The compliance landscape for CAP sponsors has transformed significantly, especially with the new demands set forth by the Canadian Association of Pension Supervisory Authorities (CAPSA) in its updated guideline No. 3. While the immediate deadline of January 1 has passed, adherence to these guidelines will remain crucial in 2026 and beyond. This article explores the significance of good governance and the expectations for CAP sponsors moving forward.
Good governance is a central theme in the updated CAPSA guideline. It serves as the framework necessary for oversight within the CAP, ensuring effective review of service providers, investment options, member communication, education, and decision-making tools. For those CAP sponsors who have not yet audited their compliance with the CAP guidelines, now is an excellent time to assess these directives and establish a governance structure that fits their specific CAP based on its size and complexity.
For those sponsors who have verified their governance framework’s compliance or made enhancements to existing processes, the review process should continue into 2026. It is essential to ensure that their governance framework aligns with CAP oversight as outlined by the guidelines. The updated directive specifies various aspects that need attention, such as evaluating the CAP’s features, assessing service provider performance, analyzing investment options, and gauging the effectiveness of member communication, education, and decision-making tools.
When selecting service providers, CAP sponsors must consider specific factors highlighted in the guidelines, which may require adjustments to their procurement processes.
The CAPSA guidelines underscore that governance frameworks should be periodically reviewed. Should any areas require improvement, plan sponsors are expected to address these aspects promptly.
In maintaining oversight in line with the guideline, 2026 may introduce additional requirements for plan sponsors. The emphasis on good governance is not merely procedural; it aims to enhance members’ outcomes.
Read: How CAPSA’s updated CAP guideline will impact plan sponsors, members
The guideline highlights the importance of member education, mandating that CAP sponsors develop a strategy targeted at the CAP’s objectives to enhance decision-making and outcomes for members. If an evaluation reveals that member communication or education is ineffective, sponsors are expected to take action based on this data. This may involve targeted campaigns, promoting upcoming educational events, introducing new tools, or providing access to financial or investment advice to improve member decision-making.
Decumulation
Decumulation solutions are anticipated to be a continuing topic of discussion through 2026.
Earlier this year, new regulations were enacted in Quebec allowing defined contribution pension plans and voluntary retirement savings plans to offer variable payment life annuities. Ontario could soon follow, as indicated in its 2025 fall economic statement, where the government announced plans for a legislative framework that would permit VPLAs in pooled registered pension plans, DC pension plans, and plans allowing voluntary contributions.
Read: Ontario taking steps to end preferred pharmacy networks, introducing VPLA framework
For CAPs not classified as defined contribution pension plans, decumulation solutions are still evolving. Service providers are developing products to address the challenges of transitioning retirement savings into income for retired members. Yet, while these solutions can aid members, CAP sponsors must still uphold their responsibilities concerning third-party decumulation services.
At a minimum, the CAPSA guidelines require CAP sponsors to supervise their service providers. This oversight includes monitoring communications to members regarding third-party decumulation solutions, clarifying that these solutions are not under the plan sponsor’s oversight, encouraging due diligence in exploring alternatives, and making sure members understand if the service provider benefits financially from selected decumulation solutions.
The use of AI
Many CAP sponsors are now familiar with the role artificial intelligence can play in enhancing plan administration and investment decisions, including providing a personalized member experience and handling inquiries.
Read: Quebec adopts VPLA legislation
The CAPSA guideline emphasizes the importance of monitoring service vendors. With AI increasingly prevalent in CAP administration, it is prudent for plan sponsors to inquire about the use of AI by service providers—specifically regarding its application in making investment recommendations for members.
As reiterated by the CAPSA guidelines, plan sponsors looking to partner with or refer members to service providers for investment advice must conduct diligent research to ensure these providers are competent to offer such services.
It is important to recognize the potential risks associated with AI, especially concerning the accuracy of its output. If AI is employed by vendors for making recommendations, sponsors should question how the vendor ensures the precision and appropriateness of these AI-generated outputs.
Furthermore, CAP sponsors need to consider the privacy implications from vendors’ use of third-party AI tools, particularly regarding sensitive personal information. It’s crucial to review privacy clauses in service agreements to ensure they include proper measures for the handling and protection of personal information by subcontractors or other third parties.
Read: AI supporting, but not replacing, pension, benefits teams: experts
