Pension Plan Prudent Investment Practices Guideline
The Investment Guideline is designed to help administrators
demonstrate the application of prudence to the investment of
pension plan assets. It sets out a number of prudent investment
principles including the Prudent Person Rule which it describes as
"a substantive rule of law that is intended to lead to
balanced decision making, rather than dictate particular
The Guideline emphasizes the importance of communications with
plan members especially when they have responsibility for making
investment decisions For example, members of capital accumulation
plans (CAP) should be provided with sufficient details about plan
investment options to enable them to make informed investment
decisions. For more detailed guidance on plan communications,
administrators of CAPs should also refer to Guideline No. 3 for Capital Accumulation
In connection with the Investment Guideline, CAPSA has also
developed a Self-Assessment Questionnaire for plan
administrators. The Questionnaire asks plan administrators to
review their plan's investment practices and consider a number
of issues/activities when determining whether they are investing
The roles and responsibilities of the plan administrator, the
plan sponsor and their delegates, including responsibility for
establishing the investment policy.
The plan's investment objectives, risks and corresponding
risk management practices, and Statement of Investment Policies
The delegation of investment activities, and the parties
responsible for continuing to monitor and review such
Pension Plan Funding Policy Guideline
The Funding Policy Guideline provides guidance on the
development and adoption of written funding policies for defined
benefit pension plans. It provides a list of issues that a funding
policy should address, including:
An overview of the plan's features.
The plan's funding objectives and how they integrate with
the plan's investment policy.
Any funding risks faced by the plan and the plan's
tolerance for volatility in funding requirements.
Funding and contribution target levels, and cost-sharing
arrangements (if any).
A description of how any funding excesses will be
Any guidance for the plan actuary in selecting actuarial
methods and assumptions, and the frequency of actuarial valuations
(subject to any legislative requirements).
Responsibility for monitoring the funding policy.
Communication regarding the funding policy with plan
The Funding Policy Guideline also recognizes that different
considerations may apply to multi-employer pension plans (MEPPs)
– as compared to single employer plans – given
that administrators of MEPPs have the option of altering benefit
While CAPSA guidelines do not have the force of law, plan
administrators would be best advised to review their pension plan
governance and investment structures with the requirements of the
Investment and Funding Policy Guidelines in mind.
Michel Benoit has extensive experience in the
field of pensions and employee benefits.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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