Re: CAPSA Consultation on the Revisions to the Pension Plan Governance Guideline

Transcription

1 March 11, 2016 Dear Pension Industry Stakeholder: Re: CAPSA Consultation on the Revisions to the Pension Plan Governance Guideline On behalf of the Canadian Association of Pension Supervisory Authorities (CAPSA), we are pleased to release the enclosed drafts of the revised CAPSA Guideline No. 4: Pension Plan Governance, and the related Self-Assessment Questionnaire and FAQ Document, for your consideration. This consultation is part of CAPSA s strategic initiative to review and determine if revisions are necessary to CAPSA s pension plan governance guidance, which is intended to assist plan administrators to implement and maintain good governance practices. CAPSA invites comments on the revised guidelines, self-assessment questionnaire and FAQ document from all pension industry stakeholders. Background Published in October 2004, the CAPSA Guideline No. 4: Pension Plan Governance and Self- Assessment Questionnaire, were developed to assist plan administrators across Canada to implement and maintain effective pension plan governance processes. The governance guideline has become the most requested and utilized CAPSA publication by plan administrators. In their development, CAPSA undertook significant consultation with pension industry stakeholders to ensure the guidance was clear, understandable and usable for all plan administrators. Between 2001 and 2005, this involved engaging an Industry Task Force during each stage of drafting, conducting a road-testing exercise with dozens of plan administrators for sample implementation, and incorporating feedback from a public comment period. As part of CAPSA s Strategic Plan, the governance guideline was identified for periodic review and the Pension Plan Governance Committee was re-established with a mandate to examine related industry and regulatory developments, to review established international best practices, and to advise CAPSA on potential revisions to the governance guideline. CAPSA Secretariat, 5160 Yonge Street, 18 th Floor, Box 85 Toronto, Ontario M2N 6L9 Tel: (416) Fax: (416) capsa-acor@fsco.gov.on.ca

2 Page 2 of 3 In April 2014, the Committee established an Industry Working Group, composed of pension governance experts nominated by a number of national industry associations. Working in tandem, members of the Committee and the Industry Working Group have prepared the draft revisions to the CAPSA Guideline No. 4: Pension Plan Governance, and the related Self- Assessment Questionnaire and FAQ Document, included in this consultation. CAPSA wishes to express its gratitude to the Industry Working Group for the dedication and insight that it brought to this task. Overview of Draft Revisions The draft revisions to the CAPSA Guideline No. 4: Pension Plan Governance, and the related Self- Assessment Questionnaire and FAQ Document, are intended to assist plan administrators by: - Clarifying when a fiduciary relationship exists and what obligations flow from such relationships, including that fiduciary responsibility is retained when any activities are delegated to third parties; - Encouraging the establishment of a governance framework, through which information on governance methods and activities are documented; - Equipping them with additional tools to identify the various roles and assign responsibilities to appropriate participants; - Broadening the scope of performance measurement to include all participants in the plan administration; and, - Capturing best practices as they relate to the identification and management of the plan s risks. Stakeholder Comments Your feedback on the draft revised CAPSA pension plan governance documents is appreciated. We request that your commentary be as specific as possible. Please direct your submissions (electronic are preferred) to the CAPSA Secretariat: Neil Mohindra A/Policy Manager CAPSA Secretariat 5160 Yonge Street, Box 85 Toronto ON M2N 6L9 capsa-acor@fsco.gov.on.ca We look forward to receiving your comments by June 10, All submissions received will be publicly released on the CAPSA website at the end of the consultation period. Any questions regarding this consultation may be directed to the CAPSA Secretariat at the contact information noted above. CAPSA Secretariat, 5160 Yonge Street, 18 th Floor, Box 85 Toronto, Ontario M2N 6L9 Tel: (416) Fax: (416) capsa-acor@fsco.gov.on.ca

3 Page 3 of 3 Please note that these draft documents do not reflect the official position of any provincial or federal government or agency. We appreciate your participation in this consultation. All comments will be fully considered as CAPSA works toward finalization of the revised draft pension plan governance guidance. Sincerely, Angela Mazerolle Chair, CAPSA Superintendent of Pensions, New Brunswick Tamara DeMos Chair, CAPSA Pension Plan Governance Committee Managing Director, Private Pension Plans Division, OSFI CAPSA Secretariat, 5160 Yonge Street, 18 th Floor, Box 85 Toronto, Ontario M2N 6L9 Tel: (416) Fax: (416) capsa-acor@fsco.gov.on.ca

4 Consultation Draft - Guideline Guideline No. 4: Pension Plan Governance (Revised) Consultation Draft Guideline (March 2016) 1

