Business Owners

How To Comply With CAP

There are three parties responsible for group retirement plans.

  1. The Plan Sponsor – the employer
  2. The Service Provider which can be the insurance company or investment fund.
  3. Plan members – your employees

Each Party Has Responsibilities And Obligations

Plan Sponsor

As the employer you have the responsibility for following the Cap Guidelines. Some plan sponsors delegate this responsibility to the plan service provider. This has the potential for serious negative consequences.

The CAP sponsor is responsible for:

  • Setting up the plan;
  • Providing investment information and decision‐making tools to CAP members;
  • Introducing the plan to members;
  • Providing on‐going communication to members;
  • Maintaining the plan; and,
  • Ensuring that termination of the plan or the membership of an individual with the plan is done in accordance with the terms of the CAP.

Plan Service Provider

In many cases employers have been delegating the responsibility for CAP Guideline compliance to the Plan Provider. Ultimately however, the employer remains responsible to ensure compliance. One of the key requirements of the guideline is to engage the services of a Certified Financial Planner (CFP) to provide employees with the necessary education, risk assessment and portfolio selection. In the vast majority of cases the Plan Provider is an insurance company or investment fund provider. They are not compensated for activities like education and assessment so those tasks are either neglected or poorly executed.

Consequently, employees are not properly educated about Canada’s retirement system or how their CAP plan works. Furthermore they are not given a proper assessment of their individual risk tolerance and not guided to select a suitable investment portfolio for their age and retirement goals.

Without valuable guidance, employees routinely accept the Plan Provider’s “default selection” which is generally a safe, low-yield fund. Many employees don’t make voluntary contributions to the plan because they are not aware their employer will match their contributions.

In the absence of regular review and recommendations from a CFP these condition may be neglected for years. Upon retirement the employee may discover they don’t have adequate funding for retirement. They may legitimately place the blame on the shoulders of the employer citing that CAP guidelines were not followed.

Plan Members

Employees have responsibilities too.

In order for the CAP to remain compliant they must:

  • Understanding of the plan and investment options
  • Choose investments
  • Update personal information
  • Utilize counselling, information and tools to help make investment decisions
  • Monitor savings and investments
  • Revisit investment strategy
  • Utilize advisor for assistance and guidance

Advisors engaged by the CAP sponsor must have the appropriate level of knowledge and skill to perform the tasks delegated and to provide any advice within their area of expertise the CAP sponsor requests. The CAP guidelines require advisors hold a CFP designation – Certified Financial Planner.

Where Employers Fail in Compliance:

The most common infraction by most employers is not engaging an independent Certified Financial Planner to properly counsel the employees. Under the current guidelines, the employer is required to refer plan members (employees) to aqualified independent advisor for pension and retirement planning services. There is only one professional designation that meets the criteria and that is a Certified Financial Planner (CFP).

A CFP is recognized as having the education and qualifications necessary to provide financial planning and retirement planning services.

To download the complete Guidelines for Cap from the Joint Forum of Financial Market Regulators follow this link: