Our publication: Administering a pension plan well

Pension plans are administered by pension committees. In pension plans with fewer than 26 members or beneficiaries, the employer may replace the pension committee if provided for in the plan text.

For many members, their pension plan will be their main source of income after retirement. Therefore, it is important that pension committees administer the plans effectively in order to protect the rights of those members and beneficiaries.

Several situations can adversely impact the sound administration of a pension plan and, in some cases, expose pension committee members to personal liability. Here are some examples:

• The members of the pension committee meet only once a year, before the annual meeting.
• The committee has assigned duties to certain people, but does not carry out a follow-up.
• The internal control measures are insufficient to ensure that contributions are paid monthly into the pension fund.
• Only one member of the committee makes decisions and monitors the administration of the plan.
• Certain members of the committee favour the interest of a specific group over the interest of all of the plan members and beneficiaries.
• Certain members lack the information and training they need to carry out their duties.

Pension plan administration must be organized in such a way as to allow the pension committee to carry out its duties in a competent and prudent manner. That is why it is necessary to establish rules for the sound administration of pension plans. Every member of the pension committee must be familiar with and apply these rules.

This part of the collection addresses sound pension plan administration and the basic principles underlying it. It sets out 11 steps to help you establish sound administration processes.

A self-assessment questionnaire will help you determine whether you are administering your pension plan soundly.

The principles and steps in this part are the basis for the sound administration of a pension plan. The mechanisms that need to be developed to follow these principles and steps, however, will vary depending on the specific characteristics of each plan. Get to know these principles and steps so that you can establish rules adapted to your pension plan.

A list of the relevant sections of theSupplemental Pension Plans Actand the Regulation respecting the exemption of certain categories of pension plans from the application of provisions of the Supplemental Pension Plans Act is provided in the References section.

What does the sound administration of a pension plan entail?

The sound administration of a pension plan depends on the implementation of internal control mechanisms and processes ensuring that the pension fund is properly managed and that day-to-day administrative operations are monitored. These processes enable the pension committee to follow the principles and steps involved in the sound administration of a pension plan.

These processes are applied by the pension committee and other collaborators in the plan's administration (employer, financial institutions, expert advisers and other service providers). These collaborators perform several financial and administrative tasks for the pension committee.

The sound administration of a plan reflects the pension committee's ethical values. It enables the committee to act appropriately in different situations. The motivation and involvement of pension committee members are integral to the sound administration of the plan and foster collaboration and communication.

Advantages of the sound administration of a pension plan

There are a number of advantages to the sound administration of a pension plan. Among other things, it makes it easier to:

• make decisions
• properly supervise the plan's administration
• better control risks
• share responsibilities among the various parties
• ensure accountability
• evaluate the performance of service providers

It also helps prevent:

• investments that are not in conformity with the investment policy
• contradictions between the plan and administrative practices
• noncompliance with theSupplemental Pension Plans Actor other legislation
• a lack of information and training among pension committee members
• charging inappropriate expenditures to the plan
• fraud
• conflict of interest
• a lack of information among members and beneficiaries.

In short, the sound administration of pension plans helps reduce the risk of error and increases the level of confidence of members, beneficiaries and the pension plan sponsor.

Basic principles of the sound administration of a pension plan

Administering a pension plan is like managing a company. Like anyone who manages assets that belong to someone else, the pension committee must act in a competent and prudent manner. To do so, it should respect the 6 sound management fundamental principles established by the Ordre des administrateurs agréés du Québec :

• Transparency presents reality in its entirety, without alteration or bias. Since the pension committee exercises power on behalf of others, it must account for its actions. Transparency is reflected in constant and open communication between the collaborators in the pension plan and the various others involved.
• Continuity allows for the uninterrupted administration of the plan. The committee must take measures to retain pension plan documents (for example, rules must be established concerning the transfer of pension plan data when there is a change of actuary or plan manager), prepare the next generation for changes in the committee's membership and ensure the plan's financial security in the short and long term.
• Efficiency combines the achievement of results with minimal use of resources. It is reflected in a systematic effort to minimize the use of financial, material and human resources without adversely impacting the collaborators in the pension plan. Moreover, administration costs must be proportional to the size of the pension plan.
• Balance refers to the equal proportion of opposite forces and ideas. The harmony resulting from this balance contributes to the sound administration of the pension plan. The pension committee must demonstrate its balance, in exercising its powers, through the unbiased choice of the means made available to it to achieve its objectives. In other words, to act cautiously, the committee must consider possible risks. It does not have to systematically rely on expert opinion to take low-risk actions.
• Integrity (abnegation) is the quality of pension committee members who forgo any personal advantage or interest other than that which has been contractually granted to them in the performance of their duties. Pension committee members may not place themselves in a situation of potential or real conflict between their own interests and those of members and beneficiaries.
• Fairness implies the fair and equal treatment of every member, beneficiary and key administrative player.

The pension committee must be guided by these principles, regardless of the type of pension plan (defined benefit or defined contribution), its size or its administrative structure. Only the processes and tools differ depending on the characteristics of each plan. For example, small plans rarely have an investment subcommittee.

11 steps to the sound administration of a pension plan

We suggest 11 steps to help your pension committee establish administrative processes that favour transparency, continuity, efficiency, balance, integrity and fairness.

You can also consult Canadian Association of Pension Supervisory Authority (CAPSA) Guideline no. 4, Pension Plan Governance. 

1. Understanding your role and responsibilities

   As soon as a new member is appointed, the pension committee provides this person with information about:

   • the role and responsibilities of the pension committee and its members
   • the terms of the pension plan and its administration
   • administrative objectives and issues
   • the available training

   In addition, it is important that committee members have access to all documents relating to the pension plan (see question 2 of the self-assessment questionnaire) and that they understand their content. However, they cannot consult any personal information in these documents unless they need such information to carry out their duties.

   An employer acting as pension plan administrator has the same obligations as a pension committee. The employer must also be familiar with his or her duties and how they should be carried out.

2. Establishing ethical rules

   The pension committee and each of its members must act in the interest of all members and beneficiaries. To this end, the committee should adopt a code of conduct in order to ensure, among other things, its members' honesty, loyalty and integrity.

   This will ensure that pension committee members:

   • avoid acting in their own interest or in the interest of a specific group
   • are aware if they are allowed to accept gifts and other advantages and under what circumstances, etc.
   Example 1

   A committee member appointed by active members makes decisions in the interest of these members, and a member appointed by the employer makes decisions that benefit the employer.

   Committee members should consider the interests of all members and beneficiaries.

3. Making a distinction between day-to-day administrative operations and management duties

   The pension committee's role is similar to that of the board of directors of a company. The committee makes strategic decisions, controls risks and oversees management.

   In order to carry out its role with objectivity and transparency, it may delegate the supervision of day-to-day administrative operations to a third party, such as a representative of the employer, an external adviser or a financial institution.

4. Entrusting tasks to competent resources

   Administrating a pension plan is a complex process. Pension committee members may not have the expertise required to carry out certain financial or administrative tasks. In such a case, the committee could seek out the services of experts in these areas to carry out these tasks. It may entrust these tasks via a mandate, the delegation of powers or a service contract. The difference between these types of contracts is addressed in section Choose the type of contract of the part of this collection entitled Role and Responsibilities of the Pension Committee.

   The committee must make sure to entrust these tasks to experts. To do so, it could issue a call for tenders specifying selection criteria. For example, it could make sure that these people are members in good standing of their professional order and that no complaints have been filed against them.

5. Specifying the roles and responsibilities of different collaborators

   When the pension committee entrusts tasks, it must specify their nature so that all collaborators are aware of their responsibilities. As a result, if some collaborators play more than one role, they will be able to distinguish the limits of each.

   Often, day-to-day administrative operations are assigned to a representative of the employer who serves on the pension committee. This person therefore plays two roles. It may be difficult for him or her to determine which role takes precedence in a given situation, and he or she may overstep the assigned mandate.

   In the case of a plan with fewer than 26 members and beneficiaries administered by the employer as provided for in the plan text, clear lines should also be drawn between the roles of plan administrator and employer. When the employer awards a contract for the pension plan, he or she must sign it in his or her capacity as the pension plan administrator and not as the employer.

6. Establishing oversight mechanisms

   The pension committee is ultimately responsible for the administration of the pension plan. When it entrusts functions to other collaborators, it must establish mechanisms to ensure that the work is done properly and that the collaborators carry out their duties effectively.

   Among other things, these mechanisms allow the committee to monitor:

   • the payment of contributions into the pension fund (see Example 9 in the part of this collection entitled Role and Responsibilities of the Pension Committee for more information)
   • cash outflows and administration costs
   • the compliance of the plan with laws and regulations
   • the pension fund's returns.

   Monitoring the plan can take different forms. The pension committee must establish the nature and frequency of the information and reports it receives. For example, the committee could require that the person responsible for registering eligible employees in the plan prove, within a given time frame, that he or she has fulfilled his or her duties.

   Failure to establish adequate monitoring rules could expose pension committee members to personal liability.

7. Evaluating the performance of service providers

   The committee must regularly evaluate the performance of its advisers and financial and administrative collaborators. When it does not have the necessary expertise, it should call on experts.

   Performance evaluations must be based on measurable and reasonable criteria and impartial assessments. For example, the committee could require that a statement of cessation be provided within 30 days following the date it is notified of the end of a member's active membership, even if the Supplemental Pensions Plans Act stipulates that such statements are to be provided within 60 days. Failure to meet the deadline could indicate a shortcoming.

   Example 2

   A pension committee has been working with the same actuary and the same auditor since the plan was introduced. It has automatically renewed the contracts for over ten years.

   Regardless of whether there have been any difficulties, the committee must periodically evaluate the actuary's and the auditor's work, including their performance, the quality of their services and the competitiveness of their rates.

8. Requiring quality information and encouraging knowledge acquisition

   The pension committee members and collaborators must have access to quality, up-to-date and accurate information. Among other things, they must have the latest version of the plan text.

   In addition, the pension committee members must understand the information they are given. Trusting is not enough. Too often, a pension committee will be content with vague answers such as: "I've always done it that way. Don't worry about it."

   The committee must be capable of identifying problems, making the right decisions and adequately overseeing the administration of the plan. For this reason, it must provide its members with training.

9. Controling risks

   There must be mechanisms in place to allow the committee to rapidly identify risks, evaluate their scope and react appropriately.

   Example 3

   Risk	Possible pension committee control mechanism
   Contributions are not paid into the pension fund.	Require a monthly confirmation from the employer AND the financial institution certifying that the contributions were paid.
   Employees were not registered at the appropriate time and the situation must be corrected retroactively.	Obtain information about the eligible employees from the employer. Make sure that membership conditions are respected in accordance with the plan text and the Supplemental Pension Plans Act so that the employees' rights are not infringed.
   Contributions are incorrectly calculated.	Ask the employer to confirm that all of the data required for the calculation of contributions based on the definition of salary and the contribution rates set out in the text of the plan have been taken into account.
   Statements are not sent to members and beneficiaries.	Make sure that statements are sent out (follow up with service provider).
   The investment policy is ill adapted to the characteristics of the plan.	Make sure that the investment policy evolves with the characteristics of the plan (maturity, division, plan closed to new members, etc.).
   A pension is still being paid to a deceased annuitant.	Ask annuitants to periodically complete a declaration to avoid suspension and continue receiving their pension.

10. Fostering communication and pension committee accountability

    Transparency is predicated mainly on communication among the various collaborators, members and beneficiaries.

    The pension committee must establish policies to inform members and beneficiaries of the plan's administration, their rights and obligations and any significant events. It should also specify the procedure for members or beneficiaries who would like to make a request or file a complaint.

    Communication is important because it allows the pension committee to report on the plan's administration on a regular basis between annual meetings. This increases the confidence level and interest of members and beneficiaries in their pension plan. For example, in certain plans, members are regularly notified on the intranet site of the terms of the plan and its administration, the variations in the pension fund's returns, the arrival of a new committee member, etc.

    It is also important to foster communication between the pension committee, the sponsor (in general the employer and, in some plans, the union) and the other collaborators in the plan's administration, since these people work together and collaborate actively in the achievement of the plan's objectives.

11. Evaluating your sound pension plan administration rules

    The pension committee should regularly evaluate the effectiveness of the administration mechanisms and processes in place in order to make the necessary changes, and should notify members, beneficiaries and the employer of these changes.

You now have all the keys to sound pension plan administration. To assess the sound administrtion rules in place for your plan, complete the self-assessment questionnaire. Certain information could help you implement rules adapted to your needs.

References

Legal references

Sections of the Supplemental Pension Plans Act  and the Regulation respecting the exemption of certain categories of pension plans from the application of provisions of the Supplemental Pension Plans Act  (Regulation respecting categories)

Topics	Supplemental Pension Plans Act	Regulation respecting categories
Access to documents and information about the plan's administration	151.3
Plan administrator	147, 149, 266	1 to 5
Delegations	152 to 155
Service providers	154.1 to 154.4
Obligations of the pension committee	151, 151.1, 158, 159
Internal by-laws establishing rules of operation and governance	151.2
Pension committee responsibilities	156, 180
Role of the pension committee's trustee	150

Other references

• Fundamental Norms and Principles of Sound Management – Chapter 2 , Excerpt of the compendium gathering the Ordre des administrateurs agréés du Québec's generally accepted Sound Management Principles
• CAPSA guidelines : Guideline no. 4 on Pension Plan Governance
• Duties of the plan administrator Web page
• Risk management measures Web page
• Internal controls Web page

Self-assessment

This self-assessment is designed to help pension committee members determine whether the committee is applying sound pension plan admnistration rules.

Pension committees administer pension plans. They play an important role that requires their members to have thorough knowledge of the committee's obligations and responsibilities.

To properly administer a pension plan, the members of the committee must be prepared, and they must have the right tools. They must show common sense in the exercise of their duties and adopt a set of rules of procedure. The committee must also adopt operating and governance rules based on sound management principles.

Using common sense that is not based on rules can be risky but so can following rules without using common sense. The rules cannot cover every situation with which the pension committee will be faced. That is why it is important for the members of the committee to have a thorough understanding of their role and to be actively involved in the administration of the pension plan. This will allow them to act appropriately in any given situation.

This part of the collection outlines the fundamental principles of the role, obligations and responsibilities of a pension committee and its members. It also discusses the committee's obligations when it entrusts duties to service providers, the liability of its members and ways to reduce the risk of lawsuits.

A list of the relevant sections of the Supplemental Pension Plans Act is provided in the References section.

Role of the pension committee

In a pension plan, the contributions of the employer and those of plan members (if they pay contributions) are paid into a pension fund. Although the fund is used to pay out the benefits provided for in the plan, it does not belong to the employer or the members (active or inactive) or beneficiaries: it is a trust fund. The pension committee that administers the pension fund is the trustee. It assumes the obligations of an administrator of the property of others. The sections in the Civil Code of Québec that apply to persons who are charged with the administration of property that is not their own are listed in the references.

The role of a pension committee is to ensure the management of the pension fund and the day-to-day administration of the pension plan by implementing adequate means to protect the benefits of the plan's members and beneficiaries and to maintain and increase pension fund assets. Its role is similar to that of a corporate board of directors, and is distinct from the role of the body empowered to establish, amend or terminate the pension plan.

To fulfill its mission, the pension committee must make sure that a number of duties are carried out. For more information about this, see the Duties of the pension committee section.

The pension committee's internal bylaws must stipulate the mechanisms and rules needed to ensure the proper operation of the pension committee and the sound administration of the pension plan.

As the plan's administrator, the pension committee must apply the plan text and ensure compliance with legal requirements. If some provisions of the plan text are unclear, the committee must interpret them, ask for the necessary opinions to validate their application and, where necessary, recommend that the empowered body (usually the employer) make changes to the plan.

Moreover, as administrator of the pension fund, the pension committee is responsible for the full administration of the fund's investments. It must develop an investment policy that takes into account the type of pension plan, as well as its characteristics, financial commitments and funding policy. It must review and revise the investment policy on a regular basis and make sure that it is respected.

Investments must comply with the applicable provisions of the Supplemental Pension Plans Act, which may limit or prohibit certain types of investments. The pension committee's investments must also comply with the investment policy and any investment rules contained in the plan text, including rules regarding term contracts and other financial instruments.

The pension committee must make an effort to put together a diversified investment portfolio so as to minimize the risk of large losses, unless it is reasonable to act otherwise under the circumstances.

In some pension plans, the members decide how to invest the contributions credited to their account. In that case, the pension committee must make sure that the members have at least 3 diversified investment options and that the investments have different degrees of risk and expected rates of return, which will allow them to put together a portfolio adapted to their needs. Therefore, the pension commmittee is not responsible for establishing an investment policy. However, it should apply Canadian Association of Pension Supervisory Authorities (CAPSA) Guideline no. 3 on capital accumulation plans , which recommends that the committee:

• select the financial institution that will offer the investments and evaluate it periodically
• make sure that the investments offered are appropriate and revise them if applicable
• provide members with the information and tools they need to choose their investments.

Obligations of the pension committee

Like any person who administers the property of others, the pension committee has the legal obligation to exercise the prudence, diligence and skill that a reasonable individual would exercise in similar circumstances. It must act with honesty and loyalty, in the best interest of members and beneficiaries.

Furthermore, pension committee members who have particular knowledge because of their professional or business experience must use such knowledge in administering the pension plan. Lastly, all pension committee members must avoid conflicts of interest.

The obligation to act with prudence means that a pension committee that does not have sufficient knowledge in a specific area should consult experts or entrust tasks to people with the necessary competencies. The more the knowledge of committee members is limited, the more important it is for the committee to call upon such persons.

Entrusting duties

Since the tasks are numerous and sometimes complex, the committee can entrust duties to service providers, but must make sure that they are correctly carried out. The people whose expertise is required (accountant, auditor, actuary, securities depositary, portfolio manager, employer who is party to the plan) are called key administrative players.

Important!

The pension committee has the power to entrust duties to a service provider. One or more of the committee's members or another person may also entrust duties, provided they are authorized to do so by the committee.

If it entrusts duties to a service provider, the committee must make sure that the person has the necessary skills, provide clear instructions and adequately monitor his or her work. To that end, the rules for choosing, compensating, monitoring and evaluating service providers must be provided for in the internal bylaws. For example, the bylaws could require that the committee issue a call for tenders to invite individuals of its choosing to submit a bid.

Choosing the type of contract

When a pension committee entrusts some or all of its duties to a service provider, the legal responsibility of the pension committee with respect to those duties depends on the nature of the contract between the committee and the service provider, unless a discretionary power of the committee is involved (see Entrusting duties that involve the exercise of a discretionary power). The contract may be a mandate, a service contract or a delegation. For protection purposes, it is strongly recommended that the contract be in writing.

A pension committee does not have the power to perform certain tasks. It must call on professionals who have exclusive competence to carry out such tasks. For example, the committee must retain the services of an independent auditor to audit the plan's financial report or financial statements. To do so, the committee must enter into a service contract with a qualified professional. Execution of these tasks cannot be entrusted by means of a mandate or delegation.

Mandates and service contracts

A mandate is a contract by which the pension committee grants authority to a person to represent it in fulfilling one or more of its duties. In the Supplemental Pension Plans Act, such a person is called a representative of the pension committee (i.e. the mandatary under the Civil Code of Québec). The representative carries out duties on behalf of the committee and represents the pension committee before third parties (members, other persons, government agencies). The committee is responsible to these parties for the acts or omissions of representatives who act within the limits of their mandates.

A mandate can be given for the purpose of performing a specific task or generally overseeing all of the pension committee's business. It is therefore possible to mandate the employer or another person to carry out the committee's duties. For example, it is common to mandate the employer to answer members' questions, sign up workers who are eligible for the plan, issue statements of benefits, etc.

The mandate should be written in clear terms to ensure that all of the parties clearly understand its scope. It must clearly indicate that the representative is authorized to take actions that only the pension committee, as the administrator of the property of others, has the power to take.

The committee and the representative are required to cooperate with each other. The committee must provide the representative with the information required to fulfill its mandate. The mandate should clearly indicate the respective obligations of each party.

A service contract is usually a contract by which the committee hires a person to perform a specific task. Unlike a representative, a person who provides a service under a service contract (i.e. a service provider), does not act on behalf of the pension committee or represent the committee before third parties. A service provider does not usually interact with the plan's members or any other person or government agency.

As previously indicated, acts that are reserved for certain professionals are entrusted by means of a professional service contract. This is the case for audits of the plan's financial report or financial statements, which must be performed by an independent auditor, actuarial valuations for defined benefit pension plans, which must be performed by an actuary, and legal opinions, which can only be given by a legal expert.

Service contracts can also be signed for the purpose of carrying out certain duties for the committee. For example, it is not uncommon to enter into administrative service contracts with consulting firms for the purpose of preparing statements, making calculations and drafting plan amendments.

The service contract should clearly define the obligations of each party.

The committee is responsible for the actions or omissions of representatives and service providers that occur in the course of their duties. The committee can, however, seek recourse against these individuals if they fail to fulfill their obligations. That is why written contracts are important.

When the committee entrusts duties, it should:

• Choose the representative or service provider carefully. The committee must take reasonable measures to assess the person's ability to execute the contract. For example, it can check the person's professional credentials and require references.
• Provide the representative or service provider with clear and specific instructions, preferably in writing.
• Supervise the individual's work, to the extent required by the circumstances. The committee must require reports and read them in order to make sure that the appropriate services have been provided and that they meet the committee's expectations.
• Check periodically that the pension fund is paying a reasonable price for the services received.
• Keep written documents that reflect the steps taken to implement each instruction listed above.

Delegations

A delegation is when the pension committee entrusts duties to a person who agrees to assume the same obligations and liability as the pension committee. A delegation should be drafted in clear terms, and the committee should have the right to revoke it at any time.

Persons to whom duties have been delegated, known as delegates, therefore act on their own behalf. Delegation involves a transfer of liability from the committee to the delegate.

As administrator of the pension plan, the committee must supervise the work of delegates to make sure that they adequately perform their delegated duties. To this end, it can require that they provide an account of their work by submitting periodic reports.

Delegates can delegate some or all of their duties if the delegation agreement so authorizes. Their obligations are then delegated to a subdelegate. As a result, if the committee chooses delegates for their particular qualities, such as their expertise, it must make sure that the delegation agreement does not authorize subdelegation.

The pension committee should regularly review the delegations in effect. During a review, all committee members have a say in evaluating delegates' competence and verifying if the delegations that are in effect still comply with the committee's policy. This exercise enables the committee to decide whether a delegation should be maintained or revoked and to make any other changes or adjustments necessary.

It should be noted that, under the Supplemental Pension Plans Act, the pension committee must review all delegations within 30 days after a member having the right to vote takes office. New members should also be informed about the mandates and service contracts in effect.

Important!

When a pension committee chooses to delegate duties, it should do so in writing and indicate on the contract that a delegation is being made. It should also specify that the delegate will assume the pension committee's obligations and liability when performing the delegated duties.

Even if the contract does not specify that a delegation is being made, if the duties entrusted to the service provider involve the exercise of a discretionary power, the rules with respect to delegation will apply. For example, if a person can make decisions without having to obtain the pension committee's authorization, that person has the same obligations and liability as the committee would have had had it acted on its own. For the other functions, the terms of the contract will serve to determine the intention of the parties. That is why it is important to have a clearly worded contract.

When the committee delegates duties, it should:

• Make sure that the plan text does not prohibit delegation. If it does, any delegation will be null and void, and committee members could be held liable for any errors or omissions by the delegate, as if they themselves had made these errors or omissions.
• Take reasonable measures to assess the delegate's ability to successfully execute the contract. For example, it can check the person's professional credentials and require references.
• Provide the delegate with clear and specific instructions in writing.
• Supervise the person's work, to the extent required by the circumstances. The committee must require reports and read them in order to make sure that the appropriate services have been provided and that they meet the committee's expectations.
• Check periodically that the pension fund is paying a reasonable price for the services received.
• Keep written documents that reflect the steps taken to implement each instruction listed above.

If these precautions are taken, in the event of an error or omission on the part of the delegate, it is the delegate who will be held liable and not the committee. The pension committee is, however, obliged to intervene as soon as it becomes aware of the delegate's error or omission. Should the committee fail to intervene, it may be held liable for losses incurred. The pension committee must also intervene immediately if it learns that the delegate is carrying out a duty that has not been delegated to him or her.

Entrusting duties that involve the exercise of a discretionary power

When a pension committee entrusts duties that involve the exercise of a discretionary power to a service provider, that service provider is deemed to be a delegate of the pension committee. Regardless of the type of contract by which the service provider is bound to the pension committee (mandate or service contract), the service provider has the same obligations and liability as a delegate. In particular, the service provider must act in the best interest of the plan's members and beneficiaries.

In this case, as in delegation, there is a transfer of the pension committee's liability to the service provider. To the extent that the committee has been careful in choosing a competent person, has given clear instructions and adequately monitors the work, the committee is not responsible for the actions taken by the service provider. (See Delegations for details.)

The duties entrusted to a service provider do not all involve the exercise of a discretionary power. For example, a service provider who prepares statements for members and beneficiaries or who calculates benefits and refunds generally does not exercise a discretionary power.

Discretionary power is characterized by the holder's freedom to evaluate, act and make decisions. For example, a portfolio manager who chooses which securities to buy and sell exercises a discretionary power of the pension committee.

Service providers generally exercise a discretionary power when they can make decisions without first obtaining authorization from the pension committee. For example, a service provider who makes recommendations to the pension committee does not exercise a discretionary power because the final decision is made by the committee.

If the pension committee transfers a discretionary power to a service provider because it does not have the competence needed to act for itself, it should specify in the contract between it and the service provider that the committee will not authorize or ratify the decisions made by the service provider. In fact, if the committee authorizes or ratifies the service provider's decisions, it assumes the same liability as if it had acted alone.

Acting in the best interest of the plan's members and beneficiaries

Pension committee members must not exercise their powers for their own self-interest or for the interest of a third party. They must therefore not take into account the interests of the entity that appointed them, such as the employer, the union, active or non-active members or beneficiaries. Pension committee members do not represent the people who appointed them. Committee members must act in the best interest of the plan's members and beneficiaries as a whole, putting their own interest on the same level as the interests of all the others.

Maintaining a register of interests

Pension committee members should not be in a position in which there could be a conflict between their own personal interests and those of the pension plan. A conflict of interest situation is a situation where legitimate interests could conflict with those of the pension fund, either now or in the future.

It is the duty of the committee members in question to notify the pension committee in writing as soon as possible of any interests in a business that may cause their personal interests to conflict with the duties of their office, whether or not it involves a financial benefit. In addition, when a member can claim rights from the pension fund or against it, other than rights under the plan, such as the payment of benefits, that person must declare his or her rights, their nature and their value in writing.

The committee must keep a register of interests and rights reported to it. The committee must allow the employer, members and beneficiaries to consult the register during the annual meeting.

It should also establish the procedure to follow when a member is in a potential conflict of interest situation. A member who is in such a situation could continue to perform duties on the committee while not participating in deliberations or the making of certain decisions. The goals is to avoid an actual conflict of interest.

Important!

When the committee entrusts duties to a person (e.g. a delegate), the contract should indicate that this person is obligated to declare the interest he or she has in a business that may cause his or her personal interests to conflict with the duties of his or her office. The person must also declare the value and the nature of the rights he or she could claim from the pension fund or against it.

Not receiving advantages or benefiting from pension fund assets

Pension committee members may not receive fees, commissions or other advantages with respect to any transaction concerning pension fund investments. The same rule applies to delegates, employers and certain other persons mentioned in the Supplemental Pension Plans Act who may be in a conflict of interest situation.

However, this prohibition does not apply if such advantages are usually granted to persons in the exercise of their duties and if they correspond to what is normally granted for such transactions. For example, portfolio managers may receive their usual fees for transactions.

It is important to note that receiving a secret commission to the detriment of the pension fund constitutes a criminal act.

Moreover, pension committee members may not use the assets of the pension fund or the information to which they are privy in the exercise of their duties for personal profit. For example, a committee member cannot rescue his or her own business by receiving a loan from the pension fund.

Complying with legal requirements

The pension plan must be administered in compliance with the requirements set forth in legislation, in particular the Supplemental Pension Plans Act and the Taxation Act.

Pension legislation contains a number of legal requirements that govern funding of the plan, administration of the pension fund, benefits that can be paid, plan members' rights and information that must be submitted to Retraite Québec and the Canada Revenue Agency. The committee is obligated to make sure ensure that all legal requirements are met.

If certain provisions of the plan text do not comply with the minimum requirements of the Supplemental Pension Plans Act, the Supplemental Pension Plans Act shall have precedence.

Penalties or fines can be levied if certain legal requirements are not met. For example, if the annual information returnis not submitted before the deadline, the pension fund will be required to pay additional fees (penalties) to Retraite Québec.

Liability of the pension committee

The pension committee acts through its members, who are personally responsible for ensuring that the committee meets its obligations. Committee members can be brought before civil courts and forced to pay damages and interest.

The committee has an obligation of means, not results. Committee members therefore cannot be held liable in all situations that involve financial losses. The Supplemental Pension Plans Act does not require that the committee obtain predetermined results to fulfill its duties adequately. The committee does, however, have the obligation to act with prudence, diligence and skill, that is, to take the necessary steps that a reasonable person would take in similar circumstances, in particular, it must:

• Establish operating and governance rules (internal bylaws).
• Obtain all the information and documents required to properly administer the pension plan (e.g. the plan text, internal bylaws, correspondence with Retraite Québec, a copy of the annual information return and, if applicable, the actuarial valuation report) (see the part of this collection entitled Documents Regarding the Pension Plan and its Administration).
• Obtain the necessary information before making decisions and understanding the scope of its decisions.
• Verify the credentials of persons to whom it has entrusted duties, provide them with clear instructions and exercise adequate supervision over their work.
• Act in the best interest of the plan's members and beneficiaries at all times.
• Meet regularly and draft minutes of the meetings.

The pension committee should not hesitate to consult an expert if it considers that it lacks the necessary competence to make a decision. If the committee acts in good faith, on the basis of an expert's opinion, it will be deemed to have acted with prudence.

It is up to the individual taking legal action to demonstrate that the pension committee or a person to whom it entrusted duties is in breach of his or her obligations and that damages have resulted.

Nevertheless, pension committee members who approve an investment that is not compliant with the Supplemental Pension Plans Act are, for that reason alone, jointly and solidarily liable for any resulting losses, no other proof of wrongdoing being required. They would therefore be liable even if they could show that they acted like a reasonable person. They can, however, avoid such liability if they can show that they acted in good faith and on the advice of an expert. It is therefore very important to make sure that the person who is entrusted with choosing investments acts with competence and in compliance with the law.

Members of the pension committee are jointly and solidarily liable

The Supplemental Pension Plans Act stipulates that each committee member who has a voting right is deemed to have approved every decision made by the pension committee. Members are jointly and solidarily liable unless they voice their opposition immediately.

Joint and solidary liability means that one or more members can be sued or found liable for damages caused by an error or omission on the part of the pension committee or any committee member who acted on behalf of the committee. The members who are sued have the right to recover the other members' share of the damages.

Joint and solidary liability also means that each committee member may be held personally responsible for the consequences of a decision made by the committee. Committee members who do not want to be held liable for decisions with which they disagree must immediately voice their dissent. Dissent cannot be expressed by abstention or by simply voting against the decision. It must be explicit. Members who are in disagreement must therefore make sure that their dissent is noted in writing in the minutes of the meeting. Should a member fail to voice dissent during the meeting, and if the decision has not yet taken effect, that member may voice dissent in a letter addressed to the committee, or put the matter on the agenda for the following meeting.

Members who are absent for a committee meeting are deemed to have approved any decisions made in their absence, unless they send notice of their dissent in writing to the other members within a reasonable delay after receiving news of the decision. It is therefore important to draft detailed minutes of each meeting and for all committee members to be aware of the decisions made in their absence.

Resignation of a pension committee member

Pension committee members are allowed to resign. Their resignation, however, does not discharge them of their liability as committee members for decisions made during their term. Moreover, if a committee member resigns without a serious reason at a time when the committee or the pension plan is experiencing serious problems, the resigning member may be held liable for any damages thus incurred. It would therefore be prudent to give the reasons for resigning in the notice of resignation.

A member who resigns must give notice in writing to the individuals designated by the plan to appoint a replacement. If the plan makes no specific provisions in this regard, the member must inform all the other committee members of his or her resignation. The member must also notify Retraite Québec, and indicate on the notice the date of resignation and the date it takes effect. This date is either the date the notice is received or a later date indicated on the notice (a member cannot resign retroactively).