5 Consultation Draft - Guideline Context for the Guidelines The Canadian Association of Pension Supervisory Authorities (CAPSA) has designed these guidelines and associated reference tools to help plan administrators meet their governance * responsibilities. Published originally in 2004, these guidelines have been used widely by pension plans in Canada. The current version includes updated and clarified principles and guidance on implementation of the principles. Pension Plan Governance Pension plan governance is about delivering on the pension promise consistent with the pension plan documents and pension legislation. Pension legislation defines the pension plan administrator as the body responsible for the governance of the pension plan. 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. Pension Plan Administrator Pension legislation specifies who may be a plan administrator and identifies the plan administrator s responsibilities. The plan administrator may be any of the following: the employer who established the plan, a pension committee, a board of trustees, an insurance company, a bargaining agent, or another body established or permitted by law. The party appointed as the plan administrator is usually stated in the plan documents. The plan administrator may use delegates to help carry out governance responsibilities. Delegates may include employees of the plan administrator and external third party service providers. * Please note that defined terms are italicized and bolded when first used. Definitions are in the Glossary of Terms, contained at the end of the guidelines. 2

6 Consultation Draft - Guideline Pension Governance System An effective pension governance system: establishes a framework for defining the duties, associated responsibilities and accountabilities for all participants in the governance process, covers all facets of pension plan management, including communication, funding, investments and benefit administration, and provides careful oversight while enhancing protection for plan members and beneficiaries. Good pension plan governance: is essential for meeting fiduciary and other responsibilities, minimizes risks and maximizes efficiency, promotes accurate, timely and cost-effective delivery of pension benefits, promotes administration of the plan in the best interests of plan members and beneficiaries, requires control mechanisms that encourage good decision-making, proper and efficient practices, clear accountability, and regular review and evaluation, contributes to positive pension plan performance, and helps to demonstrate due diligence on the part of the plan administrator. Governance Guidelines This CAPSA Guideline on Pension Plan Governance provides a broad, flexible outline of key pension plan governance principles. Different types and sizes of plans, however, may require different governance practices. Although pension plan administrators need to adapt their governance practices to specific circumstances and resources, we strongly recommend that all plan administrators adopt a governance structure and processes consistent with the principles that follow. The Guidelines recommend principles for effective pension plan governance. They outline the appropriate roles and responsibilities of the plan sponsor only when the plan sponsor is acting as plan administrator. They do not cover the roles and responsibilities of the plan sponsor under general corporate governance principles. Many individuals who have pension plan governance responsibilities also have responsibilities to the plan sponsor. Consequently, those with governance responsibilities must clearly understand the different roles and responsibilities for each. Further, when taking actions that affect the pension plan, they must carefully document the actions for both sets of responsibilities. In particular, whenever the two roles are in a conflict of interest, the administrator must act in the best interests of plan members and beneficiaries. CAPSA encourages all pension plan administrators in Canada to assess whether their current pension plan governance structures and processes are effective and to strive for the best practices set out in the Guidelines. Note, however, that the Guidelines are not intended to create additional rights and responsibilities for any party to a pension plan. Though voluntary, they are meant to help plan administrators achieve and maintain good pension plan governance. 3

7 Consultation Draft - Guideline CAPSA Guidelines This CAPSA Guideline on Pension Plan Governance provides overall guidance to assist plan administrators of all types and sizes of pension plans in achieving and maintaining good governance. Plan administrators and other governance participants may also wish to reference other CAPSA Guidelines and publications that are appropriate to the plan s circumstances. Each of the CAPSA Guidelines and other publications can be obtained through CAPSA s website ( under CAPSA Guidelines. CAPSA Pension Plan Governance Principles Principle 1: Fiduciary responsibility The plan administrator has fiduciary responsibilities to plan members and beneficiaries. The plan administrator may also have other responsibilities to other stakeholders. Principle 2: Governance framework The plan administrator should establish and document a governance framework for the administration of the plan. Principle 3: Roles and responsibilities The plan administrator should clearly describe and document the roles, responsibilities, and accountabilities of all participants in the pension plan governance process. Principle 4: Performance monitoring The plan administrator should establish and document performance measures to monitor the performance of participants in the governance and administration of the plan. Principle 5: Knowledge and skills The plan administrator, directly or with delegates, has a duty to apply the knowledge and skills needed to meet the plan administrator s responsibilities. Principle 6: Access to information The plan administrator should establish and document a process to obtain and provide appropriate information to meet its fiduciary and other responsibilities. 4

