When it comes to workplace retirement savings plans, appropriate governance can have a big impact on outcomes for members. Sponsoring employers can also bear significant fiduciary and legal ramifications when a plan is poorly managed. It is important, then, that employers carefully consider governance structure when implementing a pension plan for their employees.
In the Canadian private sector, registered Defined Contribution (DC) pension plans or Group Registered Retirement Savings Plans (Group RRSPs) are common choices to assist in employee retirement savings. Governance of these arrangements is directed by the Canadian Association of Pension Supervisory Authorities (CAPSA) guidelines, which set out best practices for appropriate oversight.
Such oversight includes performance of third party providers, review of expenses, assessment of member education, review of member communication, regulatory and legislative compliance, and more. Further, under a typical registered DC arrangement, pension legislation dictates that the sponsoring employer acts as Plan Administrator (a defined term under pension legislation). In other words, the company must “run” their own pension plan and ensure they are meeting all the legal and financial requirements this entails. Under either model, the governance requirements represent a considerable undertaking and the employer must rely on properly trained staff and ongoing input from senior management/ownership.
Most small and mid-sized employers simply do not have the necessary personnel or expertise to manage a pension plan effectively. This makes sense. Companies are built for running the business at hand, not for running a pension plan. Even if third-party service providers are hired to carry out much of the work, the buck stops with the sponsoring employer who will be held accountable if the plan doesn’t meet its commitments to members.
The ICPP has eliminated this considerable burden with its collective governance structure. When an employer joins the ICPP, they do not become plan administrator. Instead, the plan is governed by the ICPP Management Board. The not-for-profit Board acts as the administrator of the ICPP. This minimizes any fiduciary risks for our participating employers, while also reducing fees and streamlining administration. In essence, our participating employers are outsourcing governance duties to the Board.
The core directive of the ICPP Management Board is to optimize member pensions. The Board is comprised of pension experts who represent the interests of all major plan stakeholders. Their areas of expertise include actuarial, investment, legal, human resources, and finance. Board Members are selected by a Nominating Committee of highly regarded pension industry professionals. All of our Participating Employers are eligible to participate in the selection of Board representatives.
By centralizing governance in this way, the ICPP can offer a hassle-free pension solution for employers. Additionally, our members can rest assured that their retirements are in the hands of experts who represent their best interests at all times.
Key benefits of the ICPP’s governance model include:
- Elimination of individual employer risks and administrative burden as the ICPP Management Board takes on the responsibilities of Plan Administrator
- Significant reduction in fees and soft costs associated with administering a pension plan in-house
- Fair Board representation for all major plan stakeholders provided by pension industry leaders
- Dedicated, not-for-profit governance with a clear mandate to optimize member retirement outcomes