Lawsuits and liability insurance

The best way to prevent a lawsuit is to use common sense and to include operating and governance rules in the pension committee's internal bylaws, thereby ensuring the effectiveness and thoroughness of the decision-making and monitoring procedures used in the administration of the pension plan. Furthermore, the actions of the pension committee members must be motivated by the best interests of plan members at all times.

Although lawsuits against pension committee members are rare, the risk cannot be dismissed entirely. Even when a lawsuit is groundless, defence costs alone can be high.

When committee members are not covered by liability insurance but are not found guilty of any wrongdoing, the pension fund must reimburse them for the cost of their legal defence. However, if the lawsuit against the member is successful, the costs of legal defence and any damages that the member must pay cannot be paid by the pension fund. In some plans, an agreement is made with the employer to indemnify pension committee members. However, it may be difficult or even impossible to enforce such an agreement if the employer is in financial difficulty.

For this reason, it is strongly recommended that civil liability insurance coverage be provided for pension fund trustees. This type of insurance coverage protects pension committee members against acts, errors or omissions committed when carrying out their duties.

In some plans, committee members are protected by the employer's liability insurance, which is commonly called "directors and officers civil liability insurance." Generally speaking, such insurance provides protection against administrative errors and omissions. It does not cover fiduciary risk. Furthermore, the protection may be withdrawn if the employer is in financial difficulty or goes bankrupt. For those reasons, it is far preferable that the committee take out liability insurance specifically for its members.

Insurance premiums are an administrative expense. They must be paid by the pension fund, unless the plan specifies that administration expenses are to be assumed by another person.

If committee members have liability insurance, the insurer pays for the cost of legal defence, whether or not the lawsuit against them is successful, to the extent that the wrongdoing alleged in the lawsuit is covered by the insurance. If the lawsuit is successful but the wrongdoing is neither a deliberate or gross fault, the insurance policy's deductible may be paid by the pension fund. However, before making a decision to pay the deductible, the committee must take into account the financial impact of such payment on the pension plan's assets and any other circumstances. For example, it might not be appropriate for the pension fund to pay the deductible if it is very high compared with the pension fund's assets or if the employer has agreed to pay it. Furthermore, an agreement may be reached with the employer for the employer to pay the portion of damages that exceeds the coverage limits of the insurance policy.

Before choosing insurance coverage, it is important to compare the costs of the different components and actions covered, which vary from one insurer to another. The following elements should be considered.

• The amount of the premium:

  The amount that the underwriter of an insurance contract must pay the insurer periodically or at the beginning of the contract in exchange for taking on a risk: the premium is the cost of insurance

• The amount of the deductible:

  The portion of the damages (fixed amount or percentage) that the insured must pay in the settlement of a claim

• The terms of payment of defence expenses:

  For example, these expenses are paid before a judgment is rendered.

• Out-of-court settlements
• The persons insured:

  Current, past or future members, representatives, delegates, service providers

• Coverage at the end of a committee member's term:

  In particular if the member resigns

• The acts covered:

  For example, find out whether events that occurred before the policy comes into force are covered.

• Exclusions

  Insurance policies that cover fiduciary risk are often complex. Pension committee members should not hesitate to meet with an insurance representative to obtain clarifications. Furthermore, it would be prudent to consult an independent insurance expert.

Important!

Rules for the sound administration of a plan (also called governance rules) are important. Insurers take these rules into account when deciding whether to cover pension committee members against the risks to which they are exposed and to determine the cost of the policy.

Duties of the pension committee

Pension committees administer pension plans. Their role is to ensure the management of the pension fund and the day-to-day administration of the pension plan. To do so, they must:

• implement adequate means to protect the benefits of the plan's members and beneficiaries
• maintain and enhance pension fund assets
• ensure that a numbe of duties are carried out, such as signing up workers who are eligible for the plan, paying contributions into the pension fund, paying pensions and benefits, etc.

References2

Legal references

Sections and chapters of the Supplemental Pension Plans Act 

Topics	Supplemental Pension Plans Act
Role of the pension committee's trustee	150
Obligations of the pension committee	151, 151.1, 158, 159
Delegation	152 to 155
Service providers	154.1 to 154.4
Discretionary power	153, 154
Register of interests	159, 166
Fees and other benefits	162, 182
Responsibilities of the pension committee	156, 180
Dissent	156
Membership	Chapter IV
Contributions	Chapter V
Refunds and pension benefits	Chapter VI
Transfers of benefits and assets	Chapter VII

Other references

• Guidelines for Capital Accumulation Plans  of the Joint Forum of Financial Market Regulators
• CAPSA Guidelines : Guideline No. 3 – Capital Accumulation Plans

• Newsletter number 28: Rules regarding the payment of contributions into the pension fund

The members of a pension committee work together to ensure the management of the pension fund and the day-to-day administration of the pension plan. The Supplemental Pension Plans Actoutlines the minimum composition of the committee. Like all groups that make collective decisions, operating and governance rules are necessary for the affairs of a pension committee to run smoothly.

This part of the collection covers the main conditions for creating a pension committee.

It then looks at internal bylaws governing the operation of the pension committee, as well as the plan's governance rules.

You will see that basic rules are required to guide committee members in carrying out their duties. The rules do not have to be complicated, but they should be adapted to the characteristics of the pension plan. They are an essential tool for facilitating sound pension plan governance. Because they guide committee members in carrying out their duties, these rules prevent arbitrary decisions and foster optimal performance. They are essential to ensuring the transparency of the plan's administration and heightened confidence in the plan.

Each member of the pension committee must be familiar with the internal bylaws in order to properly participate in the pension plan's administration.

A list of the relevant sections of the Supplemental Pension Plans Act and the ensuing regulations is provided in the References section.

Pension committee

To be empowered to act, a pension committee must be composed in the manner provided for in the pension plan text. The plan text must be consulted to find the provisions for the pension committee's composition. However, the committee's makeup must comply with the minimum requirements set out in the Supplemental Pension Plans Act.

The Supplemental Pension Plans Act provides for the minimum number of members on the pension committee. The maximum number of members on the committee is specified in the plan text. Generally speaking, the number of members on the committee varies based on the size and characteristics of the pension plan.

Designation of voting members

Voting members according to the Supplemental Pension Plans Act

Pension committees must have at least three voting members, including:

1. A member designated as a third party as provided for in the plan text. This member is usually designated for his or her expertise. He or she cannot be:
   • a plan member or beneficiary
   • a director (e.g. a member of the board of directors) or an administrator (e.g. human resources administrator)
   • a director, administrator or employee of the employees' association representing members (e.g. a union)
   • the child or spouse of a pension committee member or any person to whom it is prohibited by section 176  of the Supplemental Pension Plans Act to grant a loan made from the assets of the pension plan.
2. A member designated at the annual meeting by the group of activeplan members. The person designated does not have to be a plan member or beneficiary. If the group does not designate a committee member, an active or non-active plan member must be designated under the conditions provided for in the plan text.
3. A member designated at the annual meeting by the group of non-active plan members and beneficiaries. The person designated does not have to be a plan member or beneficiary. If the group does not designate a committee member, an active or non-active plan member or a beneficiary must be designated under the conditions provided for in the plan text.

Important!

Committee members designated at the annual meeting do not have to be plan members or beneficiaries, and the plan text cannot stipulate that they must be plan members or beneficiaries. They could, for example, be union representatives or members of an association of retirees.

These members are designated based on the manner proposed by the pension committee. If the committee does not make a proposal, or if the proposal is not accepted, each of the groups determines its own procedures for designating its members.

Voting members according to the plan text

The plan text sets out the number of voting members in addition to those designated in accordance with the Supplemental Pension Plans Act. It must also specify who is to designate the voting members. Usually, the employer and the union reserve the right to designate several of the pension committee members.

Committee members can be designated based on various criteria: in their own right, by virtue of their position in the company (e.g. the human resources administrator) or by virtue of their plan status (plan member, beneficiary, member designated as a third party).

The Supplemental Pension Plans Act does not require any particular competencies for membership in a pension committee. However, the plan text may require that committee members other than those designated at the annual meeting have certain competencies. For example, in some plans, the member designated as a third party must have training in law, actuarial science or finance.

Important!

In plans with fewer than 26 members and beneficiaries, the plan text may specify that the plan is to be administered by the employer or a "select" pension committee.

The select pension committee must be made up of at least 2 members, one of them a member designated as a third party. The other may be a plan member or beneficiary designated in accordance with the plan text or a person designated at the annual meeting by the majority of plan members and beneficiaries in attendance.

Designation of non-voting members (or "additional members")

The Supplemental Pension Plans Actstipulates that a maximum of 2 additional members may sit on the pension committee. Additional members can only be designated at the plan's annual meeting. These members have the same rights as the other members, except the right to vote.

The group of active plan members and the group of non-active plan members and beneficiaries can each name an additional pension committee member at the annual meeting. That member does not have to be a plan member or a beneficiary. If one of these groups does not designate an additional member, the other group cannot designate 2 members. Some plans have no additional members, some have 1 and some have 2.

Important!

For pension plans covered by section 64 of the Act to foster the financial health and sustainability of municipal defined benefit pension plans , each of these 2 groups can designate 2 non-voting members at the annual meeting (for a potential of 4 non-voting members).

The designation of an additional member allows the pension committee to prepare someone for a regular seat on the committee at a future date. An additional member is not responsible for any of the decisions made by the pension committee but can become familiar with how the pension plan operates and how it is administered so as to earn the qualifications needed to one day be designated a voting member of the committee.

Some plans prepare future pension committee candidates by allowing observers, i.e. non-committee members, to attend pension committee meetings. The pension committee can also invite non-members such as specialists to attend its meetings.

Committee members' terms

A member's term of office is limited to a maximum of 3 years. The plan text can provide for different terms depending on the position. For example, the chair of the committee could have a 3-year term, while a member designated at the annual meeting could have a 2-year term.

Members' terms can be automatically renewed upon expiry if the plan text so specifies, except for members designated at the annual meeting. In the latter case, to serve another term, the member would have to be designated again at another annual meeting.

Important!

At the annual meeting, the plan members and beneficiaries can designate a new committee member only if the term of the member previously designated has expired or if a vacancy has occurred because, for example, a member has died. Thus, where the term of office is more than 1 year, committee members will not be designated at every annual meeting.

Replacement of members

The plan text specifies the conditions for replacing a committee member (except for a member designated at the annual meeting). It indicates the following:

• Who is empowered to designate a replacement. Generally, those who designated the outgoing member are given the power to designate the replacement.
• The time period for designating a replacement. If there is a delay in replacing a voting member designated under the plan text, the Supplemental Pension Plans Act stipulates that the pension committee may designate the replacement.
• The term of office for the replacement member (i.e. whether a new term begins or the balance of the existing term is completed).

These conditions are intended to ensure that a member's absence or incapacity to act will not prevent the committee from carrying out its duties.

Important!

If a voting member designated at the annual meeting is prevented from acting or is regularly absent or if his or her seat becomes vacant, the committee designates a replacement who will serve until the next annual meeting. The replacement does not have to be a plan member or beneficiary. He or she can, for example, be anyone who has pension plan administration skills.

In the following situations, members are no longer qualified to serve their term of office and may have to be replaced:

Resignation

A member's term ends on the date of his or her resignation from the committee or on a later date mentioned in the notice of resignation (a member cannot resign retroactively). The member's seat then becomes vacant.

When a committee member resigns, notice must be sent to the pension committee and Retraite Québec. The person must indicate the reason for the resignation and the date it takes effect. See articles 1357 to 1359 of the Civil Code of Québec.

Death

A member's term ends upon his or her death. The member's seat then becomes vacant.

Absence or permanent or temporary incapacity

There are other situations that may require the replacement of a member who is absent or incapable of acting, or whose seat is vacant. The member's absence may be due to illness, parental leave, a year taken to pursue studies, etc. The plan text must indicate the situations that require that a temporary or permanent replacement be named. In the case of a voting member designated at the annual meeting, the internal bylaws may provide for such situations. For example, it could be stipulated that a member on maternity leave is replaced until she returns to work.

Furthermore, in accordance with the Civil Code of Québec, a member's term ends in the event of personal bankruptcy and the institution of tutorship or homologation of a protection mandate for him or her.

Loss of qualification

Members designated because of their status must cease to serve on the committee if they no longer meet an essential condition for their designation. Their seat then becomes vacant.

Members designated as plan members can no longer be committee members if they are no longer a plan member.

Removal from office

Committee members can be removed from office for serious reasons. The people empowered to designate these members are also empowered to remove them from office. Their seat then becomes vacant.

Expiry of members' terms

Once their term has ended, committee members remain in office until their replacement takes office or until their term is renewed.

Important!

Where the provisions in the plan text for designating or replacing members are incomplete or give rise to application problems, the committee may recommend changes to the person empowered to amend the plan, usually the employer.

Compensation of committee members and administration costs

Usually, pension committee members serve without compensation. Under the Supplemental Pension Plans Act, they are not entitled to compensation from any source whatsoever, unless otherwise specified in the text plan. If so, the text plan also indicates who will pay them. When committee members are paid by the pension fund, administration costs must be proportional to the size of the pension plan.

The employer usually pays the salaries of its employees who are granted leave from work to attend committee meetings. The plan texts may stipulate that members designated as a third party are to be paid the market rate.

Other administrative expenses related to members' tasks, such as training or travel expenses, are paid by the pension fund, unless otherwise indicated in the plan text. These expenses must be reasonable and appropriate to the situation. For example, it may not be appropriate to pay for a business class airline ticket for a member attending a meeting. The committee should establish a policy on administrative expenses and keep committee members informed. This policy should specify eligible expenses and reimbursement terms (receipts, etc.).

Dissolution of the pension committee

Generally speaking, the pension committee continues to exist until the complete liquidation of the pension fund following the termination of the pension plan. Termination may result from any of the following:

• The employer's decision terminate the plan
• The employer's bankruptcy 
• The sale of the company, if the new owner does not maintain the plan
• Retraite Québec's decision to terminate the plan.

The Supplemental Pension Plans Act stipulates that a pension committee must meet certain obligations upon termination of a plan. For example, in the event of the employer's bankruptcy, the committee must take the necessary steps to recover sums owing by the employer from the bankruptcy trustee.

Therefore, the committee must adopt rules for the continuation of its operations during the termination process. Furthermore, since the responsibility of committee members for the decisions made by the committee continues after the dissolution of the committee, it is important for them to retain pension plan documents and their personal notes.

Committee members who are no longer active because of a plan merger should retain their personal notes. Rules for the transfer of pension plan documents following a merger should also be adopted to ensure the continuity of administration of the plan resulting from the merger.

Internal bylaws

The pension committee must adopt internal bylaws, also referred to as "rules of internal administration," to provide for its operations and governance. The internal bylaws must cover the following topics:

• The respective duties and obligations of the committee members
• The rules governing the appointment of the chair, vice-chair and secretary
• The ethics rules to which the committee members are subject
• The procedure for meetings and the frequency of meetings
• The measures to be taken to provide committee members with professional development
• Risk management measures to be taken
• Internal controls
• Books and registers to be kept
• The rules to be followed when selecting, remunerating, supervising or evaluating delegates, representatives or service providers
• The standards that apply to the services rendered by the committee, including the standards on communicating with plan members and beneficiaries.

The provisions of the internal bylaws take precedence over those set out in the plan text. However, the internal bylaws can only take precedence in the following cases if the plan text so expressly provides:

• Rules for designating the chair, vice-chair and secretary and for determining their duties and obligations
• Quorum and the right to cast a deciding vote at committee meetings
• The proportion of members who must vote in order for a decision to be valid.

The internal bylaws must be adapted to the characteristics and size of the committee.

The pension committee must ensure compliance with the internal bylaws and revise them as needed. Each member must be provided with a copy of the internal bylaws. For more information about internal bylaws, see Newsletter number 22.

Assignment of roles and duties

Officers must be appointed to see to the coordination and adequate performance of the committee's activities.

The number of officers and their duties generally depend on the size of the committee and the characteristics of the pension plan. Most committees have at least 3 officers: a chair, a vice-chair and a secretary. Usually, there is a provision that the officers are chosen by the members of the committee. If the rules for designating the committee's officers or their duties are not described in the plan text, they should be described in the internal bylaws.

The internal bylaws must also specify the rules for designating the other committee officers and describing their duties. The Code Morin (which is similar to Robert's Rules of Order, the guide in English to parliamentary procedure) gives examples of the main duties carried out by officers.

