Group RRSPs: Employer Duties
- Group RRSPs very similar to defined contribution pension plans.
- Can be used in addition to or instead of pension plans.
- Benefits to employees: pre-tax contributions directly from payroll deductions, lower commissions and admin fees paid by employer.
- Not subject to pension legislation – reporting and admin requirements are not as extensive.
- Employer duties:
- Administrate: Make payroll deductions and remit to plan provider on time; complete and submit necessary documentation
- Advise: educate, support and promote
Fiduciary Duty
- Anyone who is responsible for managing the assets of another person is considered a fiduciary at common law.
- A fiduciary has an ethical and legal duty to act in the best interest of the person whose assets they are managing, and must not benefit personally from the relationship.
- Indalex Limited (Re) 2011 ONCA 265: Administrators owe
a fiduciary duty to plan members to act in their best interests,
notwithstanding any conflicting duties.
- when an employer is both plan administrator and sponsor, it must put the conflicting duties of these roles aside and act in the members' best interests.
Scope of Fiduciary Duty
- The scope of the fiduciary responsibilities of a group RRSP
sponsor depends on how it defines its role.
- Higher duty: an employer that takes an active role in the oversight and management of the group RRSP.
- Lesser duty: If the employer communicates that it is simply facilitating payroll deduction and requires the employee to make all other decisions.
- Less plan oversight and management creates risk that the group RRSP will not perform as expected.
- US developments: employers cannot completely abdicate responsibility for investment.
Aspects of Fiduciary Duty
- Ault v. Canada (Attorney General) (2011): there is a
duty to communicate information that is "highly relevant"
to beneficiaries of a pension plan.
- The principles articulated by the court can apply to the CAP model where information relating to investment options and plan terms are important, since plan members' retirement income is dependent solely on their investment decisions.
- R. v. Christophe (2009), the Ontario Court of Justice: The court also noted the administrator's fiduciary duty to prudently select and supervise its delegates—which gives legal responsibilities to the plan administrator to select and monitor investment options and managers.
Best Practices
- Proper oversight
- Communicate and educate
- Provide choices
- Don't forget about fees
- Encourage independent advice
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.