8 Consultation Draft - Guideline Principle 7: Risk management The plan administrator should establish and document a framework and ongoing processes, appropriate to the pension plan, to identify and manage, to the extent possible, the plan s risks. Principle 8: Oversight and compliance The plan administrator should establish and document appropriate processes to ensure compliance with the legislative requirements and pension plan documents. Principle 9: Transparency and accountability The plan administrator should establish and document a communication process with the aim to be transparent and accountable to plan members, beneficiaries and other stakeholders. Principle 10: Code of conduct and conflict of interest The plan administrator should establish and document a code of conduct, including a policy to manage conflicts of interest. Principle 11: Governance review The plan administrator should establish and document a process for the regular review of the pension plan s governance framework and processes. 5

9 Consultation Draft - Guideline CAPSA Pension Plan Governance Guidelines Principle 1: Fiduciary responsibility The plan administrator has fiduciary responsibilities to plan members and beneficiaries. The plan administrator may also have other responsibilities to other stakeholders. A fiduciary relationship is one of trust between two or more parties where one (or more) person(s) (the fiduciary[ies]) has an obligation to act in the best interests of the other party. (a) Fiduciary responsibilities Fiduciary obligations are owed when legislation imposes such duties or when: i. a plan administrator and/or any delegates can exercise discretionary power to affect the interests of members or beneficiaries; ii. a plan administrator and/or any delegates can unilaterally exercise that power so as to affect the interests of the members or beneficiaries; and iii. the members and/or beneficiaries are in a position of vulnerability at the hands of the plan administrator and/or any delegate. The plan administrator and delegates must act honestly, in good faith and in the best interests of plan members and beneficiaries of the pension plan as part of their fiduciary responsibilities. In its fiduciary role, the plan administrator s responsibilities include: treating members and beneficiaries impartially, acting with the care, skill and diligence of a prudent person, interpreting the plan terms fairly, impartially and in good faith, managing conflicts of interest, and within the scope of such duties and its authority, ensuring that members and beneficiaries receive promised benefits. The pension governance process should help the plan administrator carry out its fiduciary and other responsibilities. Although plan administrators may delegate certain tasks of the plan administrator to third parties, the administrator retains fiduciary responsibility. (b) Other responsibilities The plan administrator may also have other responsibilities to other stakeholders. When employers, bargaining agents, or their nominees act as plan administrators, they must understand the difference between their plan administrator and other roles, and act accordingly. Employers and bargaining agents should follow the principles in these Guidelines when acting as plan administrator. 6

10 Consultation Draft - Guideline Principle 2: Governance framework The plan administrator should establish and document a governance framework for the administration of the plan. The governance framework should: i. identify the duties and functions that need to be performed for the plan administrator to meet its fiduciary and other responsibilities; and ii. determine and demonstrate on an on-going basis how the plan administrator will meet such fiduciary and other responsibilities. Principle 3: Roles and responsibilities The plan administrator should clearly describe and document the roles, responsibilities, and accountabilities of all participants in the pension plan governance process. The plan administrator: is ultimately responsible and accountable for managing the plan; may delegate operational management tasks, but should provide oversight to ensure responsibilities are fulfilled; is responsible for selecting the delegates and monitoring the actions of delegates; is responsible for managing any conflicts of interest that arise; and should ensure that the pension governance structure, roles and responsibilities, accountabilities and reporting relationships (i.e. chain of delegation) are clearly documented and communicated to all participants in the pension plan governance process. When the same person or entity performs both pension plan governance and corporate functions, there must be a clear recognition, understanding, and documentation of the different roles and responsibilities of each function. When a decision is made, it should be clearly documented, and its rationale and the role under which it is taken should be included. Principle 4: Performance monitoring The plan administrator should establish and document performance measures to monitor the performance of participants in the governance and administration of the plan. The plan administrator is responsible for: establishing and documenting appropriate performance measures; regularly monitoring the performance of all participants in the governance process, including the plan administrator, internal staff and delegates; 7

11 Consultation Draft - Guideline regularly reviewing the appropriateness of such performance measures; and establishing procedures and taking follow-up actions to correct inadequate performance. Since performance evaluations need to be based on objective, impartial assessments, the plan administrator may require independent professional assessments. Principle 5: Knowledge and skills The plan administrator, directly or with delegates, has a duty to apply the knowledge and skills needed to meet the plan administrator s responsibilities. The plan administrator is ultimately responsible for the governance and the administration of the pension plan. The plan administrator should either obtain appropriate support to directly fulfill the administration role or delegate the function to external experts. The plan administrator and delegates in the governance structure should together possess and apply the knowledge and skills to fulfill the plan administrator s responsibilities. The plan administrator should, on appointment and on an ongoing basis, consider whether all delegates have the relevant qualifications, resources and experience to carry out their function and provide access to appropriate education. Principle 6: Access to information The plan administrator should establish and document a process to obtain and provide appropriate information to meet its fiduciary and other responsibilities Processes should exist so that the plan administrator obtains the necessary information to meet its fiduciary, decision-making and other responsibilities. The plan administrator should provide any delegates with appropriate information needed to carry out their responsibilities. Principle 7: Risk management The plan administrator should establish and document a framework and ongoing processes, appropriate to the pension plan, to identify and manage, to the extent possible, the plan s risks. A plan s risk management framework should provide reasonable assurance for the achievement of the plan s objectives through: a) identifying the risks; b) assessing and prioritizing the risks; c) ensuring a clear understanding of the responsibilities for the management of the risks; d) accepting the risk or designing and implementing an appropriate risk-mitigating response; 8