Usually, the chair presides over the committee's meetings and keeps order. The chair receives motions for discussion by the committee as a whole, puts matters to a vote and declares the results of the votes. He or she signs official documents and certifies the minutes of committee meetings. The vice-chair replaces the chair when the latter is absent.

The secretary prepares the agenda for each meeting and drafts the minutes of each meeting for approval by the members of the committee as a whole. The secretary must send documents and other information useful for administering the plan to the committee members, unless the committee has entrusted that duty to someone else.

Distribution of tasks among committee members

Plan administration involves a number of tasks. Generally, the committee assigns some of them to members, who act on behalf of the committee and who are accountable to the committee for their work.

For example, a committee member may be made responsible for:

• signing contracts with various service providers
• approving administrative expenses
• certifying the conformity of documents and issuing copies of them.

Another committee member may be made responsible for:

• making sure that the procedure for signing up eligible workers complies with the plan and the Supplemental Pension Plans Act
• making sure that contributions are paid into the pension fund on time, in the correct amount and, if applicable, into the appropriate accounts.

The internal bylaws must specify the tasks that the pension committee entrusts to its members. This will make it easier to manage the situation if the person to whom a task is entrusted is absent.

Subcommittees

In large plans, subcommittees are frequently formed to advise the pension committee. Subcommittees are usually made up of pension committee members and experts. For example, an investments subcommittee could be made up of an investment consultant and committee members with financial knowledge.

Generally speaking, subcommittees play an advisory role and have no decision-making power. Their mandate is mainly to conduct studies and make recommendations to the pension committee. The internal bylaws should describe the duties and obligations of the subcommittees.

Ethics rules

Ethics rules must be provided for in the internal bylaws. Such rules are necessary to ensure that the members of a pension committee act responsibly and with integrity in carrying out their duties. Generally, such rules remind members of their obligations and cover the following areas:

• Relations of committee members with their colleagues, service providers and plan members and beneficiaries.
  Example 12

  Members must act with integrity. They cannot be involved in any way with illegal activities (fraud, secret commissions, etc.).

• Members' duty to carry out their functions in compliance with the law and with competence, diligence and prudence.
  Example 13

  Members must use their knowledge and skills in the exercise of their duties. They must make informed decisions, using any required expert knowledge, and participate actively in the meetings and work of the pension committee.

• Obligation to respect the confidentiality of some types of information related to the plan, its members and beneficiaries and service providers. Service providers share the same obligations.
  Example 14

  Members should not speak indiscreetly about any of the information they learn while carrying out their duties. They should not use any of the information they learn to obtain an advantage for themselves or for any other person (spouse, child, a particular group, etc.).

• Conflicts of interest and their declaration. These rules could include the following:
  • Members should not carry out their duties for their own personal interests or for those of any other person (spouse, child, a particular group, etc.).
  • Members should not accept any present or future advantage whatsoever if they know that the advantage is given to influence their decisions.
  • Members who have interests in a business that could place them in a situation of conflict of interest on a personal level or with regard to their duties must inform the committee's secretary in writing; the secretary keeps a register for this purpose.
  • The nature of such conflict must be indicated in sufficient detail to allow the other committee members and plan members and beneficiaries to understand the implications of the situation.
  • The secretary must send each new committee member a form on which to declare potential conflicts of interest, and send the same form annually to all committee members.
• Obligation for members in a situation of conflict of interest to withdraw from a meeting and allow the other members to deliberate and vote.
• Rights of members related to accepting or refusing an advantage or gift. Any advantages or gifts received must not influence committee members' judgment, objectivity or arm's length relationship with service providers.

A pension committee can model its ethics rules on those of the employer.

Important rules for pension committee meetings

Committee meetings provide an opportunity for each committee member to discuss the questions before the committee and to participate in decision making by voting.

Frequency of meetings

The frequency of meetings must be specified in the internal bylaws, and the committee must meet often enough to allow its members to carry out their duties. Holding only one meeting just before the annual meeting is not enough to adequately monitor the plan's administration.

The committee should meet as often as necessary to properly oversee the day-to-day administration of the plan and the work of those to whom the committee has entrusted certain tasks. Some committees meet once every 3 months to discuss current business and hold special meetings as often as necessary.

A committee that delegates all of its duties will usually meet less frequently. However, it must still hold meetings to ensure that the delegates are properly carrying out the duties entrusted to them.

Meeting times and places

Committee meetings must be held in a place and at times that allow all committee members to attend. The committee can hold its meetings at the committee's office or at some other place agreed upon by the members. Where there are great distances between the places where committee members work, the committee's meetings can be held by means of video or telephone conference.

Calls to meeting

Committee members must be given advance notice of meetings so that they can prepare for and attend them. The formalities for calling a meeting generally depend on the size of the pension committee. They are simpler for smaller committees.

Calls to meeting must be accompanied by an agenda and the documents that the members should be familiar with before the meeting. These documents must be sent far enough in advance to give the members the time to study them.

The internal bylaws should specify:

• who issues the call to meeting (usually the secretary)
• the minimum number of days prior to the meeting for giving notice of the meeting and the matters to be considered
• how the call to meeting is sent (by mail or email)
• the documents to accompany the call (including reports needed to oversee current committee business).

Agenda

To ensure that the matters in question will be discussed at the meeting, the pension committee secretary usually prepares a written agenda. Its contents will depend on the particular situation of the plan. The agenda for a regular meeting lists matters related to current business. The agenda for a special meeting indicates the special matter to be discussed.

At each meeting, the committee must establish that there is a quorum and adopt the meeting's agenda.

Quorum

The quorum is the minimum number of members who must be present at meetings to carry on deliberations and make decisions. For example, the quorum specified for a pension committee with 15 members could be 10 members, including 2 members designated by the employer and 2 members designated by the union. Quorum must be ensured throughout the meeting.

The plan text may specify the quorum, but it may also stipulate that the rules in the internal bylaws shall apply.

Meeting procedure

During a pension committee meeting, the items on the agenda are discussed, in order, one after the other. At the beginning of the meeting, the members should be given the opportunity to add items to the agenda. The pension committee must include rules in its internal bylaws to ensure that meetings are productive and harmonious and that all members are able to express themselves. These rules will be more or less elaborate depending on the size of the pension committee. Usually, the committee chair applies these rules. Here are some examples:

• Members are allotted a specified amount of time to express their point of view.
• If there is disagreement among the members on the addition of an item to the agenda, the question is put to a vote.
• The chair decides when the discussion period ends and puts matters to a vote of the members.

Clear and simple rules will make it possible to avoid procedural debates and delays. Useful examples of such rules are found in the Code Morin and the Code de procédure des assemblées.

Decision making

Generally, pension committee members express themselves during a period of debate and then vote on the motions submitted.

To allow members to follow debates that lead to a vote, rules may provide that:

• after discussion of an item on the agenda, a member may make a motion, which may be seconded by another member and then put to a vote
• If a new item is added to the agenda, a member can move that it first be studied before being put to a vote. The chair then decides whether or not to proceed in that way.

For committees with less formal procedures, it is important for the chair to inform the members when debate is over and call on them to vote.

Voting

Votes may be taken in several ways: by a show of hands, a secret ballot or a voice vote. The internal bylaws must include clear rules on how votes are taken and counted. For example, the chair may record the number of votes for and against each matter put to a vote.

Every committee member has the right to vote, except the 2 additional (non-voting) members.

The committee cannot make a decision based on the group voting method, where a vote is given to each group of members: those designated by the employer, by the union, by the plan members at the annual meeting, etc. Members of the pension committee must act and vote as trustees of the pension fund. They are not representatives of the persons who appointed them to the committee.

Some plans specify that the vote of the chair prevails in the event of a tie vote. In that event, the committee's decision is the decision for which the chair votes. If the plan text is silent on this matter, the internal bylaws can include a rule to cover the situation.The proportion of votes required to adopt a motion should be indicated in the plan text. If the plan text is silent on this point, the proportion is as indicated in the internal bylaws. If both the plan text and the internal bylaws are silent on the matter (particularly in the case of a new plan where no internal bylaws have yet been adopted), decisions are adopted by a majority of the members (those present and those absent), that is, by a proportion of 50% plus one. This rule is provided for in article 1332 of the Civil Code of Québec as a fall-back rule.

Information

Committee members must receive pertinent information before being asked to make a decision.

The committee secretary, or another person designated by the committee, must provide committee members with documents and information that will be useful for decision making.

The internal bylaws should include rules to ensure that committee members carry out the usual verifications, consider all options and are informed of any risks.

If the members are not fully informed, prudence requires that they abstain from making a decision.

Minutes of meetings

The minutes of a meeting are a summary of its activity. They must be sufficiently detailed to allow someone to follow the committee's deliberations.

The minutes of a pension committee's meetings are important. They show how the committee carried out its duties.

The minutes of a committee meeting should reflect the items on the meeting's agenda. They should provide an explanation of the manner in which decisions were made, the reasons supporting them and the committee's oversight activities. For example, the minutes could summarize the questions put to the portfolio manager and the answers received, with a view to ensuring that objectives have been met. They could also include confirmation by the employer and the securities depositary that the contributions were paid into the pension fund.

Often, it is the committee's secretary who prepares the minutes of each meeting. If necessary, the secretary should receive training in how to prepare minutes. In some plans, an outside person who is qualified for the task acts as the secretary.

Every meeting should have minutes containing at least the following elements:

• The name of the person who chaired the meeting
• The chair's declaration of quorum
• The names of the members in attendance
• The adoption of the minutes of the previous meeting
• A summary of the discussions on the items on the agenda
• The options studied by the pension committee with the reasons supporting the committee's decisions and its reasons for rejecting certain options
• The voting results for each motion, with the proportion of votes for and against
• The names of members who expressed their dissent, along with their reasons.

Minutes of a committee's meetings are approved by the members to confirm that the minutes accurately and completely reflect their discussions and decisions. If a committee meets frequently, the minutes of a meeting should be adopted at the next meeting. If meetings are held less frequently, the committee can adopt a rule that provides for the adoption of minutes upon expiry of a period agreed to by the members for receiving their comments.

All committee members must be sent minutes of each meeting, whether they were present at or absent from the meeting,within a reasonable time. For example, if the committee meets frequently, the minutes should be provided before the next committee meeting. That will allow members at the next meeting to make sure that the minutes of the previous meeting accurately and completely reflect the committee's discussions and decisions. This means that members should take their own notes during meetings and keep them for future reference. The minutes of a meeting allow members who were absent to be informed of the committee's decisions and, if necessary, to give written notice of their dissent.

In addition to the minutes, all documents related to the oversight of current business, debates and decision making must be retained. This includes reports submitted to the committee by experts and service providers.

Training for members

The pension committee should make sure that its members acquire the knowledge they need to carry out their duties. The internal bylaws must provide for measures to be taken to provide training for committee members. A reasonable budget should be allocated for training, either in-house or outside the organization.

Some committees organize training sessions during committee meetings on matters of interest to all their members. Such training, usually given by a consultant, takes into account the plan's characteristics and the committee members' needs. Various consultants (actuaries, representatives of financial institutions, etc.) can provide complete information about their training services.

Retraite Québec offers training activities and information documents for pension committee members. For more information, see the Training for plan administrators section of its website. In addition, committee members can subscribe to Info express to keep up to date with news about supplemental pension plans.

Risk management measures

See Risk management measures on Retraite Québec's website.

Internal controls

See Internal controls on Retraite Québec's website.

Bookeeping and retention of plan documents

The documents related to the administration of a pension plan include the plan text and its amendments, the internal bylaws, the investment policy, the financial reports or financial statements, the minutes of committee meetings, the register of contributions, the register of benefits, the register of administrative costs and the register of interests. Member files can contain the calculation of benefits, options, the designation of a beneficiary, the spousal benefits waiver, etc.

All the plan documents should be kept in the same place, preferably at the pension committee's office. If some of these documents are kept at the offices of a service provider, it is important to make sure that they are remitted to the committee or the new service provider, if applicable.

The committee must retain all documents (paper and electronic versions) related to the plan's administration. To this end, the committee should adopt rules for retaining and archiving documents and providing access to information. The committee can model its rules on those followed by the employer. A committee member is responsible for document retention. This member provides access to them in accordance with the rules provided for under the Supplemental Pension Plans Act.

This governance rule fosters the continuity and transparency of the pension plan's administration. It also allows the committee to answer requests for access to information made by plan members and beneficiaries. The committee can thus show that it is properly carrying out its duties.

All documents related to the plan's administration must be retained throughout the life of the pension plan. There should also be rules to ensure their retention after liquidation of the pension fund, a plan merger or a division of the plan. Files concerning plan members must be retained as long as the member or his or her heirs can assert rights under the plan.

Rules to be followed when selecting, compensating, supervising or evaluating delegates, representatives or service providers

See Rules for choosing service providers on Retraite Québec's website.

Standards for services rendered by the committee, including standards on communicating with plan members and beneficiaries

See Service standards on Retraite Québec's website.

References3

Legal references

Sections of the Supplemental Pension Plans Act  (SPPA) and the Regulation respecting supplemental pension plans  (RRSPP)

Topics	SPPA	RRSPP
Content of the pension plan	14
Consultation of pension plan documents and information by eligible workers, plan members and beneficiaries	114	60
Access to documents and information by pension committee members	151.3
Designation of voting members	147
Designation of non-voting members	147.1
Committee members' term	148
Replacement of members	148 and 167
Compensation of committee members and administration costs	162
Internal bylaws	151.2

Section 1 of the Regulation respecting the exemption of certain categories of pension plans from the application of provisions of the Supplemental Pension Plans Act  (CQLR, c. R-15.1, r. 7)

Section 64 of the Act to foster the financial health and sustainability of municipal defined benefit pension plans  (CQLR, c. S-2.1.1)

Article 1332 of the Civil Code of Québec  (CQLR, c. CCQ-1991)

Other references

• Code Morin : Procédure des assemblées délibérantes, Victor Morin
• Code de procédure des assemblées, Michel Filion
• Canadian Association of Pension Supervisory Authority (CAPSA) Guideline no. 4, Pension Plan Governance Guidelines 
• Newsletter number 22: Internal by-laws
• Obligations of the plan's administrator

Self-assessment3

The pension committee is encouraged to answer each of the following questions. If you answer "No" to any of the questions, you should take the necessary measures to correct the situation.

The art of choosing a solid team and keeping a watchful eye

In order to fulfill their obligations with prudence, pension committees usually call upon service providers to help them administer the pension plan in compliance with the plan text and the applicable legislation. These service providers are key resources that must be selected and hired by the pension committee.

The part of this collection entitled Role and Responsibilities of the Pension Committee discusses the fundamental principles of the role, obligations and responsibilities of a pension committee. One of these principles has to do with key resources. When the committee entrusts duties to these resources, such as preparing the actuarial valuation or choosing investment options, it must make sure that they have the necessary skills, provide them with clear instructions and oversee their work. These conditions limit the pension committee's liability.

The committee also limits its liability when it hires a service provider as an advisor and bases its decisions on the advice of this expert. It is therefore important that the committee know how to select an advisor with the expert skills required.

This part of the collection contains practical information that will help pension committee members select key resources wisely and develop harmonious relations with them.

It presents the key administrative resources whose expertise is usually required. It also addresses the process involved in selecting key resources, including rules for screening candidates and putting out calls for tenders, as well as the various subjects that should be covered in the contract between the committee and the service provider. Lastly, it discusses oversight and the replacement of key resources.

The committee's internal bylaws (the document that sets out the committee's operating and governance rules) must include rules for selecting, compensating, overseeing and evaluating its experts.

A list of the relevant sections of the Supplemental Pension Plans Act and the ensuing regulations is provided in the References section at the end of the document.

Key administrative resources4

Administering a pension plan involves many duties with varying levels of complexity. The Supplemental Pension Plans Act stipulates that some of these duties must be carried out by an accountant or an actuary selected by the pension committee. Other duties can be carried out by the pension committee or by various service providers to whom the committee has decided to entrust these duties.

Accountant and auditor

Administering a pension plan requires a number of accounting operations. The most common are those relating to the preparation and auditing of the financial report or financial statements.

Within 6 months following the end of each fiscal year of the plan (financial year), the pension committee must have a financial report or financial statements prepared by an accountant with expertise in Canadian accounting standards relating to pension plans. With some exceptions, the financial report or financial statements must be audited by an accountant who is a member of the Ordre des comptables professionnels agréés du Québec and who holds the title of auditor. The accountant must perform the audit in conformity with the standards governing the profession and the rules set out in the Supplemental Pension Plans Act.

