CANADA - The new guidelines on pension plan governance issued by the CanadianAssociation of Pension Supervisory Authorities (CAPSA) have been criticisedfor their failure to outline governance responsibilities of plan sponsors.
Consultants Watson Wyatt said: “The guidelines are silent about plan sponsors’ governance responsibilities. As a consequence, there is no recognition of the tension that can arise between plan administrators’ responsibility for investment policy on the one hand and plan sponsors’ control over funding and benefit policy on the other.”
However, the consultants said that final guidelines are a “significant improvement” on the draft guidelines issued by the CAPSA in 2001 as the fiduciary and administrative roles of plan administrators are more clearly described and they apply to all plans,irrespective of size.
The guidelines set out 11 core governance principles, in particular, actions required by plan administrators include establishing:- Governance objectives and responsibilities for participants in the governance process;- Performance measures, performance monitoring processes and internal controlframeworks to manage pension risks;- Mechanisms to ensure compliance with plan documents, regulatory requirementsand administrative policies;- Codes of conduct and policies regarding conflicts of interest; and- Communication of governance processes to members, beneficiaries and other stakeholders.
Nancy MacNeill Smith, chair of CAPSA, said: “We have listened to pension plan administrators and stakeholders in finalising the governance guidelines. We are confident that the guidelines will help pension plan administrators implement effective governance systems for their pension plans.”
The regulator noted: “Although the guidelines do not create additional rights or obligations for any party to a pension plan, regulators expect pension plan administrators to voluntarily take measures necessary to follow the guidelines.”
CAPSA views good pension plan governance as a cornerstone of the private pension plan system. Good pension plan governance leads to numerous benefits for plan administrators and members, including the accurate, efficient and cost-effective delivery of the pensionbenefits provided under the pension plan, a statement issued by CAPSA added.
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