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New Federal Draft Disclosure Guidelines for Defined Contributions Pension Plans Issued

Posted on September 7, 2009 by Heenan Blaikie

On September 4, 2009, the Office of the Superintendent of Financial Institutions ("OSFI") issued draft disclosure guidelines ("Guidelines") for defined contribution pension plans ("DCPPs"). The Guidelines will apply to employers in the federal sector who sponsor DCPPs.

The Guidelines build on the Guidelines for Capital Accumulation Plans ("CAP Guidelines") published by the Canadian Association of Pension Supervisory Authorities in 2004. The CAP Guidelines are voluntary, reflecting the expectations of pension regulators. They apply to all types of tax-assisted retirement savings plans, including DCPPs, group registered retirement savings plans and deferred profit sharing plans. However, they apply only to plans in which employees have investment choice.

The Guidelines will apply only to DCPPs in the federal sector and will apply to all such plans regardless of whether members of such plans have investment choice. The Guidelines cover the following topics:

  • requirements for employee booklets
  • investment information and decision-making tools
  • disclosures concerning expenses, fees and penalties
  • contents of annual member statements
  • disclosure of plan amendments
  • benefit statements on termination, retirement or death.
The Guidelines cross-reference the CAP Guidelines on important topics, such as what decision-making tools an employer should provide, information to be disclosed regarding investment options, and disclosures related to investment fund management fees, account fees and service provider fees. The Guidelines do not expand on the requirements in the CAP Guidelines on these important topics.

The federal Pension Benefits Standards Act requires plan sponsors to provide a written explanation of the provisions of the pension plan. Electronic versions may be provided, but not as a replacement for written copies. The Guidelines state that member booklets should include details of the nature of the DCPP, the main plan terms, the impact of investment choices, whether the DCPP was converted from a defined benefit pension plan, plan contact information and relevant pension committee information.

If members have investment choice, the member booklet should include information about the asset classes, specific investment options and investment tools. The booklet should also clarify that account statements will reflect investment performance in members' accounts net of fees. There should also be information concerning default investments if no investment election is made, and that members should seek independent investment advice.

Notably, the Guidelines do not expand on the topic of providing investment advice. In Canada, there is no requirement for employers to provide investment advice, either directly or indirectly, and employers have generally been reluctant to do so due to liability concerns.

OSFI will receive submissions on the Guidelines until the end of this year. Submissions may be made to the Senior Pension Analyst by facsimile at (613) 990-7394.
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