Comments on OSFI's Draft DC Disclosure Guidelines Due by Year End
It is common knowledge that pension legislation was drafted with defined benefit pension plans in mind and does not deal adequately with defined contribution pension plans. Until recently, the only regulatory guidance for DC plan sponsors was the CAPSA Guidelines for Capital Accumulation Plans (PDF) (CAP Guidelines). Now DC plan sponsors will have another resource - the Disclosure Guideline for Defined Contribution Pension Plans (PDF) (OSFI Guidelines).
The draft OSFI Guidelines apply directly to federally-regulatory plans so employers that sponsor DC plans that are registered with the Office of the Superintendent of Financial Institutions (OSFI) (or who are thinking of converting their DB plan to DC) will need to pay particularly close attention to the OSFI Guidelines. But in the regulatory vacuum that exists for DC plans in Canada, any guidance from a major regulator on DC plans is welcome, and DC plan sponsors in other jurisdictions will want to review the OSFI Guidelines for guidance as to what OSFI believes is "industry standard" for disclosure by DC plan sponsors.
The OSFI Guideline considers the topics which should be addressed in plan member booklets, and provides a helpful road map for plan administrators when drafting such booklets. It sets out information regarding investment decisions, plan expenses, annual statements, plan amendments, and termination/retirement statements that should be provided to plan members, eligible employees and spouses. The OSFI Guideline relies heavily on the CAP Guidelines, incorporating many of the specific provisions of the CAP Guidelines.
Not surprisingly, there is an emphasis on disclosure of risk. A clear explanation of the nature of the DC plan and the impact of the investment choices must be set out in the employee booklet.
Sponsors of federally-registered DC plans have until December 31, 2009 to get their comments into OSFI.
