CAPSA: Revised Governance Guideline
On December 22, 2016, the Canadian Association of Pension Supervisory Authorities (“CAPSA”), consisting of Canada’s pension regulators, published revised Guideline No. 4: Pension Plan Governance Guideline, along with the related Self-Assessment Questionnaire and FAQ Document (together, the “Governance Guideline”), in final form following industry consultation. The previous version of the Governance Guideline was released in October 2004 and this revision was released in draft on March 11, 2016 (see our News & Views of April 2016).
The revised Governance Guideline includes a number of revisions and additions, including the following:
- Expanded explanations of fiduciary duties, including situations when a fiduciary relationship exists and the responsibilities that flow from that relationship;
- Guidance for creating a governance framework, including a suggestion that an administrator can create an electronic governance “binder” that stores plan-related material under various folders;
- Guidance for documenting various plan administration roles and responsibilities, including a sample tool for documenting roles and responsibilities;
- Clarifying an administrator’s duty to monitor and document plan administration;
- Guidance on how to develop an appropriate level of knowledge and skills for the parties involved in pension plan administration (such as pension committee members and the employer’s finance and human resources departments);
- Examples of risks faced by pension plans, such as funding, investment, and operational risks;
- Guidance on methods and substance of communications with members;
- Guidance with respect to conducting a governance review.
The Governance Guideline maintains the eleven Governance Principles contained in the original 2004 Governance Guideline. The Self-Assessment Questionnaire has been changed to add additional questions (there are now 28 questions rather than the initial 21), and the FAQ Document has been significantly expanded and revised.
In general, the Governance Guideline has been revised to emphasize that governance and administrative practices need to be documented, and to make it easier for plan administrators to review their compliance with the Governance Principles.
The Governance Guideline (along with other guidelines released by CAPSA) has been increasingly referred to by Canadian pension regulators to help pension plan administrators understand their duties and obligations with respect to plan administration and governance. Pension plan administrators should periodically review their compliance with the Governance Guideline, and can expect that regulators will consider the administrator’s compliance with the Governance Guideline as part of an examination or audit.