12 Consultation Draft - Guideline e) monitoring and evaluating the risks and effectiveness of the responses and risk management processes generally; and f) documenting the risk management processes. Principle 8: Oversight and compliance The plan administrator should establish and document appropriate processes to ensure compliance with the legislative requirements and pension plan documents. Every pension plan needs documented processes to enable compliance with legislative requirements and to ensure functions related to the administration and governance of the pension plan fall within the plan terms, plan administrative policies, and legislative requirements. Principle 9: Transparency and accountability The plan administrator should establish and document a communication process with the aim to be transparent and accountable to plan members, beneficiaries and other stakeholders. The plan administrator should establish a communication process, taking into account both fiduciary and other responsibilities, so that plan members, beneficiaries and other stakeholders have access to legislated and other appropriate information about the plan. Plan administrators should inform pension plan members and beneficiaries of the process for asking questions and raising concerns. When communicating with plan members, the plan administrator should: a) communicate how important decisions about the plan are made; and, b) inform them of the risks, benefits, options, and responsibilities of membership in the plan. Principle 10: Code of conduct and conflict of interest The plan administrator should establish and document a code of conduct, including a policy to manage conflicts of interest. In order to manage both actual and perceived conflicts of interest, the plan administrator should establish and periodically review a documented code of conduct. The code of conduct should set out expected behaviours and establish procedures to identify, monitor and address material conflicts of interest. Plan administrators should ensure delegates have an appropriate code of conduct that includes a policy to manage conflicts of interest, as well as processes to disclose any conflicts and any breaches of the code of conduct. 9

13 Consultation Draft - Guideline Principle 11: Governance review The plan administrator should establish and document a process for the regular review of the pension plan s governance framework and processes. The attached Pension Plan Governance Self-Assessment Questionnaire has been developed to assist the plan administrator in carrying out a governance review. The governance review may result in the plan administrator setting goals and objectives for the future and methods to correct any shortfalls in governance. Based on the governance review, the plan administrator may modify its policies and practices to improve overall pension plan governance. The plan administrator may wish to communicate the result of the governance review to plan members, beneficiaries and other stakeholders. 10

14 Consultation Draft - Guideline Glossary of Terms administration the oversight, management and operations of the pension plan and its pension fund including the investment of the assets of the pension fund. beneficiaries individual, group, body or entity entitled to a benefit under the terms of a pension plan other than plan members. delegate any party who carries out aspects of the administration of the pension plan and investment of the pension fund (including a committee). plan administrator plan member(s) or member(s) the individual, group, body or entity that is responsible for the oversight, management and operations of the pension plan and pension fund. all current and former employees, including retired employees, entitled to benefits under the pension plan. plan sponsor the individual or entity that is responsible for determining the design of the pension plan, setting the benefit structure for various classes of members, and establishing, amending or terminating the pension plan. third party service provider the entity (or entities) or individual(s) that is/are retained by the plan administrator to perform some or all of the delegated duties associated with the pension plan and the pension fund that the administrator is required to perform. stakeholder a party who has an interest in decisions and actions about the pension plan. It includes plan members and beneficiaries, and may include others who may be entitled to pension plan benefits in circumstances such as marriage breakdown. Depending on the circumstances of the pension plan, it may also include the plan administrator, employers, collective bargaining agents, employee and employer associations, and others. In Québec, there is also the notion of "delegatee", which is distinct from that of the "delegate". The delegatee has, with respect to delegated functions, the same responsibilities as the plan administrator. 11