The accountant must submit an independent auditor's report to the pension committee, stating that, in his or her opinion, in all material respects, the financial report or financial statements fairly present the plan's financial position at the end of the fiscal year, as well as the change in net assets for the fiscal year.

Also, within this same time frame, the pension committee must file an annual information return (AIR) with Retraite Québec. The accountant must complete part of the return when he or she is required to audit the financial report or the financial statements.

The accountant must also provide the committee with the Report on Supplementary Matters Arising from an Audit Engagement with regard to the questions in the AIR.

The accountant may also be asked to establish the method for calculating rates of return or the method for applying the monthly interest rate on late contribution payments if these methods are not stipulated in the plan.

The accountant or a person with expertise in accounting standards can perform other verifications and offer other services, such as giving advice on internal controls.

Important!

Not all financial reports and financial statements need to be audited. In plans with fewer than 50 members and beneficiaries, whose net assets have a market value of less than $1 000 000, the committee is not required to have the pension fund's financial report or financial statements audited in either of the following cases:

• If it is the plan's first fiscal year
• If it is not the plan's first fiscal year and, at the annual meeting, the committee informed the members and beneficiaries of its intention not to have the financial report or financial statements audited, and less than one third of the members and beneficiaries opposed this intention

Actuary

A pension committee that administers a defined benefit plan must hire an actuary to prepare the required actuarial valuations. The actuary must be a member of the Canadian Institute of Actuaries and hold the title of Fellow.

The actuary's role is to determine the cost of the plan and its financial position. This involves determining the value of the plan's commitments and the value of the plan's assets and establishing whether the plan has a surplus or a deficit. This information is used to determine the level of contributions that must be paid into the pension plan to make sure that its funding respects the minimum rules provided for under the Supplemental Pension Plans Act.

In the performance of their duties, actuaries must respect tax rules, the funding rules provided for under the Supplemental Pension Plans Act and the standards governing their profession.

The actuarial valuation report that the actuary files with the pension committee contains the information prescribed by the applicable regulations. It also includes a declaration by the actuary attesting that the report complies with the Supplemental Pension Plans Act and professional standards.

A notice of the plan's financial position at the end of the fiscal year must be produced, unless an actuarial valuation is required on the same date. The actuary must produce a document accompanying this notice. The content of both these documents is provided for under the Regulation respecting supplemental pension plans.

Actuarial firms usually offer consulting services and administrative services (see Administrative service providers). Among other things, they can:

• inform the committee of the risks related to plan funding and liquidity requirements
• assess the extent to which the plan's assets match its liabilities
• take part in the annual meeting.

Actuaries who work in financial institutions, such as insurance companies, can also offer the same services.

Securities depositary

The Supplemental Pension Plans Act requires that pension plans have a pension fund into which contributions are paid and in which investment income is kept. This fund constitutes a trust patrimony that is separate from the patrimonies of the employer and the members and beneficiaries.

Pension committees usually hire a securities depositary (also called a "securities custodian") to hold the pension plan's assets, that is, its securities and cash on hand.

Banks, trust companies and insurance companies can act as securities depositaries.

The depositary's duties are as follows:

• receiving contributions and investment income
• paying benefits and expenses or, depending on the contract, transferring the necessary funds to the person with payment authority
• disbursing the funds needed to make investments according to the instructions of the person who manages  them (e.g. the portfolio manager)
• keeping track of proxies, voting rights and maturity dates of investments
• producing the agreed reports.

In addition to serving as a securities depositary, most depositaries provide pension committees with complementary services. For example, the depositary can analyze the return on investments, verify the pension fund's degree of risk exposure and make sure that investments comply with the investment policy, the Supplemental Pension Plans Act and the Income Tax Act.

Some pension plans, in particular small and medium-sized plans and defined contribution plans in which members make their own investment choices, entrust the function of securities depositary to the financial institution that manages the plan's assets. The pension committees that administer these plans should make sure that securities depositary tasks and portfolio manager tasks are entrusted to separate people in order to avoid conflicts of interest.

Portfolio manager

In the case of small and medium-sized plans, once a written investment policy has been adopted, the pension committee usually hires a portfolio manager. In the case of larger plans, the pension committee will often entrust fund management to an internal manager or select several external portfolio managers.

The portfolio manager manages the pension fund's investments according to the plan's investment policy, the Supplemental Pension Plans Act and the Income Tax Act. The portfolio manager's duties include the following:

• making investment choices (more specifically, identifying the market sectors and securities in which to invest) and allocating assets among various investment categories
• maintaining relations with the securities depositary and, if applicable, with the actuary
• reporting to the pension committee as agreed.

The pension committee usually delegates the exercise of voting rights attached to the pension fund's securities to the portfolio manager. Moreover, the plan text or the investment policy must set out the rules applicable to the exercise of voting rights. The manager exercises voting rights according to these rules.

Insurance companies, trust companies and companies that specialize in asset management offer portfolio management services.

Important!

The role of the securities depositary differs from that of the portfolio manager.

• Securities depositaries hold the pension fund's assets. They do not manage investments, but rather carry out the operations requested.
• Portfolio managers manage investments. They give instructions to the securities depositary. Portfolio managers do not have access to the pension fund's assets

Administrative services provider

Most pension committees transfer their administrative tasks to service providers. These tasks may include the following:

• registering employees eligible for membership in the plan
• answering questions from members and beneficiaries
• processing applications for benefits from members: eligibility, calculations, options
• providing access to plan documents
• making sure member and beneficiary files and plan records are up to date
• preparing statements of benefits for members and beneficiaries
• preparing applications for the registration of amendments to the plan, as well as reports that must be filed with government authorities
• keeping the books and preparing financial reports or financial statements
• ensuring the appropriate retention of pension committee and pension plan files and documents.

The pension committee can transfer these administrative tasks to the employer, the labour union that sponsors the pension plan or service providers, such as financial institutions, actuarial firms or companies that specialize in the administration of pension plans.

The pension committee takes the following considerations into account when deciding whether to entrust these tasks to a service provider, the employer or the union:

• the complexity of the pension plan and the number of files to be processed
• the experience and training of the staff members to whom the tasks will be entrusted
• the possibility of replacement in the event that those staff members are absent or have left
• the tools available to these staff members in carrying out the tasks: administrative manuals, databases, software, etc.
• the cost.

In the case of defined contribution plans, insurance companies and trust companies usually provide all administrative services.

Financial expert

When drafting or revising an investment policy, the pension committee should be advised by a financial expert independent of the portfolio manager.

The pension committee can also call upon a financial expert to carry out other duties, including the following:

• monitoring the investment policy
• training pension committee members
• selecting and evaluating the portfolio manager
• analyzing the reports of the securities depositary and the portfolio manager.

Financial experts usually work for insurance companies, trust companies or actuarial firms.

Legal advisor

The pension committee may hire a legal advisor for the following duties:

• making sure that the provisions of the pension plan comply with all applicable legislation
• resolving contentious issues
• negotiating and drafting contracts with service providers.

Legal advisors can be lawyers or notaries. They must be very knowledgeable about pension plans, the Supplemental Pension Plans Act and tax rules.

Communications consultant

The pension committee may hire a communications consultant, for example, to draft the pension plan's information booklet, amendment notices and statements of benefits, and to help prepare the annual meeting.

Adequate and clear documents are essential if members and beneficiaries are to take an interest in their pension plan and make informed decisions.

Selecting key administrative resources

When the pension committee hires service providers for advice or asks them to perform certain duties, it must adopt formal rules in order to select competent people. These rules must be stipulated in the committee's internal bylaws.

Failure to establish adequate rules can entail risks, including the following:

• errors in the administration of the plan because the people performing tasks or providing advice do not have the necessary skills
• additional administrative costs for the pension fund, processing errors or a lack of continuity or an interruption in day-to-day operations due to high service provider turnover.

The pension committee must establish a selection process that is adapted to the characteristics of the pension plan. The major steps in this process are described below.

Determining the pension committee's needs

In order to take full advantage of the required services, the pension committee must first determine its needs. These needs may vary depending on the size and complexity of the plan, the administrative approach and pension committee members' knowledge.

For example, pension committee members may need the following:

• a financial expert who can help them draft an investment policy because they do not have sufficient knowledge to draft it on their own
• an external resource who can perform administrative tasks because having them carried out internally would be too costly
• a specialized external resource because pension committee members do not have the expertise needed to advise members who choose their own investments.

Important!

If the pension committee does not have the knowledge required to properly identify its needs and select key administrative resources, it must seek the assistance of an expert. The Supplemental Pension Plans Act stipulates that the pension committee will be assumed to have exercised prudence if it bases its decisions on the expert's advice.

Calls for tenders

Once it has determined its needs, the pension committee must seek out potential candidates. The mechanism used to select candidates must allow the committee to demonstrate that it has taken reasonable measures to select more than one potential candidate capable of providing the services required. Practically speaking, this means that the pension committee's decision must not be based solely on subjective criteria, for example, if the sole candidate is a friend of a pension committee member. The committee must be conscientious and objective in its search.

The committee may solicit bids from service providers through a public call for tenders or a call for tenders by invitation.

Public call for tenders

This procedure involves publishing a public tender notice in the newspapers or on the Internet in order to reach all those who might be interested and have the required skills, thereby stimulating as much competition as possible. This procedure, which is generally used for large contracts, reduces the potential for favouritism and conflicts of interest.

In a public call for tenders, the contract is awarded to a service provider whose service offer (or "bid") meets all of the requirements set out in the call for tenders.

Call for tenders by invitation

Calls for tenders by invitation lie somewhere between public calls for tenders and private agreements. They guarantee impartiality and transparency, while providing the pension committee with more leeway in selecting a candidate.

In calls for tenders by invitation, the pension committee draws up a list of potential candidates.

The list of potential candidates is usually drawn up based on general criteria, such as:

• the sector of activity (e.g. financial institutions that offer pension fund management services)
• the region of practice (e.g. actuaries who have an office in the region where committee members live).

Specific criteria can also be useful in drawing up the list, in particular the sector of activity in which certain consultants specialize. For example, the pension committee could search for actuarial firms that have substantial experience in the municipal sector or in administering multi-employer pensionplans. 

Important!

A list of service providers is published annually in various journals that specialize in employee benefits, a few of which are mentioned in Sources of information about key resources.

Book of specifications

It is important to clearly lay out what is expected of the service provider from the outset. In public calls for tenders, these instructions are included in a document called "book of specifications."

The following is an example of what might be included in a book of specifications:

A description of the pension plan and its environment – This description allows service providers to assess the scope of the tasks involved and find out what skills are needed to carry them out. For example, the description might include the following:

• the type of plan
• the number of active and inactive members and beneficiaries by province and the turnover rate
• the plan's financial position
• a description of the software or other tools the service provider may be required to use, for example in order to transfer data.

The scope of the contract – It is important to clearly indicate the nature of the services required and to include a description of the tasks to be carried out as well as, where practicable, any other points that the committee wishes to settle in the contract. For more information on this topic, see Contract.

The information and documents that the candidate must supply – The information and documents requested may include the following:

• a description of the company
• an example of a standard report
• the names of the people who will be in charge of the file, their training and a summary of their experience in general and the experience they have in carrying out similar contracts
• a description of the procedures and controls implemented to ensure the quality of the work
• proof of insurance (amount, coverage and exclusions)
• where applicable, the permits and licences held, for example permits issued by the Autorité des marchés financiers
• in the case of a portfolio manager, that person's policy with regard to "soft-dollar commissions"
• the price charged for the required services and a detailed description of costs and fees (services that are included and those that are not, type of compensation, etc.). Depending on the type of compensation, this will be either a fixed price or a fixed rate with an estimated total cost.
• the period for which the costs and fees are guaranteed.

Lastly, the book of specifications provides the contact information of the person in charge of the selection process and the person to be contacted should service providers have any questions. It also indicates the deadline and location for submitting bids.

Bid analysis

The purpose of bid analysis is to determine whether bidders meet the minimum requirements set out in the call for tenders. It also serves to determine which bidders will be invited for an interview.

In order to carry out the analysis, the committee should develop a scale indicating the various selection criteria and the weight assigned to each one. Criteria might include the following:

• the candidate's training and experience
• the quality of the communications (Are the reports complete and easy tounderstand?) 
• the price (Is it competitive?)
• the quality of the organization and its growth.

At this stage, the committee should also verify whether any proceedings have been instituted against the candidates or the companies they represent.

Interview

The interview is an essential step in the selection process. It provides an opportunity to assess certain subjective elements, such as a candidate's affinities with pension committee members.

The committee must prepare carefully for the interview. In order to assess candidates during an interview, the committee must establish criteria and weight them according to their level of importance. To help them select a candidate from among those interviewed, the pension committee can consider several criteria, including the following:

• the candidates' ability to tailor their reports to the pension committee's specific requirements
• the additional services they are willing to provide
• their ability to clearly answer the pension committee's questions
• their ability to explain technical concepts in laypersons' terms
• their behaviour: eye contact, confidence, politeness, tone, etc.

During the interview, the pension committee can ask candidates to provide additional details about certain aspects of their bid.

Important!

It is important to properly document each step in the selection process and to retain the pertinent documentation, for example:

• a text describing the nature of the services to be provided and the selection criteria
• a text describing the tendering procedure (e.g. the committee might note that it used a call for tenders by invitation and include the names of the candidates who were invited to submit a bid)
• an analysis grid for the bids received, along with the weight assigned to each selection criterion
• the list of candidates short-listed for an interview
• a description of the interview (including the questions asked and the answers given), and the analysis grid used, along with the weight assigned to each evaluation criterion
• the reports and other documents provided by the candidates.

By following this procedure, the pension committee can demonstrate that it applied sound governance principles when selecting a service provider.

Contract

Pension committee members are personally liable for the plan's administration. Of the various types of contracts (mandates, service contracts, delegation), only delegation allows the pension committee to transfer its liability to the service provider. To the extent that it provided adequate oversight, the committee is accountable only for the care it demonstrated in selecting its service providers and providing them with instructions.

The Supplemental Pension Plans Act stipulates that a service provider who exercises a discretionary power of the pension committee is considered a delegate of the committee.

A service provider who, as part of a service contract or mandate, makes decisions without having to obtain the authorization of the pension committee has the same obligations and incurs the same liability that the committee would have had it been the one to act. As is the case with delegation, pension committee members are not liable for the decisions made by the service provider, provided the committee chose the provider carefully, gave clear instructions and adequately oversaw the work.

It is therefore important to provide clear instructions when entrusting tasks to a service provider. A contract including those instructions should be signed by an authorized representative of the pension committee.
In addition, when the pension committee hires a service provider as an advisor, a clear and complete contract helps avoid unpleasant surprises and misunderstandings.

The contract should reflect the elements the parties have agreed upon. Where applicable, the book of specifications is the background document for the agreement. However, any subsequent changes made to the book of specifications, in particular in the service provider's bid or during the interview, must be taken into account. If necessary, it may be preferable to have a legal advisor draft or validate the contract.

The contract is usually drafted by the service provider and is generally a standard contract, the content of which can be adjusted to take the pension committee's specific requirements into account. It is important that the committee carefully read each of the contract's provisions in order to make sure that they are properly understood and that they clearly reflect all the terms and conditions the committee and the service provider have agreed upon. The service provider should provide explanations as needed. The pension committee should also make sure that all the contract's provisions comply with the applicable legislation, the pension plan text and the investment policy, if applicable.

The contract should address the following main elements.

Scope of the contract

All tasks must be clearly described, along with their associated costs and the related deadlines. The more detailed the contract, the easier it is to monitor and the easier it is to evaluate the service provider's performance.

General and specific obligations of the parties

The contract should indicate the various obligations of the pension committee and the service provider, for example:

• the information the pension committee must make available to the service provider so that he or she can perform the assigned tasks
• the confidentiality rules that apply to the service provider
• the rules that the service provider must abide by with respect to conflicts of interest
• reporting rules, in particular the frequency of meetings with the pension committee and the types of reports the service provider must provide
• rules dealing with breaches of contract (e.g. the contract can provide for penalties in the event of failure to meet deadlines)
• the pension committee members the service provider can contact.

Important!

Clauses that seek to exclude or limit a service provider's liability are null.

Prices and invoicing

The procedure for setting the price should be provided for in the contract. Depending on the duty to be carried out, a single contract may provide for various types of compensation:

• fee-for-service (e.g. fixed amount for each calculation)
• hourly rate (fixed amount for each hour worked)
• lump sum (fixed amount for the entire contract). It is important to specify the work covered by this amount.
• percentage of the plan's assets.

