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Update! - CAPSA finalizes guidelines on prudent investment practices and funding policies

On November 15, 2011, the Canadian Association of Pension Supervisory Authorities ("CAPSA") released the final versions of CAPSA Guideline No. 6: Pension Plan Prudent Investment Practices Guideline and the Self-Assessment Questionnaire on Prudent Investment Practices (the "Self-Assessment Questionnaire") as well as Guideline No. 7: Pension Plan Funding Policy Guideline.

Draft versions of these policies and the Self-Assessment Questionnaires were addressed in our News & Views of April 14 2011 (PDF).

Guideline No. 6 is intended to guide plan administrators on how to demonstrate the application of prudence in the investment of pension plan assets. The Self-Assessment Questionnaire is designed to help plan administrators review the investment practices of their pension funds. It suggests topics applicable to single employer defined benefit and defined contribution plans as well as multi-employer pension plans.

Guideline No. 7 outlines the general principles and objectives of pension plan funding, the purpose of establishing a funding policy for defined benefit pension plans and the individual roles of the sponsor and administrator.

CAPSA guidelines do not have the force of law. However, through these guidelines CAPSA has been instrumental in shedding light on what pension regulators in Canada consider to be sound practices. More importantly, these policies should be viewed as an integral part of a plan sponsor/ administrator’s risk management.