15 Consultation Draft Self-Assessment Questionnaire Guideline No. 4: Pension Plan Governance (Revised) Consultation Draft Self-Assessment Questionnaire (March 2016) CAPSA has prepared the Pension Plan Governance Self-Assessment Questionnaire to help you assess how successfully your plan follows best practice governance principles. You can use the questionnaire to determine which principles you have already instituted and which steps to take to improve the governance of your pension plan. To make the best use of the questionnaire, when you answer a question Yes, document the sources of the answer. When you answer No, note the areas that need more work and what you need to do to change the response to Yes. Plan administrators may adapt the questionnaire to suit the needs of their pension plans. The questionnaire should be completed and then reviewed regularly for purposes of continuous improvement. You may wish to appoint an individual to co-ordinate the completion of the questionnaire. This individual may wish to get help from those who have the best knowledge of particular issues. The primary responsibility for completing the questionnaire remains with you. You should approve the completed questionnaire. We recommend you complete or review and update the questionnaire annually. The completed questionnaire does not have to be filed with the regulator of your pension plan, but should be kept on file for your future reference. (In this questionnaire, you refers to the plan administrator.) 1

16 Self-Assessment Questionnaire CAPSA Guideline No. 4: Pension Plan Governance (Revised) Consultation Draft Self-Assessment Questionnaire Principle 1: Fiduciary responsibility a) Have you identified your fiduciary and other responsibilities to plan members and beneficiaries? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Have you identified any responsibilities to other stakeholders? c) Do any delegates have fiduciary duties? If yes, has the fiduciary role been clearly identified? d) Is there a clear delineation between the plan administrator and other roles? Principle 2: Governance framework Have you established and documented a governance framework for the administration of the pension plan? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed Principle 3: Roles and responsibilities a) Have you identified your roles and responsibilities, including any necessary delegation, for the effective governance of the pension plan? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Have you clearly documented expectations for yourself and each of your delegates? 2

17 Consultation Draft Self-Assessment Questionnaire Principle 4: Performance monitoring a) Have you established and documented clear measures for assessing the performance of all participants in the governance process? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Do you have a regular performance monitoring, review and remedial process for all participants in the governance process? Principle 5: Knowledge and skills a) Have you established an ongoing process to identify and fill any gaps in the knowledge and skills needed for the effective governance of the pension plan? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Have you considered whether all delegates have and continue to have the qualifications, resources and experience to fulfill their delegated functions? Principle 6: Access to information Have you established and documented a process to obtain and provide appropriate information to carry out your fiduciary and other responsibilities? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed Principle 7: Risk management a) Have you identified, assessed and prioritized the pension plan s risks? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Do you have a continuous process to monitor and manage these risks? 3

18 Consultation Draft Self-Assessment Questionnaire Principle 8: Oversight and compliance a) Have you identified the legislative requirements, plan documents and any regulatory or plan-specific policies that apply to the pension plan? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Do you have a documented process to ensure you comply with legislative requirements and pension plan documents and policies? If yes, does this process include a regular review to monitor changes to support future compliance? Principle 9: Transparency and accountability Response Have you established and documented a communication process that: Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed a) provides plan members, beneficiaries and other stakeholders with access to legislated or other appropriate information about the pension plan? b) informs plan members and beneficiaries about the process for asking questions and raising concerns? c) communicates how important decisions are made? d) informs members about the risks, benefits, options and responsibilities of membership in the pension plan? 4

19 Consultation Draft Self-Assessment Questionnaire Principle 10: Code of conduct and conflict of interest a) Do you have a code of conduct that sets out the expected behaviours for you as the plan administrator and your delegates? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed b) Does your code of conduct include a conflict of interest policy that identifies and addresses potential conflicts of interest that may arise in particular circumstances of your pension plan, whether actual or perceived? c) Do your delegates have a code of conduct that includes a conflict of interest policy? Are there appropriate processes in place to disclose to you any conflicts and any breaches of the code of conduct? Principle 11: Governance review Have you established and documented a process for a regular review of your pension plan s governance? Response Comments /Actions / Where Documented Timeframes: Implemented / Last Reviewed Completed by: Approved by: (if different) Name Name Title Title Date Date 5

20 Consultation Draft Frequently Asked Questions Guideline No. 4: Pension Plan Governance (Revised) Consultation Draft Frequently Asked Questions (March 2016) The following frequently asked questions (FAQ) and responses have been developed by the CAPSA Pension Plan Governance Committee with the assistance of its Industry Working Group. The purpose of the FAQ is to provide pension plan administrators with general guidance, additional clarification and examples related to the revised CAPSA Guideline No. 4: Pension Plan Governance, published for consultation in March The FAQ may be updated periodically to incorporate additional questions received from stakeholders. Additional questions related to the CAPSA Guideline No. 4: Pension Plan Governance should be referred to: CAPSA Secretariat 5160 Yonge Street, P.O. Box 85 Toronto ON, M2N 6L9 phone: fax:

21 Principle 1: Fiduciary responsibilities CAPSA Guideline No. 4: Pension Plan Governance (Revised) Consultation Draft Frequently Asked Questions The plan administrator has fiduciary responsibilities to plan members and beneficiaries. The plan administrator may also have other responsibilities to other stakeholders. Question 1.1 What is a fiduciary relationship? As a plan administrator, what are my fiduciary responsibilities? Answer: Generally, a fiduciary relationship exists whenever one party (the plan administrator) has discretionary power over the interests of the other party (plan member or beneficiary) and has an obligation to use that power in the other s best interests. The party with the discretionary power is the fiduciary. The hallmarks of a fiduciary relationship are the fiduciary s discretionary power and the beneficiary s vulnerability to the abuse of that power. Fiduciary law regulates the fiduciary s use of its discretionary power to ensure it is not abused by imposing a strict standard of conduct often referred to as the fiduciary s responsibilities or duties. Two primary responsibilities flow from a fiduciary relationship: the duty of care and the duty of loyalty. An administrator s duty of care is set out in Canadian pension benefits standards legislation and generally requires that the administrator exercise the same degree of care that a person of ordinary prudence would exercise in dealing with the property of another person. A fiduciary is expected to be more prudent in dealing with another person s property than in dealing with his or her own. The administrator s duty of loyalty means that the administrator must act solely in the best interests of the plan members and beneficiaries, and be impartial and even-handed. The responsibility to be impartial and even-handed includes that the administrator treat members and beneficiaries fairly with due regard to their different interests and not personally favour some beneficiaries over others; however, it does not mean equal treatment. In summary, as a fiduciary, it is a plan administrator s responsibility to: Exercise the same degree of care that a person of ordinary prudence would exercise in dealing with the property of another person; Act in the best interests of all plan members and beneficiaries; Be impartial and even-handed in the treatment of all plan members and beneficiaries; Retain expert advisors or agents to carry out tasks for which the administrator is unsuited or unqualified; Manage conflicts of interest; Give due regard to different members and beneficiaries interests; and Ensure the administrator is not influenced by personal favouritism. 2

22 Consultation Draft Frequently Asked Questions Question 1.2 I am both the employer and the plan administrator of my company s pension plan. What are some examples of my responsibilities regarding the pension plan in my role as the employer and in my role as the plan administrator? Answer: As the employer, on the one hand, you would normally: Determine the provisions of the pension plan Make any necessary amendments to the plan provisions Make contributions to the pension plan On the other hand, as the plan administrator, you would: Ensure that the plan is administered in accordance with its provisions and in compliance with legislative requirements and plan policies, including funding policies File any amendments made to the plan and any prescribed documents with the appropriate regulatory authorities Ensure contributions required to be made to the pension plan are paid on a timely basis See also Question Principle 2: Governance framework The plan administrator should establish and document a governance framework for the administration of the plan. Question 2.1 What is a governance framework? Answer: A governance framework is a documented structure that (i) clearly sets out what areas the plan administrator needs to address in the administration of the plan in order to meet its fiduciary and other responsibilities, and (ii) demonstrates how the administrator intends to meet those responsibilities. One approach to documenting the governance framework involves the plan administrator creating and maintaining an electronic governance binder that stores plan related material under various folders. The following folders could be established: 3

23 1. Background 2. Plan Documentation 3. Governance Reference Material (including CAPSA Guidelines) 4. Minutes of Meetings 5. Contracts with Service Providers 6. Communications with Plan Beneficiaries 7. Governance Policies and Procedures a. Fiduciary Responsibility b. Roles and Responsibilities c. Performance Monitoring d. Knowledge and Skills e. Access to Information f. Risk Management g. Oversight and Compliance h. Transparency and Accountability i. Code of Conduct and Conflict of Interest j. Governance Review CAPSA Guideline No. 4: Pension Plan Governance (Revised) Consultation Draft Frequently Asked Questions Under each of the governance sub-folders it would be expected that the plan administrator would adopt and document a process, procedure or policy and other related material to assist it in meeting the stated Principle. Principle 3: Roles and responsibilities The plan administrator should clearly describe and document the roles, responsibilities, and accountabilities of all participants in the pension plan governance process. Question 3.1 Please provide a sample assessment tool outlining the various responsibilities and accountabilities by role that my organization can use as a starting point. Answer: Below is a sample tool for single employer defined benefit plans and defined contribution plans to review roles and responsibilities. As noted in the Guideline, when the same person or entity performs both pension plan governance and corporate functions, there must be a clear recognition, understanding, and documentation of the different roles and responsibilities of each function. When a decision is made, it should be clearly documented, and its rationale and the role under which it is taken should be included. Although the plan administrator may not perform all tasks related to the governance of the pension plan, it remains ultimately responsible and accountable for the management of the plan. 4