In general, when there is not much work to be done and the work is relatively simple, the price is set on a fee-for-service basis or according to an hourly rate. A lump-sum amount is usually prescribed when the nature and the scope of the work is known ahead of time, as might be the case, for example, with the preparation of annual statements.

When the price is set according to an hourly rate or on a fee-for-service basis, the contract should stipulate that the service provider is required to report on the work completed and the expenses incurred upon request by the pension committee. In addition, the contract should provide for a maximum amount above which the service provider must obtain the committee's authorization before continuing the work.

Where the duty to be carried out extend over a long period, the contract should stipulate the number of invoices and supporting documents to be presented to the pension committee, along with the prescribed time frame for their submission.

Assignment of contract and subcontracting

The committee usually hires a service provider because of that person's skills, aptitudes and reputation. It therefore expects that the services will be delivered by this person. To that end, it is customary to stipulate that the service provider cannot assign the contract or subcontract it out.

Amendments to the contract

The contract should stipulate the circumstances under which it can be revised, for example, further to legislative amendments, amendments to the pension plan text that make the plan's administration more complex, a significant increase or decrease in the number of members or the departure of the person placed in charge of the file by the service provider.

Expiry of contract

The contract should indicate the date on which it expires. It should also set out the terms and conditions for extending it or terminating it before its expiry.

To facilitate the transfer of the file, the contract should also specify certain obligations of the service provider, such as the obligation to transfer the file in its entirety to the new service provider within the agreed time frame and the obligation to draw up a list of the work currently under way and the work that needs to be done in the short term.

In the event of termination of the contract, the pension committee is required to pay the service provider for the services delivered in proportion to the price agreed upon. If the service provider has received overpayment, the amount overpaid must be returned to the pension committee.

Each party to the contract is usually held liable for the damages it has caused the other party. The contract should include provisions to that effect.

Oversight and replacement of key resources

In order to meet its commitments and limit its liability, the pension committee must oversee the work of its service providers.

Accountability mechanisms (such as reports and statements to be submitted to the committee) are usually provided for in the contract. Obviously, adequate oversight involves more than simply verifying whether the service provider has produced the appropriate documents. The committee must also examine the documents to make sure that they do not show signs of a problem. If necessary, the committee should not hesitate to ask the service provider for explanations, whether in order to properly understand the content of the documents submitted, or to obtain an explanation for any discrepancy noted.

Even if there are no problems, the committee must evaluate its service providers from time to time. Are their prices still competitive? Have they managed to adapt to new developments in the market? Does the portfolio manager's performance continue to meet expectations? If necessary, the pension committee can call upon specialists to help it evaluate its service providers.

Changing service providers can have a considerable financial impact on the pension plan and can involve certain risks. As a result, the reasons for replacing a service provider must be serious. However, the pension committee must not hesitate to make this decision where the situation requires it.

The pension plan's documents (e.g. minutes of meetings) should indicate the reasons why the committee decided to stay with or replace a service provider. If the pension committee replaces a service provider, the people with whom the service provider was authorized to have dealings should be informed.

Important!

The Supplemental Pension Plans Act provides for oversight measures.

• When, in the normal course of his or her duties, a service provider notes a situation that could adversely affect the financial interests of the pension fund and that requires a correction, he or she must file a written report on the situation with the pension committee. If the committee does not correct the situation immediately, the service provider must then send a copy of the report to Retraite Québec.
• The service provider must send the pension committee any information and documents received from government authorities (including Retraite Québec) that raise questions regarding the extent to which the plan or the plan's administration complies with the applicable legislation.

References4

Legal references

Sections of the Supplemental Pension Plans Act  (SPPA), the Regulation respecting supplemental pension plans  (RRSPP) and the Regulation respecting the exemption of certain categories of pension plans from the application of provisions of the Supplemental Pension Plans Act  (Regulation – Categories).

Topics	SPPA	RRSPP	Regulation - Categories
Accountant	3
Accountant's duties	46 and 161
Auditor	3 and 161
Auditor's duties	3 and 161		20
Actuary	3
Actuary's duties	46, 118 to 119.1	§ 3
Insurance company	10
Obligations of the pension committee	151 to 151.2, 156 and 180
Service providers	152 to 154.4 and 168

Sources of information about key resources

To obtain the names and contact information of most service providers (actuaries, managers, communications consultants, etc.), you can consult the directory of service providers published annually in certain journals that specialize in employee benefits, including:

• Avantages 
• Benefits Canada 
• Benefits and Pensions Monitor 

Other sources of information are also available:

Accountants

Visit the website of the Ordre des comptables professionnels agréés du Québec .

Actuaries

You can consult the Canadian Institute of Actuaries'  website for actuaries who specialize in pension plans. The site allows you to search for an actuary based on various criteria (province, city, name, etc.).

Securities Depositaries

Banks, trust companies and insurance companies act as securities depositaries for pension plans.

Portfolio Managers

Insurance companies, trust companies and companies that specialize in asset management offer portfolio management services.

The profession most in demand for portfolio managers is chartered financial analyst  (CFA).

Administrative Services Providers

dministrative services providers usually work for insurance companies, trust companies or companies specializing in pension plans and employee benefits.

Financial Experts

Financial experts usually work for insurance companies, trust companies or actuarial firms.

The profession most in demand for financial experts is chartered financial analyst  (CFA).

Legal Advisors

Visit the websites of the Barreau du Québec and the Chambre des notaires du Québec .

Administering a pension plan requires ongoing communication with members and beneficiaries to inform them of their rights and obligations and explain how the pension plan works and how it is administered. Members and beneficiaries need a variety of complex information on which to base their decisions.

To meet its obligations, a pension committee must satisfy all legal requirements and act in a prudent, competent and diligent manner.

To do so, it must make sure that members and beneficiaries receive all the information required under the Supplemental Pension Plans Act. In addition, all committee communications must respect the rules set out in other laws, specifically those regarding the protection of personal information. They should also take into account jurisprudence, pension plan governance standards and any rules set out in the plan text.

To ensure the sound administration of a pension plan, the pension committee's internal bylaws must specify standards for communicating with members and beneficiaries regarding services provided by the committee. They should also outline standards regarding the reliability and clarity of the information communicated.

In addition to making pension plan administration a more transparent process, effective communication has a number of other benefits. In particular, it allows members to:

• make informed decisions regarding financial planning for retirement
• better understand how a pension plan works and recognize its importance
• have confidence in the plan and its administration.

Also, if the situation requires, members and beneficiaries should be given the assistance they need to fully understand the consequences of their choices.

This part of the collection presents the key information that must be given to members and beneficiaries under the Supplemental Pension Plans Act and the Regulation respecting supplemental pension plans. What information must be provided? To whom? When? How? A helpful table summarizes the information that must be communicated with respect to each of the key elements set out in the Supplemental Pension Plans Act.

This part of the collection also describes a few rules and principles of effective communication, including communication methods and the language of communication.

A list of the relevant sections of the Supplemental Pension Plans Act and the ensuing regulations is provided in the References section.

Information about the pension plan

The pension committee must provide entitled parties with general and specific information about the pension plan. Whether this information is provided verbally or in writing, on paper or electronically (see Methods of Communication), it must be reliable and clear.

Inaccurate or imprecise information can be detrimental to members and beneficiaries. That is why it is so important for the pension committee to establish rules in its internal bylaws to meet its legal obligations and reduce the risk of error.

General information about the pension plan

General information about the pension plan is designed to inform concerned parties about the provisions of the pension plan.

Summary of the pension plan

The summary of the pension plan, or information booklet, is of key importance. It is often the only document given to eligible workers and members to familiarize them with the plan, as well as with their rights and obligations.

The summary should be written in plain language, be easy to read and understand, and accurately describe the provisions of the pension plan. The full plan text cannot be given in place of the summary.

The summary must be updated to take into account amendments to the pension plan and the Supplemental Pension Plans Act. The committee should establish rules to make sure that it is reviewed on a regular basis.

Information regarding amendments

The pension plan is a contract under which members receive benefits according to the terms outlined therein. The Supplemental Pension Plans Act provides for various methods of informing members, as well as beneficiaries where applicable, of anticipated amendments to the contract.

The information that the pension committee must provide varies depending on the type of amendment and its impact on member and beneficiary benefits.

Notice of amendment

A pension committee that is planning to apply for the registration of an amendment to the plan text must inform members by sending a notice of amendment.

This notice allows members to keep abreast of any changes that could affect their benefits.

Amendments for which members and beneficiaries must be consulted

The pension committee must consult members and beneficiaries before applying to register certain amendments.

Generally speaking, the consultation process is designed to give active members, non-active members and beneficiaries an opportunity to share their views on the proposed amendment.

The pension committee must consult the members and beneficiaries for amendments to the plan involving the following:

• the allocation of surplus assets during the plan's existence
• the appropriation of surplus assets upon plan termination.

Similarly, if 2 plans are to merge, the members and beneficiaries of the plan that will be merged into the other (the exporting plan) must be consulted in the following cases:

• if the consequences of the plans' provisions concerning the allocation of surplus assets during the plan's existence are not identical
• if the consequences of the plans' provisions concerning the appropriation of surplus assets upon plan termination are not identical
• if the provisions of the importing plan are less advantageous with respect to the appropriation of surplus assets upon plan termination.

Special conditions apply for multi-employer plans with negotiated contributions, as well as for the defined contribution plans covered by the Regulation respecting the funding of pension plans of the municipal and university sectors.

The rules governing the consultation process—specifically those regarding the people that the pension committee must consult, the notices that must be sent and the information that must be provided—vary depending on the type of amendment. The References section lists the relevant sections of the Supplemental Pension Plans Act and the ensuing regulations for each type of amendment.

Important!

If an amendment to the plan text requires that members and beneficiaries be consulted, and if the pension committee is informed of an association that represents members or beneficiaries (e.g. retirees or managers) in pension plan-related matters, it must send the members concerned a notice indicating the name and address of the association, along with its purpose and membership conditions. Interested members can then contact the association as needed.

Amendments requiring the individual consent of members

Generally speaking, pension plan amendments apply to all affected members, without them having to give their individual consent.

However, for certain amendments, the pension committee must obtain the consent of each member or beneficiary and provide an individual notice of amendment in order for the amendment to apply to that member or beneficiary. Consent must be obtained in the following cases:

• when an amendment that reduces member benefits takes effect prior to the date on which the notice is sent or prior to the effective date of the collective agreement, the arbitration award or the decree establishing the amendment
• the conversion of a defined benefit plan into a defined contribution plan.

The information provided must help members and beneficiaries understand what they are consenting to. This is why they are usually invited to meetings where they can receive additional information and ask questions.

Retraite Québec may set special conditions before approving amendments of conversion, employer substitution, division or merger.

Important!

Before registering an amendment that requires the individual consent of members and beneficiaries, Retraite Québec must make sure that sufficient information was provided. To that end, the required consents must be included with the application for registration of the amendment.

Annual summary of amendments

To give members and beneficiaries a general overview of pension plan amendments, the pension committee must provide them with an annual summary of amendments.

Annual meeting

Like anyone who administers another person's assets, pension committees must give an account of their actions. As the key democratic component of the plan, the annual meeting gives interested parties an opportunity to designate pension committee members in accordance with the method of their choice or the method proposed by the committee.

The pension committee is responsible for organizing the annual meeting. Its internal bylaws should contain provisions to encourage attendance and ensure a transparent process. The following examples provide some useful tips.

Ways of encouraging attendance:

• use videoconferencing or other information technologies
• include the benefits of attending in the notice of meeting (e.g. participants can find out information, ask questions, exercise their right to vote, if applicable)
• place meeting reminders in the employee newsletter, on the company's website, on pay slips or on retirement pension payment statements
• pair the meeting with another event (e.g. staff meeting, training day, recreational activity)
• provide information about certain aspects of the plan (e.g. right to transfer benefits, death benefits)
• gather ideas from members and beneficiaries about topics to address, and invite a speaker to discuss retirement-related subjects
• encourage members and beneficiaries to ask the committee questions ahead of time and answer them at the meeting.

If there are members and beneficiaries in different areas:

• hold the meeting at different times and at different locations
• hold the meeting at a different location each year and give members and beneficiaries who cannot attend the text of the presentation given at the meeting, with a list of the questions asked and the answers given.

Ways of ensuring a transparent process:

• draft minutes of the meeting and make them available for consultation
• schedule a question period for members and beneficiaries.

Consultation of pension plan documents

The pension committee must give certain individuals an opportunity to consult the pension plan documents. This right is often set out in the written summary of the plan.

Important!

The pension committee cannot charge consultation fees. If the committee decides to send the applicant a copy of the document in question, it must do so free of charge.

However, if the same person makes more than one request in any 12-month period, fees may be charged for sending copies and any subsequent consultations.

Information about the individual benefits of members and beneficiaries

Members and beneficiaries are entitled to information about their individual benefits under the plan. Members normally make decisions based on this information, specifically in regard to financial planning for retirement.

Annual statement

The annual statement allows members and beneficiaries to track their benefits under the pension plan and verify the accuracy of the information concerning them. It also informs them of the plan's financial situation.

Important!

When the pension committee is informed of an association that represents members or beneficiaries (e.g. retirees or admnistrators) in pension plan-related matters, it must enclose with the annual statements sent to the members concerned a notice indicating the name and address of the association, along with its purpose and membership conditions. Interested members can then contact the association as needed.

Such an association can also ask the pension committee to provide it with a list of the names and addresses of the members and beneficiaries it represents. The committee must then ask the individuals in question for their consent before personal information can be provided. A notice to this effect must be enclosed with the annual statement sent to members and beneficiaries or with the statement of cessation of active membership, if it is sent before. Once the committee has provided an initial list, the notice is sent only to new members or beneficiaries represented by the association.

Statement of variable benefits

In the case of a defined contribution plan or a defined benefit plan that includes defined contribution provisions, non-active members or their surviving spouses can receive variable benefits directly from the funds they hold. The plan must provide for payment of such benefits.

Non-active members or their spouses set the income to be received as variable benefits for each calendar year, taking the following limits into account:

• The maximum amount of variable benefits is the maximum income from a life income fund (LIF).
• The minimum amount of variable benefits is the same amount as established for a defined contribution plan. The minimum amount is nil before the age of 71.

Statement of cessation of active membership

The statement of cessation of active membership, also called the "termination statement", provides information about the benefits a member has accumulated in the pension plan and how they may be used.

The pension committee must provide, free of charge, the information used to compile the statement within 30 days of receiving a written request from the member or another person entitled to a refund or benefit. The committee must also provide, free of charge, an updated statement within 60 days of receiving a written request from the member.

Important!

When the value of the benefits established on the date of a member's cessation of active participation is less than 20% of the maximum pensionable earnings (MPE), i.e. $11 740 in 2020,this person is entitled to a refund of his or her benefits. The pension plan administrator may decide to reimburse the member even if he or she has not requested reimbursement. The administrator must then notify the member of the decision, and the member will have 30 days to indicate how he or she wishes the benefits to be paid (e.g. deposit to an RRSP, cash payment).

If the member does not so indicate, the administrator will decide how the benefits will be paid (e.g. cash payment). The notice sent to the member must indicate this possibility.

Important!

When a pension payable under a pension plan is directly or indirectly integratedwith a public plan, such as the Québec Pension Plan or the Canada Pension Plan, all documents regarding plan benefits or their calculation must indicate the applicable reduction and the method used to calculate it.

These documents include the plan summary, the various statements and all other information that is not required under the Supplemental Pension Plans Act (e.g. pension estimates).

This requirement must be met, whether the information is provided by the pension committee or by another party (e.g. the employer).

Forms to facilitate decision making

All pension plan members and, on occasion, their spouses have to make choices at one time or another, for example, at retirement. Some pension committees provide members and their spouses with forms to inform them of their choices and help them make decisions.

Since the decisions to be made can have a significant impact on the benefits of members and their spouses, they should also be offered the assistance of capable persons to explain the different options, answer their questions and make sure they understand the consequences of their choices, specifically where the spouse renounces his or her benefits.

This assistance for members and their spouses is not explicitly provided for in the Supplemental Pension Plans Act. However, it is a good administrative practice.

Choice of options form

When a member ceases to be an active member, it is common to enclose a choice of options form with the statement of cessation of active membership. This administrative document indicates the various payment options.

