Principal at Mercer outlines a spectrum of support as plan sponsors wrestle with mounting regulatory demands
With mounting administrative obligations and limited internal bandwidth, Capital Accumulation Plan (CAP) sponsors are finding themselves cornered by the new governance realities set by the updated CAPSA guidelines.
On Tuesday, in a webinar hosted by Benefits and Pensions Monitor, Leslie Steeves and Carl Proulx acknowledged the revised Guideline No. 3 from the Canadian Association of Pension Supervisory Authorities (CAPSA) marks a turning point for plan sponsors.
The updated CAPSA document brings the first significant change since 2004 and reflects how the shift in retirement risk from sponsors to members has transformed the retirement landscape.
“Many plan sponsors are currently facing challenges such as limited internal resources, budget constraints, and time limitations,” noted Proulx, DC delegated growth leader at Mercer.
For him, this isn’t just a compliance issue, but a structural inefficiency that’s undermining strategic oversight. Too much time, he argued, is spent on investment governance, performance reviews and fee issues, while critical governance areas like member education, plan design, and vendor management are sidelined.
While these areas are essential for the long-term success of a capital accumulation plan, they sometimes receive minimal attention in the current governance framework, explained Proulx.
“The reality is that many plan sponsors do not have the luxury of additional time, resources, expertise or budget to manage these changes effectively,” he said.
In a live poll, more than half of participants admitted to using some external support to meet regulatory requirements by receiving traditional consulting and advice. While this is the most common approach in Canada, he emphasized it still leaves sponsors holding the bag when it comes to executing key decisions.
“It's clear that a shift and focus is necessary for plan sponsors. They will need to rethink their governance strategies and consider how they can allocate their limited resources more effectively,” he said, pointing to the possibilities of delegating certain responsibilities, leveraging external expertise or adopting new technologies to streamline processes.
He suggested several areas that could support consulting, from partial delegation or “menu takeover”, which allows sponsors to retain oversight while easing the operational load.
“It’s a balanced way to enhance governance without completely relinquishing control,” he noted.
However, not all solutions are viable in every context as he noted that menu takeover, while helpful for inertia and timely decisions, can fail to address deeper governance needs.
He pointed to full delegation as a model already gaining traction in other markets which offer plan sponsors a comprehensive governance solution, everything from member communication to fiduciary oversight, by transferring the management of their plan to a third-party provider.
“This can significantly reduce the pressure on internal resources and ensure that all the regulatory requirements are met efficiently,” he said.
While not yet available in Canada for CAPs, Proulx underscored that this model is becoming “increasingly popular” and has shown “significant promise” in other countries like the US, adding that full delegation can also provide access to pooling powers and economies of scales, which can ultimately reduce costs for members.
CAPSA guidelines, the ‘best practice standard’ for sponsors
Plan governance also emerged as a top concern in for attendees, with 39 per cent of participants flagging it as their greatest area of concern. According to Steeves, this result aligns with what Mercer has been hearing from clients, particularly regarding the pressure to adopt a documented governance framework.
“Plan members require support in their decision making, and the guideline makes it very clear that CAP sponsors are centrally positioned to provide it. This is an important update to the guideline that can foster clear accountability, mitigate risk and future-proof governance processes,” noted Steeves, principal and senior lawyer in Mercer Canada’s law and tax practice.
One of the biggest shifts is the regulator’s emphasis on oversight across four key areas: member education, service provider management, fee transparency, and documented governance.
Steeves highlighted the need for plan sponsors to evaluate not only investment strategies, but also “clarity and accuracy of member statements, ongoing communication, decision-making tools, and the accuracy of any online or IT resources.”
Steeves made it clear that the revised CAPSA guideline is not a minor policy adjustment. It’s a fundamental recalibration of what effective governance should look like in the DC plan space.
"While these guidelines are not legislative in nature, they do represent the best practice standard for CAP sponsors in meeting their fiduciary duties," Steeves said. “The guideline is very clear on the need for a structured and documented governance framework that is appropriate for the nature and complexity of the CAP plan.”
“By not responding to the guidelines in a way that reflects the size and complexity of your plan, your governance activities become increasingly offside, and your plan is at risk,” she added.