24 Consultation Draft Frequently Asked Questions Sample Roles and Responsibilities Tool for Single Employer Plans 1 Function 2,3 Record keeper Legal Advisor Custodian or Trustee Actuary Investment Advisor/ Investment Manager HR Dept. Finance Dept. Pension Committee Board of Directors (1) Plan Design - Establishment/termination of plan - Plan amendment (substantive) - Plan amendment (housekeeping/regulatory compliance) (2) Plan Funding - Reconciliation of contributions payable and paid to the plan - Actuarial methods and assumptions - Funding Policy 1 In each applicable column, indicate whether the position, department, committee or board (as applicable to the particular governance structure) is either responsible (R), accountable (A), consulted (C), or informed (I). 2 The plan-related functions listed in this tool reflect both sponsor (non-fiduciary) and administrator (fiduciary) functions. They are for illustrative purposes only and are not exhaustive. The functions will differ depending on the nature of the different plans being sponsored and administered (i.e. defined contribution, defined benefit, target benefit, etc.) 3 Please note that the references to HR and Finance departments listed above are for illustrative purposes only. The table should be modified to reflect the departments, positions (e.g. legal or investment advisor, the chief financial officer or human resources director), committees and bodies within the particular governance structure that have roles in ensuring the proper administration and sponsorship of the pension plan. 5

25 Consultation Draft Frequently Asked Questions Function Record keeper Legal Advisor Custodian or Trustee Actuary Investment Advisor/ Investment Manager HR Dept. Finance Dept. Pension Committee Board of Directors (3) Investment of Pension Assets - Statement of Investment Policy and Procedures/Guidelines - Selection of investment advisor(s) - Selection of Investments and DC Options - Monitoring of investment performance (including review of reports) (4) Administration - Appointment of investment advisor(s) - Appointment of legal counsel - Appointment of actuary - Appointment of record keeper/administrators/custodian - Monitoring of investment advisor(s) - Monitoring legal counsel - Monitoring actuary - Monitoring of record keeper/administrator/custodian - Communications strategy - Communications content - Plan documentation service provider agreements - Plan documentation/retention 6

26 Consultation Draft Frequently Asked Questions Function Record keeper Legal Advisor Custodian or Trustee Actuary Investment Advisor/ Investment Manager HR Dept. Finance Dept. Pension Committee Board of Directors - Monitoring case law/legislative compliance - Interpretation of plan provisions - Fiduciary education - Fiduciary insurance - Treatment of unusual cases - Member inquiries - Enrolment - Payment of benefits - Payroll deductions - Other filings (Annual Information Return) - Audited pension plan financial statements (5) Governance - Governance structure review - Compliance with CAPSA Guidelines - Governance Report to Board 7

27 Consultation Draft Frequently Asked Questions Question 3.2 What are the typical roles and responsibilities that plan administrators should anticipate being accountable for? Answer: The participants in the governance process, and their roles and responsibilities, may vary depending on the type of pension plan and how it is administered. The following are examples of typical roles in the governance process for a standard defined benefit, defined contribution and multiemployer pension plan and are not exhaustive. A) Defined Benefit Plan For a defined benefit plan, the roles and responsibilities may include: Role: High level duties in the administration of the pension plan Obtain appropriate training and ongoing education to carry out fiduciary and other responsibilities Establish, implement and maintain the governance framework for the administration of the pension plan Allocate roles and responsibilities to various participants in the administration of the plan Select, appoint and monitor service provider(s) Report to the plan administrator, typically the Board of Directors, on the administration of the plan and the investment of the plan s assets Ensure the plan text and administration is compliant with applicable legislation Refer to applicable CAPSA and regulatory guidelines and policies Role: Oversee the investment of the assets of the pension plan Establish and regularly review (at least annually) the investment policy for the investment of the assets, updating as required, and ensuring the policy is provided to interested parties (such as a plan actuary) Select and retain investment managers, monitor their performance and recommend / oversee changes in managers if and when appropriate Role: Day-to-day responsibilities for the administration of the pension plan (various tasks may be performed by delegates) Ensure all required documents and forms are filed with the regulatory authorities (such as Annual Information Returns, actuarial valuation reports and plan amendments) Ensure required contributions are made to the pension plan when due Calculate members benefits accurately and in a timely manner 8