It is usually given to the member or any other person, specifically a spouse, who has a choice to make in the following situations:

• at the end of employment
• at retirement
• in the event of death
• when an application for partition of pension plan benefits following the breakdown of a union is filed with Retraite Québec (see Breakdown of a union).

The information on the form must be adapted to the situation. For example, if the member can transfer his or her benefits, the form must indicate the potential transfer instruments. If the member is entitled to an immediate pension, the form must indicate the various types of pension to choose from (guaranteed, temporary, indexed, etc.).

Waiver of spousal benefits

A member's spouse can at any time waive the benefits to which he or she is entitled under the Supplemental Pension Plans Act in the event of the member's death. To do so, the spouse must notify the pension committee of the waiver in writing. The committee can provide the spouse with a waiver form but cannot require that it be used.

The waiver must be signed by the spouse and contain the following information:

• the date of the declaration
• the name and address of the member and the spouse who is waiving spousal benefits
• the name of the member's pension plan and its registration number with Retraite Québec
• the name of the member's employer
• the benefit that the spouse is waiving (pre-retirement death benefit, joint and survivor pension or benefits in case of retirement pension postponement).

A spouse who waives spousal benefits can revoke the waiver. He or she must notify the pension committee in writing before the member's death or before payment of the pension begins. The committee can provide a form for this purpose but cannot require that it be used.

Member investment choices

In a defined contribution plan where members choose their own investments, the pension committee's communications must take into account the Canadian Association of Pension Supervisory Authority (CAPSA)'s Guideline no. 3 respecting capital accumulation plans .

The recommendations in this guideline reflect best practices in the field. Their goal is to ensure that members have the information and support they need to make wise investment choices. They cover the following topics:

• the investment information that members should be given

  (e.g. product guides, degree of risk and performance of the various investments offered)

• a description of the fees and penalties
• decision-making tools (e.g. asset distribution model, calculator)
• the content of the member's statement of account (e.g. summary of transactions)
• the rules regarding the transfer of assets from one investment vehicle to another.

Breakdown of a union

When there is a breakdown of the union between a pension plan member and his or her spouse, the Supplemental Pension Plans Act and the Regulation respecting supplemental pension plans stipulate the following:

• the information that the pension committee must provide the married, civilly united or de facto couple
• the rules for valuating member benefits under the plan
• the procedure for partitioning the member's benefits under the pension plan.

Statement of member benefits

To make informed decisions regarding the partitioning of their assets, members and their spouses are entitled to receive a statement of member benefits under the pension plan at the breakdown of their union.

The application for a statement of benefits can be filed jointly or by one of the spouses. The application must be accompanied by documents or certificates proving certain information, such as the date of marriage, the date of the end of marital life or the date of the application for divorce.

The pension plan may stipulate fees for producing the statement of benefits and partitioning the benefits. These fees cannot be higher than the limits set in the regulations.

Application for the partition of benefits

For a member's benefits to be partitioned, one or both spouses must file a written application with the pension committee.

For married couples, the application for partition may be filed once the deadline to appeal the judgment (divorce, separation of bed and board, annulment) has expired, i.e. 30 days after the judgment date.

For civilly united couples, the application for partition may be filed once the deadline to appeal the judgment (dissolution, annulment) has expired, i.e. 30 days after the judgment date, or once the notarized contracts (declaration of dissolution and transaction contract) have been signed, as the case may be.

For de facto couples, the application for partition may be filed once an agreement concerning the partition of benefits accrued under the pension plan has been reached.

The application must include the required documents, specifically the judgment or notarized contracts, or the agreement concerning the partition of benefits.

The time frame for partitioning varies depending on whether the application was filed jointly.

Important!

Forms are available to help spouses apply to the pension committee for a statement of member benefits and the partition of benefits.

Withdrawal of an employer and pension plan termination

The withdrawal of an employer from a multi-employer pension plan and the termination of the pension plan require that the benefits of members and beneficiaries be liquidated. The pension committee must follow special rules to inform members and beneficiaries of their rights.

Withdrawal of an employer from a multi-employer pension plan

When an employer withdraws from a multi-employer plan, the pension committee must inform members, following the same rules as for a notice of amendment.

In addition, the committee must send the members and beneficiaries affected by the employer's withdrawal an individual notice informing them of benefit payment options and the plan's degree of solvency.

Termination of the pension plan

The termination of a plan requires that the pension fund be liquidated. The Supplemental Pension Plans Act sets out the steps to take to pay the benefits of members and beneficiaries. In particular, the Supplemental Pension Plans Act indicates the information that the pension committee must provide.

Generally speaking, the employer can decide to terminate the pension plan. To make its decision known, the employer must send a notice of termination to members, the union, beneficiaries and the pension committee.
Retraite Québec can also terminate a plan, in particular if the employer fails to pay its contributions. It will then inform the pension committee of its decision, and the committee must immediately send a copy of the decision to members, the employer, the union and beneficiaries.

Once it has been notified of the termination of the plan, the pension committee must send members and beneficiaries a statement of their benefits as at the termination date. The statement of termination informs them of the value of their benefits, payment options and the plan's general financial situation. The committee must also publish a notice in a daily newspaper inviting all those who believe they have rights under the plan and who have not received a statement to make their claim to the committee.

For further information about the pension committee's duties during the employer's withdrawal from the plan or the termination of the pension plan, consult the relevant sections of the Supplemental Pension Plans Act and the ensuing regulations in the References section.

Rules of effective communication

Methods of communication

The pension committee can use various methods to communicate with members and beneficiaries, for example, by regular mail, in person or using another method provided for in the Supplemental Pension Plans Act, such as publishing a notice in a daily newspaper or posting a notice in the workplace. It can also use electronic means of communication.

When the Supplemental Pension Plans Act provides for a specific means of communication, such as publication of a notice in a daily newspaper, the committee can choose to notify members and beneficiaries using the paper or electronic version of a daily newspaper.

Electronic communications are governed by the Civil Code of Québec  and the Act to establish a legal framework for information technology  (CQLR, c. C-1.1). For an electronic document to be considered the same as a paper document, the integrity of the document must be ensured.

In addition, CAPSA Guideline no. 2  entitled Electronic Communication in the Pension Industry makes general recommendations to guide pension committees. It indicates the following:

• The requirement to provide information in writing may be satisfied by electronic communication. However, the committee must provide a paper copy of all documents that could not be sent electronically and to all those who request one.
• Recipients are deemed to have given consent to receiving electronic documentation if they designate an information system, for example, if they provide their email address. Recipients should be informed that they can revoke their consent at any time.
• Recipients must be able to keep electronic documents for future reference.
• When the information being provided is available electronically as well as in paper format, the information provided electronically must be identical in content to the paper version.
• The requirement for information to be transmitted by a specified method must be met. For instance, if legislation requires a notice to be placed in newspapers, sending an email will not suffice.
• Where there is a requirement for a signature, this may be satisfied by an electronic signature.
• A requirement to present an original document may be satisfied by electronic communication.
• A requirement to retain information may be satisfied by retaining it electronically.
• Electronic communication must be retained in the format in which it was made, sent or received, or in a format that accurately reflects the information contained in the original communication.
• Information can be provided through a website or other electronic tools. The committee must notify recipients of the release of such information. This notification must include all relevant details on how to access the information.
• Pension committees must address data protection and security challenges by implementing a protocol to protect the security of information that is sent and retained, as well as to retrieve lost or corrupted data. This protocol should be continuously monitored.
• Electronic communications that contain confidential information should be made accessible only to the intended recipients through secure information systems.

Language of communication

The Charter of the French Language  stipulates that French is the official language of Québec. Accordingly, the employer's communications with its staff, including those concerning the pension plan, must be in French.

Because of its general duties as a trustee, the pension committee should use the language beneficiaries and members are able to understand in its communications with them. As a result, the notices and statements sent to French-speaking members and beneficiaries should be written in French. The internal bylaws should set out the committee's practices in this regard.

Pension committees with members and beneficiaries outside Québec must comply with the linguistic policies in effect for them.

Basic principles to help the pension committee communicate effectively

Jonathan Swift, the author of Gulliver's Travels, wrote: "Proper words in proper places make the true definition of style." This applies equally well to pension plans.

Below are 8 basic principles that can help the pension committee communicate effectively with members and beneficiaries:

• Plan. Scheduling the information to send to members and beneficiaries will enable the committee to act efficiently.
• Avoid technical terms. Pension plans have their own language, which an ordinary person can have trouble understanding. That is why the pension committee should avoid using terms that are too technical. If technical terms must be used, they should be explained.
• Don't overuse synonyms. Use the same word to avoid confusion. For example, the terms indexation and increase in the cost of living may mean the same thing to the pension committee, but they may mean something else to a member.
• Use short sentences. Long sentences are hard to read. Sentences with several clauses separated by conjunctions such as and and but are probably too long. Shorten them by making two sentences.
• Use numbered or bulleted lists. If several items must be listed, present them as a list to facilitate reading.
• Anticipate questions. Anticipating members' questions helps make sure that all written communications have the desired effect.
• Avoid mixed messages. The committee should make sure that the information provided is clear and consistent.
• Get help. To ensure they can be understood, the committee can have its texts read by someone who has never seen them, preferably by someone unfamiliar with pension plans. In some cases, it may be best to use the services of a communications specialist.

References5

Legal references

Relevant sections of the Supplemental Pension Plans Act  and the ensuing regulations:

Topics (in order of appearance in this part of the collection)		SPPA	RRSPP
Summary of the pension plan		111	56.1
Notice of amendment		26
Conversion of benefits		22
Merger of plans		196	61.1
Amendment reducing benefits		20
Annual summary of amendments		112
Annual meeting		166	61.0.11
Consultation of pension plan documents		108, 114, 115	60
Annual statement:		112
Part I	Active members		57
	Non-active members		59
	Beneficiaries		59.0.1
Part II	Financial situation of the plan		59.0.2
Notice of the existence of an association representing members or beneficiaries		113.1
Request for the names and addresses of the persons represented by the association		113.2
Statement of variable benefits		90.1	15.8 and 24
Statement of cessation of active membership		113	58
Integration of plans		111.1
Waiver of spousal benefits		88.1	67.7
Statement of benefits in the event of the breakdown of a union		108 and 110	35 and 35.1
Application for partition of pension plan benefits		107 and 110	46 to 50
Notice of employer's withdrawal from the plan		200
Notice of termination sent by the employer		204
Notice of termination sent by Retraite Québec		205 and 206
Statement of benefits in the event of plan termination		207.3	65
Public notice of termination		207.4
Pension committee's internal bylaws		151.2

Topic	SPPA	Regulation fixing the limits to the expenses for a transfer of benefits between spouses
Limits to the expenses for obtaining the statement of benefits in the event of a breakdown of a couple's union and for carrying out partition	110.1	1 et 2

Other references

• Canadian Association of Pension Supervisory Authorities (CAPSA) guidelines 
  • Guideline no. 2 – Electronic Communication in the Pension Industry
  • Guideline no. 3 – Capital Accumulation Plans
  • Guideline no. 8 – Defined Contribution Pension Plans Guideline
• Newsletter number 27: Converting defined benefit provisions into defined contribution provisions
• Newsletter number 22: Internal by-laws
• Amendments reducing benefits section of the website
• Internal by-laws section of the website
• Payment of defined benefits  section of the website
• Partition of benefits section of the website
• Plan division or merger  section of the website
• Annual meeting and consultation of the annuity purchasing policy section of the website

The role of the pension committee is to ensure the financial management and administration of the pension plan while protecting the rights of members.

In order to make informed decisions and carry out their duties in a prudent, diligent and competent manner, each committee member must have all the relevant documents concerning the pension plan. The documents must be reliable and up to date.

To effectively carry out its role and, in particular, to make sure that the right benefits are paid to the right people, the committee must keep very accurate and detailed records. It must adopt internal bylaws that stipulate, for example, the rules regarding record keeping.

Sound administration therefore requires in-depth knowledge and effective management of the various plan administration documents.

This part of the collection informs pension committee members of the main plan administration documents. It also stresses the importance of putting mechanisms in place to manage these documents, ensuring their integrity, protection and retention.

A list of the relevant sections of the Supplemental Pension Plans Act and the ensuing regulations is provided in the References section at the end of the document.

Pension plan documents

One of the pension committee's main roles is to make sure that the rights of all parties to the plan are respected, that those parties fulfill their obligations and that all legal requirements are met. These rights and obligations are described in various reference documents.

Plan text and amendments

The plan text is a contract that describes the rights and obligations of the plan members, beneficiaries, employer and pension committee. It is the pension committee's key tool.

The pension committee is responsible for ensuring the application of the plan text. If some provisions of the plan text are unclear, the committee must interpret them, ask for the necessary opinions to validate their application and, where necessary, recommend that the authorized person or body (usually the employer) make changes to the plan.

The Supplemental Pension Plans Act outlines the subjects that the plan text must address, including the following:

• Plan eligibility and membership requirements
• Employer and, if applicable, member contributions
• The refunds and benefits payable
• The rules regarding the payment of benefits
• The terms and conditions for the purchase of an annuity from an insurance company in accordance with the annuity purchasing policy, if applicable
• The rules regarding the appropriation of surplus assets in the case of plan termination
• The rules regarding the allocation of surplus assets during the plan's existence
• The conditions under which the plan can be amended and by whom
• The makeup of the pension committee, along with the conditions and time frames for designating and replacing its members.

The plan text can be amended according to the terms set out therein. The pension committee must therefore make sure that it has an up-to-date version of the text. It must also have access to the text's history, i.e. the original text and all amendments that have been made to it.

The latest version of the plan text may be the original text followed by amendments to some of its provisions. If the plan has been substantially or frequently amended, a consolidated version incorporating all amendments to the original text can be the best way to reduce the risk of error.

The pension plan text and amendments must be registered with Retraite Québec and the Canada Revenue Agency (CRA). Regardless of who has the power to amend the pension plan, the pension committee, as the plan administrator, is responsible for registering the documents. The Application for Registration of an Amendment to a Pension Plan form allows the committee to make sure that all of the necessary documents and information are included with the application.

Transfer framework agreements can also accompany the plan text. Under such agreements, members can transfer their benefits to other pension plans covered by the agreement. In general, the conditions for this type of transfer differ from those that apply to transfer vehicles, such as locked-in retirement accounts (LIRAs) or a life income funds (LIFs).

Collective agreements, orders and arbitration awards for unionized employees, and agreements with non-unionized employees

A collective agreement can refer to pension plan provisions. It can also include an agreement concerning the plan's provisions or amendments. It can stipulate that pension plan benefits be maintained for the duration of the agreement.

An agreement separate from the collective agreement can also be entered into between the employer and a group of employees.

If a disagreement arises regarding working conditions, an arbitrator may make a ruling. The arbitration award then serves as the collective agreement.

In addition, pursuant to an order, a collective agreement may apply not only to the parties who negotiated it, but also to all employers and employees in a given sector of activity.

Agreements, collective agreements and arbitration awards are not amendments to the plan text. The provisions of the plan text must be amended to reflect the document in question, and the amendments must be registered. Also, if the documents contain discrepancies, the provisions registered with Retraite Québec take precedence.

Records of decisions to amend the plan

The plan text  must indicate who has the power to amend it. Often, that power belongs to the employer or, if the plan is negotiated, the employer and the union. However, regardless of who has the power to amend the plan, the employer must consent to its membership and to any changes to its obligations further to an amendment.

The employer's decision to amend a non-negotiated pension plan or to consent to its membership or a change to its obligations can take various forms. Most often, the decision is made in a resolution by the employer's board of directors. For negotiated plans, decisions are usually enshrined with the signing of the collective agreement.

Laws and regulations

The pension committee must also meet all legal requirements. In Québec, the main laws applicable to pension plans are the Supplemental Pension Plans Act and the federal Income Tax Act .

The Supplemental Pension Plans Act provides for minimum benefits. If a plan text contains provisions that do not comply with the minimum benefits requirements under the Supplemental Pension Plans Act, or if it makes no mention of minimum benefits, the pension committee must apply the provisions of the Supplemental Pension Plans Act. However, the plan's provisions can be more advantageous than those listed in the Supplemental Pension Plans Act, for example, if it allows members to transfer their benefits after the deadline stipulated in the Supplemental Pension Plans Act.

The Income Tax Actgoverns the fiscal aspects of pension plans. Specifically, it stipulates the maximum contributions that can be paid and the maximum pensions the plan can pay out.

In addition to these 2 laws, the pension committee must also take into account other laws, such as the Civil Code of Québec , the Act respecting labour standards ,the Act respecting industrial accidents and occupational diseases  and the Charter of Human Rights and Freedoms . If it has any doubts, the committee should obtain the advice of competent persons.

