Is Your Plan Capturing CAPSA Guideline No. 4?
The pension plan industry is continually evolving. As it evolves, a greater focus exists over enhancing plan governance. The Canadian Association of Pension Supervisory Authorities (“CAPSA”) has revised Guideline No. 4: Pension Plan Governance Guideline. The new guideline was released December 22, 2016 to replace the original document dated October 24, 2004.
The CAPSA guidelines stress the importance of establishing and documenting the processes surrounding the principles identified below. It is not enough to simply discuss plan governance, you need to have support validating the work you are performing.
What is Pension Plan Governance?
As defined by CAPSA, “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.”
The ultimate responsibility for plan governance lies with the plan administrator, however the administrator may utilize third-party service providers or other delegates to assist with the plan governance.
What if I have a small plan?
The principles surrounding the updated CAPSA guideline are applicable regardless of the size of your plan. Utilizing industry best practices whether your plan is large or small is always recommended. The Pension Plan Administrator Governance Self-Assessment Questionnaire is a great tool for finding a starting point for determining a process to improve the governance of your pension plan. The tool may be amended as necessary to suit the needs of your specific plan.
Pension Plan Governance Principles
The principles and the guideline may be found in detail at www.capsa-acor.org.
- Principle 1: Fiduciary responsibility
- Principle 2: Governance framework
- Principle 3: Roles and responsibilities
- Principle 4: Performance monitoring
- Principle 5: Knowledge and skills
- Principle 6: Governance information
- Principle 7: Risk management
- Principle 8: Oversight and compliance
- Principle 9: Transparency and accountability
- Principle 10: Code of conduct and conflict of interest
- Principle 11: Governance review
Examples of Application of Governance Principles: Is Your Plan Doing Enough?
- Engaging third-party service providers to provide services, for example administration services, investment management, auditing, actuarial, etc.
- Do you have a formal service agreement in place clearly defining responsibilities?
- Do you receive a compliance certificate over the services performed?
- Executing performance monitoring over the participants in the governance and administration of the plan.
- Are you able to objectively monitor the performance of service providers?
- Would you need to engage independent third parties to complete the assessment? For example, you may consider using BDO’s Corporate Governance professionals.
- Ensuring the appropriate level of knowledge and skills exists to meet plan responsibilities.
- Are your service providers specialized in the pension industry so that they may provide appropriate and timely information to you?
- Is regular training and development provided to Trustees or other plan administrators?
- Are you engaging external experts where needed?
- Communicating with plan members, beneficiaries and other stakeholders in a transparent manner.
- Is your communication process documented and followed consistently for all information shared?
- Is your communication process modified to be appropriate for different stakeholders and meeting those varied interests?
- Reviewing plan documentation on a regular basis.
- Do you review your plan’s code of conduct, conflicts of interest policy and governance framework at regular intervals? For example, semi-annually or annually? If yes, how do you document this review?
- Are you ensuring the confidentiality in the information shared when a conflict arises? For example, do you share the name of a plan member who disagrees with a ruling or plan policy or asks for a special circumstance ruling?
- Have you set goals and objectives to make improvements over areas of weakness or to complete additional procedures to strengthen plan governance?
- Are you able to objectively complete your own governance review or do you need to involve an independent third party?
- Many Board of Trustees are already aware of plan governance and have several processes and procedures in place, such as regular Board meetings, recording detailed discussions in Board minutes, and obtaining compliance reports for key service providers.
- The Pension Plan Administrator Governance Self-Assessment Questionnaire provided on the CAPSA website can help pinpoint areas to strengthen overall plan governance.
- BDO’s Corporate Governance professionals are able to examine the way a Board functions with the use of its service providers and key management to assess its overall effectiveness and may offer recommendations to enhance plan governance.
- The principles are applicable regardless of the size of your plan.
To learn more, contact your local BDO office or:
Krista Tartaglia, CPA, CA
Senior Manager, Pension and Benefit Plans