28 Consultation Draft Frequently Asked Questions Ensure administrative timeframes established in relevant pension legislation are adhered to Respond to members and beneficiaries inquiries Role: Provide services or advice required in the administration of the plan (various tasks are likely to be performed by delegates; pension legislation may limit the parties who can provide certain services or advice) Ensure periodic actuarial valuations of the plan are prepared Draft amendments and related regulatory form filings to be made to the plan Hold and/or invest the plan assets Maintain plan records Pay members benefits accurately and in a timely manner Prepare and provide required statements to members at least annually Provide information necessary for completing the Annual Information Return B) Defined Contribution Plan For a defined contribution pension plan, the roles and responsibilities may include: Role: High level duties in the administration of the plan Obtain appropriate training and ongoing education to carry out fiduciary and other responsibilities Establish, implement and maintain the governance framework for the administration of the pension plan Allocate roles and responsibilities to various participants in the administration of the plan Select, appoint and monitor service provider(s) Report to the plan administrator, typically the Board of Directors, on the administration of the plan and the performance of the plan s investment options Ensure the plan text and administration is compliant with applicable legislation Refer to applicable CAPSA and regulatory guidelines and policies Role: Oversee the investment of the assets of the pension plan Establish and regularly review (at least annually) the investment policy for the investment of the assets, updating as required, and ensuring the policy is provided to interested parties (such as the plan s investment advisor) Select investment options, monitor their performance and recommend / oversee changes in options if and when appropriate Role: Day-to-day responsibilities for the administration of the pension plan (various tasks may be performed by delegates) Ensure all required documents and forms are filed with the regulatory authorities (such as the Annual Information Return and plan amendments) 9

29 Consultation Draft Frequently Asked Questions Ensure that calculation of employer and member contributions are consistent with the terms of the plan and are deposited to the pension fund when due Ensure administrative timeframes established in relevant pension legislation are adhered to Respond to members and beneficiaries inquiries Role: Provide services or advice required in the administration of the plan (various tasks are likely to be performed by delegates; pension legislation may limit the parties who can provide certain services or advice) Receive employer and member contributions Draft amendments and related regulatory form filings to be made to the plan Hold and/or invest the plan assets Maintain plan records Pay members benefits accurately and in a timely manner Prepare and provide required statements to members at least annually Provide information necessary for completing the Annual Information Return Provide investment information and decision-making tools to members of plans in which members make investment decisions C) Multi-Employer Pension Plan For a multi-employer pension plan, roles and responsibilities may include: Role: High level duties in the administration of the plan Obtain appropriate training and ongoing education for members of the Board of Trustees to assist them in carrying out their fiduciary and other responsibilities Establish, implement and maintain the governance framework for the administration of the pension plan Provide members of the Board of Trustees with current versions of all key documentation including plan texts, trust agreements and actuarial valuation reports Select and appoint delegates and third party service providers and, if appropriate, hire staff to carry out the administration of the plan Review performance of delegates, plan staff and service providers against established standards Monitor the funding of the plan Take action where employers are delinquent in making required contributions Ensure the plan text and administration is compliant with applicable legislation Refer to applicable CAPSA and regulatory guidelines and policies Role: Oversee the investment of the assets of the pension plan Establish and regularly review (at least annually) the investment policy for the investment of the assets, updating as required, and ensuring the policy is provided to interested parties (such as a plan actuary) 10

30 Consultation Draft Frequently Asked Questions Select and retain investment managers, monitor their performance and recommend / oversee changes in managers if and when appropriate Invest the assets of the plan in accordance with the investment policy established by the Board of Trustees and in compliance with legal requirements Role: Day-to-day responsibilities for the administration of the pension plan (various tasks may be performed by delegates) Ensure all required documents and forms are filed with the regulatory authorities (such as the Annual Information Return and plan amendments) Monitor required contributions paid by employers and, where employers are delinquent in making required contributions, follow the established delinquency control process which should include bringing them to the attention of the Board of Trustees Calculate members benefits accurately and in a timely manner Provide monthly and lump sum pension payments to members or beneficiaries Ensure administrative timeframes established in relevant pension legislation are adhered to Respond to members, beneficiaries and other stakeholders inquiries Role: Provide services or advice required in the administration of the plan (various tasks are likely to be performed by delegates; pension legislation may limit the parties who can provide certain services or advice) Periodically perform actuarial valuations of the plan and report the results to the Board of Trustees Draft amendments and related regulatory form filings to be made to the plan Hold plan assets Maintain plan records Prepare and provide required statements to members at least annually Provide information necessary for completing the Annual Information Return Question 3.3 Would the participants in the governance process and their roles and responsibilities also vary depending on the legislative requirements applicable to the plan? Answer: Yes, for example, where the pension legislation requires that the plan administrator must be a pension committee, the pension committee is legally responsible for performing all of the functions related to the administration of the pension plan. 11