If workers from another province or workers under federal jurisdiction participate in a pension plan registered in Québec, the laws of those other governments apply to them, in accordance with the agreements in effect.

Pension committee documents

Pension committee documents allow committee members to perform their duties properly, make informed decisions and ensure accountability.

Internal bylaws

Internal bylaws set out the rules regarding pension committee operations and governance. These rules help committee members fulfill their duties and are a key component of sound pension plan administration.

By developing and following internal bylaws suited to the plan's characteristics, the committee is exercising due prudence and protecting itself against legal recourse.

Each pension committee member must have a copy of the internal bylaws and be familiar with their content.

For more information, see Internal bylaws in the part of this collection entitled How a Pension Committee Operates.

Administrative policies

An administrative policy sets out the general principles adopted by the pension committee with regard to pension plan administration. Its purpose is to ensure the uniform and consistent application of the plan's provisions, as well as its administration.

An administrative policy can be used when certain plan provisions are open to interpretation. In such cases, the policy states the committee's interpretation.

An administrative policy can also establish the rules to be followed when no rules are set out in the Supplemental Pension Plans Act or in the plan text. For example, an administrative policy could cover the method for calculating interest on late contributions when the method is established by the accountant or the actuary selected by the pension committee.

Administrative procedures

An administrative procedure lists the steps to follow, the actions to take and the methods to use to carry out a given task. Its purpose is to make sure that the pension plan text is applied in a uniform and consistent manner. It also serves as a checklist to make sure that nothing has been forgotten.

Administrative procedures establish the steps involved in administering the pension plan, for example, the procedure for filling out the forms needed to apply for plan membership or to request a calculation of benefits.

These procedures are usually listed in a manual or guide intended for the person or body responsible for applying them.

Contracts with service providers

Administering a pension plan involves many tasks with varying levels of complexity. That is why the pension committee normally uses service providers to provide advice or perform certain tasks.

A contract with a service provider usually specifies the nature of the tasks entrusted to the provider, their cost and the applicable deadlines. It also indicates the obligations of each party, the frequency of meetings and follow-ups, the reports required, the confidentiality requirements, the rules regarding conflicts of interest and the consequences of failing to abide by these rules.

For more information, see Choosing the type of contract in the part of this collection entitled Role and Responsibilities of a Pension Committee and Contract in the part entitled Key Administrative Resources.

Pension committee meeting documents

The pension committee must hold meetings to monitor plan administration and make decisions. The internal bylaws should include rules to ensure the smooth operation of these meetings.

Accordingly, and in order for the pension committee to make informed decisions, these meetings must be carefully planned. A notice of meeting is usually sent to pension committee members in order to inform them that a meeting will be held. The notice is accompanied by an agenda listing the various topics that will be discussed, along with documents to help members prepare.

Minutes are drafted after the meeting and sent to all committee members so that they can make sure they truly reflect the content of the meeting.

The committee keeps the minutes and all documents concerning pension committee meetings, in particular the reports by experts and service providers.

For more information, see Important rules for pension committee meetings in the part of this collection entitled How a Pension Committee Operates.

Register of interests

The pension committee must keep a register of interests at its office indicating committee members' interests in a business that may cause their personal interests to conflict with the duties of their office.

The register should also indicate the nature and value of any rights pension committee members may have in the pension fund (e.g. claims). Their benefits as members or beneficiaries do not need to be included in the register. Any interested person may examine the register without charge during normal business hours.

For more information, see Maintaining a register of interests in the part of this collection entitled Role and Responsibilities of a Pension Committee.

Notice of annual meeting and meeting documents

The pension committee must call the employer and all plan members and beneficiaries to an annual meeting within 9 months following the end of each fiscal year of the plan. The notice of meeting should be accompanied by an agenda.

Minutes should be kept of the annual meeting and the results of any elections.

Documentation concerning the designation of committee members

The designation of committee members at the annual meeting are recorded in the minutes of the meeting. The designation of other members is indicated in a written notice signed by the authorized person or, for a member designated by the employer, in a resolution by the employer's board of directors.

Correspondence

Eligible workers, members and beneficiaries are entitled to consult any correspondence between Retraite Québec and the pension committee in the 60 months prior to the consultation request, with the exception of correspondence concerning another worker, member or beneficiary.

Service providers must send the pension committee any information or documents received from government authorities that raise questions regarding the extent to which the plan or the plan's administration complies with the applicable legislation.

Financial documents

The pension committee uses a number of documents—which can vary depending on the type of plan—to help it manage the pension fund and monitor its financial situation. The main documents are listed below.

Financial report or financial statements

The pension committee must have a financial report or financial statements prepared. The documents should address plan assets as at the end of the fiscal year (financial year) and any changes thereto since the previous fiscal year. The report should cover the following:

• All contributions made
• The benefits paid
• Plan administration and investment management costs
• Overall investment income in a given fiscal year.

This information is used to complete the annual information return (AIR).

The financial report or financial statements must be audited by an independent auditor (a chartered professional accountant (CPA) authorized to use the "auditor" designation).

An audit is not required under certain conditions (see section 20 of the Regulation respecting the exemption of certain categories of pension plans from the application of provisions of the Supplemental Pension Plans Act ).

Annual information returns

Annual information returns (AIRs) must be filed with Retraite Québec for each fiscal year of the plan. For fiscal years ending on 31 December 2018 and later, AIRs are prepared and submitted electronically via the SPP Portal, and can be kept in PDF format. With some exceptions, they must be accompanied by the independent auditor's report on the financial report or financial statements, as well as the Report on Supplementary Matters Arising from an Audit Engagement (CSRS 4460).

Only the person representing the plan administrator can submit the electronic annual return. With the submission, this person must confirm that the pension committee:

• read the AIR
• certified the accuracy and veracity of the information contained in the AIR.

The AIR contains information about:

• the plan administrator and his or her representative
• the employers who are party to the plan
• membership in the plan
• the plan's financial situation (contributions, investment income, benefits, receivables, net assets, etc.)
• the plan's administration and investments.

An AIR must also be sent to the CRA. To do so, the committee can complete and submit the CRA's T244 form. It can also complete the appendix listing the information required by the CRA on the SPP Portal. In the latter case, Retraite Québec will send the information to the CRA via a secure electronic email.

Funding policy

Defined benefit plans must have a funding policy. The purpose of the funding policy is to help the pension committee manage the risks related to the plan's funding. It is established by the person or body that has the power to amend the plan.

For more information, see the Funding policy web page.

Investment policy

The pension committee chooses plan investments. It must make sure that the plan's assets are invested in accordance with the investment policy.

The pension committee must adopt an investment policy in keeping with the plan's characteristics, its financial obligations and, if required, the funding policy. The policy must address the subjects set out in the Supplemental Pension Plans Act, specifically liquidity requirements, the proportion of assets that can be invested in debt securities and equity securities, respectively, and the types of investments authorized. The policy should be revised regularly.

Documentation concerning investments offered to members

When a defined contribution pension plan allows members to choose their own investments, the pension committee does not have to adopt an investment policy. However, the committee must make sure that members can choose from at least 3 diverse investments. It should apply Canadian Association of Pension Supervisory Authorities (CAPSA) Guideline number 3 , which stipulates that the committee should:

• select the financial institution that will offer the investments and evaluate it periodically
• make sure that the investments offered are appropriate and revise them if applicable
• provide members with the information and tools they need to choose their investments.

Actuarial valuation report

For defined benefit plans, Retraite Québec and the CRA require that an actuarial valuation report be filed periodically. The report must be prepared by an actuary who holds the title of Fellowfrom the Canadian Institute of Actuaries.

In the actuarial valuation, the actuary calculates the contributions that must be paid into the pension fund in the coming years to fund benefits and amortize deficits. The actuarial valuation also gives the value of the plan's assets and lists its obligations, and indicates whether the plan has surplus assets or a deficit.

The actuary estimates the plan's funding level (the percentage of the plan's assets in relation to the amounts required to pay benefits as they come due).

The actuary also estimates the degree of solvency of the plan (the percentage of the plan's assets in relation to the amounts required to pay benefits if the plan were terminated).

The actuarial valuation report must be submitted to Retraite Québec and the CRA at the same time as the Actuarial Information Summary.

Notice presenting the plan's financial situation

In the case of a defined benefit plan other than a member-funded pension plan, the pension committee must send Retraite Québec a notice presenting the plan's financial situation as at the fiscal year end of the plan, unless an actuarial valuation is required on that date.

This notice indicates the degree of solvency of the plan as at the fiscal year end date. The notice must be accompanied by a document prepared by an actuary who holds the title of Fellowfrom the Canadian Institute of Actuaries containing the actuary's attestation to the degree of solvency of the pension plan and the information used to establish the plan's probable financial situation on a solvency basis, i.e. assuming the termination of the plan.

Annuity purchasing policy

Defined benefit plans can have an annuity purchasing policy. If they do, the pension committee is authorized to pay member and beneficiary benefits through the purchase of annuities from an insurance company in accordance with the annuity purchasing policy and the Supplemental Pension Plans Act. The annuity purchasing policy is established by the person or body that has the power to amend the plan.

For more information, see the Annuity purchasing policy web page.

Reports and certificates of conformity from service providers

In order to monitor the pension plan's financial situation and the work of the various service providers, the pension committee must ask the providers to file reports and provide certificates of conformity for accountability purposes. For example, the portfolio manager could certify that the investment policy was followed at all times.

The frequency and content of the reports and certificates of conformity should be indicated in the contract that the pension committee enters into with each provider.

Books and records

The main goal of a pension plan is to provide plan members with a retirement income funded by contributions to the pension fund. To accomplish this, the pension committee must keep books and records, which will be used to determine the individual benefits of plan members and verify cash inflows and outflows.

Members' and beneficiaries' files

To make sure that people receive the benefits to which they are entitled, it is crucial to keep records for each member and beneficiary, including a history of changes.

The documents that members, beneficiaries, spouses or other persons send to the pension committee must be kept:

• Application for membership or waiver of membership rights if membership is optional
• Designation of beneficiaries
• Spousal waiver of the death benefit, and revocation of the waiver, if applicable
• Investment choices
• Choices of options with regard to the form of the pension
• Application for a transfer or refund
• Member's statement of marital status
• Application for a statement of benefits and application for partition in the case of separation
• Judgment of divorce or of separation from bed and board
• Birth certificate
• Medical certificate
• Death certificate.

Copies of the following documents must also be kept:

• Annual statements
• Statement of cessation of membership
• Statement in the event of the breakdown of a union
• Transfer form for tax purposes (form T2151)
• Pension adjustment, pension adjustment reversal and past service pension adjustment slips
• Tax slips concerning retirement income or refunds
• Confirmation of payment of benefits.

Lastly, the information used to calculate members' benefits must also be kept:

• Date of birth
• Membership start date
• Contributions paid
• Remuneration
• Service credited.

Although the pension committee is responsible for collecting and keeping information on plan members, this task is usually entrusted to the employer, an actuarial firm or a financial institution.

The pension committee must find out about the measures taken to ensure the comprehensiveness, reliability and secure retention of information. The committee must establish in the contract with the service provider that the information belongs to the pension plan and that the committee can obtain copies or consult the information as necessary.

Register of contributions

The pension committee must make sure that contributions are paid into the pension fund. To do so, the employer can give the committee a copy of the monthly notice it sends to the securities depositary indicating the contributions made by the employees and the employer.

The pension committee can require the securities depositary to provide a report on the contributions paid and their payment date. This report allows the committee to reconcile the contributions indicated by the employer with the contributions indicated by the securities depositary.

Even if the pension committee entrusts this task to a service provider, as is often the case with small pension plans, the committee must nonetheless monitor the provider's work.

Register of benefits

The pension committee must also monitor the payment of benefits. Generally speaking, for retirement pensions, the securities depositary makes the payments. However, the pension committee must notify the depositary of any new retirees and when other types of payment must be made.

The register of benefits, which indicates the amounts paid and the types of payment, allows the pension committee to verify whether payments by the depositary correspond to the committee's instructions. It indicates the annuities and benefits paid, as well as the amounts reimbursed or transferred. The register can also be used for information purposes, for example, to complete the AIR or calculate pension adjustments.

List of administration costs

Unless otherwise indicated in the provisions of the pension plan, the pension fund covers the plan's administration costs, which include mainly the fees of service providers (e.g. portfolio manager, accountant, actuary) to whom the pension committee has entrusted certain duties.

In order to meet its commitments and limit its liability, the pension committee must monitor and document costs related to its service providers. For example, the committee must provide regular follow-ups of the work done and the expenses incurred in relation to those initially forecasted. In addition, the committee should set a maximum amount above which the service provider must obtain the committee's approval before continuing.

To that end, the committee must keep a record of expenses, both incurred and expected. In addition, the committee should compare the expenses it has incurred with those indicated on the securities depositary's reports. The pension committee must use invoices and other supporting documents from the service providers to document its follow-ups.

In addition to the expenses related to service providers, administration costs also include expenses related to the duties of pension committee members, such as training expenses, travel expenses and compensation, if applicable.

Records management policy

Good records management allows the pension committee to demonstrate that it acted in a prudent, diligent and competent manner in the best interests of members and beneficiaries. Among other things, it gives it access to the information it needs to make informed decisions, exercise the appropriate oversight and show that members and beneficiaries received the benefits to which they are entitled.

Records retention

The pension committee must keep all documents concerning the pension plan and its administration. The internal bylaws should specify who is to keep the documents, where they are to be kept and what measures are to be taken to ensure their integrity.

The documents can be kept on paper or in electronic format. They should all be kept at the same location (i.e. the pension committee's office or the employer's establishment).

After the pension plan has been in existence for a number of years, there can be a significant quantity of records to be kept. The committee should therefore establish rules for archiving documents.

Some documents may be kept by a service provider (e.g. the administrative services provider that keeps members' files). The pension committee should make sure that these documents are kept for as long as required and that the provider will give them to the committee or a new service provider, as applicable. These requirements should be indicated in the service contract. The committee should also make sure that it has access to the documents at all times.

All documents related to the plan's administration must be kept throughout the life of the pension plan. There must also be rules to ensure their retention after liquidation of the pension fund, a plan merger or a division of the plan. Files concerning plan members must be kept as long as the member or his or her heirs can assert rights under the plan.

Access to information by pension committee members

Pension committee members are entitled to access information relevant to their duties. To that end, the committee secretary or another person designated by the committee must provide members with all the information they need to carry out their duties. Committee members are also entitled to consult and obtain copies of any relevant documents.

However, this right does not extend to the personal information of plan members, unless the duties of the pension committee members so require.

In this respect, the pension committee demonstrates prudence by establishing written rules governing access to information and its distribution to committee members. These rules should stipulate the following:

• That a committee member be designated to oversee access to information and the retention of pension plan documents. This member is usually the committee secretary. All document consultation requests should be addressed to this person, who will determine the validity of the request and grant access, as applicable.
• That access to the personal information of plan members be limited to one or two committee members. The committee could choose members who already have access to that information because of their role with the employer, such as the director of human resources.

Protection of personal information

The pension committee must take appropriate measures to make sure that no harm is caused to plan members on account of the personal information the pension plan has regarding them. This means that the pension committee must restrict access to certain information.

For example, the pension committee must make sure that the service provider to whom it has entrusted administration of the plan grants access to personal information only to the member concerned and to other authorized persons.

References6

Legal references

Sections of the Supplemental Pension Plans Act  (SPPA) and the Regulation respecting supplemental pension plans  (RRSPP)

Topics (in order of appearance in this part of the collection)	SPPA	RRSPP
Pension plan	6, 14 and 24
Internal bylaws	151.2
Register of interests	159
Annual meeting	166	61.0.11
Correspondence	114 and 154.3	60, par. 8°
Financial report or financial statements	161
Annual information return	161
Investment policy	168 and 169
Investments chosen by plan members	168
Actuarial valuation	118 to 120	4 to 11.3
Notice of the plan's financial situation	119.1	3.1 and 3.2
Administration costs	162
Access to information	151.3 and 154.3

Other references

• Canada Revenue Agency (CRA)
  • Registered Pension Plans (RPP) Glossary 
  • Registered Plans Directorate Technical Manual 
  • MP, DB, RRSP, DPSP, and TFSA Limits and the YMPE 
  • RPP 
• CAPSA Guidelines : Guideline Number 3 – Capital Accumulation Plans