAPSA’s consultation periods for the Guideline. “They wanted to ensure we were as balanced as possible in outlining not just what responsibilities sponsors had in member communications, but also what responsibilities members bear,” says Mazerolle.
And while litigation is unlikely, it’s not to be discounted, adds McMurray. “The courts would refer back to the CAP Guideline and ask the sponsor, ‘Are you CAP-Guideline compliant?’ If you are, then the burden of proof is on the employee. If you’re not, the burden of proof is on you,” he says.
The Guideline also goes into much more detail on the responsibilities of members, for example by indicating that members should use the provided materials and information to inform themselves about their CAP and the decisions for which they are responsible.
“Better information and a better understanding of the responsibilities that each player holds can only lead to better member outcomes. At the end of the day, that’s what we are aiming for,” says Mazerolle.