The Curious Case of Capital
Accumulation Plans
C1053401






Why did CAPs overtake the traditional defined
benefit plan?
How are CAPS regulated?
Potential legal issues associated with CAPs
Issues created by the CAP lifecycle
Coming to terms with the reality of CAPs
What does the legal future hold for CAPs?




Not “overregulation” or bad case law
Uncertainty about cost, and in particular,
unknown liability associated with future
obligations
DB plans not invested in a way that matched
assets and liabilities
Volatility and uncertainty led to demise of DB
plans




Pension legislation does not deal with them in
any detail which is curious given the
prevalence of CAPS
CAPSA Guidelines 3 and 8 set out some best
practices
Following Guidelines will not insulate from
liabilities
Guidelines exist within existing legislative and
common law environment





CAP Sponsor/CAP Member relationship is a
fiduciary relationship
Duties are owed to CAP members by CAP
sponsors
How are they discharged?
Design (e.g. inadequate contribution levels,
investment options, fees)
Education vs advice



How is the plan communicated to CAP
members (retirement, retirement assistance or
savings plan?)
Are CAP member demographics understood?
Do they need to be?
In light of demographics, what steps need to be
taken?




CAPs are not going away
We need to make them better
Increased contribution levels and legislation
around options, investment advice,
maintaining CAP participation after retirement
are some examples of needed steps
CAP Sponsor and member action on fees




Unless action is taken, CAP retirees will retire
into poverty
This will place a burden on society as a whole
This will also give rise to litigation and will
likely result in employers paying the cost of
certainty in contributions in a different way
There is need to accept the reality of CAPS and
to work to make them better