CAP Guidelines Do Matter

Mar 12, 2012

With all the recent  talk about the PRPP, pension reform, pension adequacy and savings rates, it seems like the Capital Accumulation Plan Guidelines (CAP) which were introduced into the pension  savings universe in 2004, have disappeared onto that dusty shelf in back room no one wants to enter.  The CAP Guidelines aren’t ‘trending’ now and consequently it’s easy for plan sponsors and  many advisors to forget about them.

The fact is CAP guidelines can be your best friend if you’re a plan sponsor. They clearly set out what your responsibilities are and more importantly, what they aren’t.  They can protect you from plan members who never attend an education seminar and who never review their asset allocation.  They can mitigate some of the liability associated with sponsoring a retirement savings plan in the first place but you have to use the Guidelines and assess the administration of your plan against those guidelines on at least an annual basis.

Despite being off the radar lately, the CAP Guidelines have had a good impact on retirement savings in Canada.  The data coming out of the 2011 CAP Benchmark Report from the Canadian Institutional Investment Network, tells us that 92% of plan members in Defined Contribution Pension Plans (DCPP) and 99% of Group RRSP plan members are making their own investment decisions. Not the plan sponsor. And correlating with that data is the trend of plan sponsors simplifying their plans by reducing the number of investment options available and establishing quality over quantity as a guiding principle.  They have also used the CAP Guidelines to establish a better default option, making participation in the plan mandatory and increasing contribution rates while more plan sponsors ask members to match employer contributions into the plan.

A big part of what your advisor does for you and your plan members is keep the governance and stewardship of your retirement plan on the radar. The CAP Guidelines offer up some great tools to help you establish your own best practices in plan governance so don’t let anyone tell you they don’t matter.

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