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Workplace Pensions: Next Generation or Final Frontier?

Workplace Pensions: Next Generation or Final Frontier?. The Curious Case of Capital Accumulation Plans C1053401. Outline of Presentation. Why did CAPs overtake the traditional defined benefit plan? How are CAPS regulated? Potential legal issues associated with CAPs

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Workplace Pensions: Next Generation or Final Frontier?

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  1. Workplace Pensions: Next Generation or Final Frontier? The Curious Case of Capital Accumulation Plans C1053401

  2. Outline of Presentation • 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?

  3. Why Did CAPs Overtake DB Plans? • 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

  4. How Are CAPS regulated? • 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

  5. Potential Legal Issues • 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

  6. Potential Legal Issues • 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?

  7. Coming to Terms With CAPS • 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

  8. The Future • 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

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