1. Joint Forum of Financial Market Regulators Guidelines for Capital Accumulation Plans November 2004 The Impact DC Plan Sponsors G3-PD Colin Ripsman Toronto

2. 2 103897 Mercer – Joint Forum DC Environment Today Greater focus on plan governance – increased scrutiny of DC plans by regulators – monitoring of investment, recordkeeping, communications and internal procedures Volatile equity market returns impacting benefit adequacy Greater support required from third party suppliers and advisors Trend towards provider consolidation Focus on employee “education” rather than “communication” Increased input from members about plan operations Greater awareness of fees and their impact on retirement income

3. 3 103897 Mercer – Joint Forum Significance of the CAPs Guidelines They do not represent a change in the existing governance environment They formally enshrine the legal obligations that currently exist – Under common law - with respect to fiduciary responsibilities – In pension legislation - with respect to DC RPPs – In federal tax legislation - with respect to all CRA registered plans The Guidelines do not replace any legal requirements, they only supplement them

4. 4 103897 Mercer – Joint Forum Significance of these Guidelines The Guidelines underscore the importance of proper CAP plan management – All the regulators from all jurisdictions and regions are in agreement – Follows two years of industry feedback and cross-country sessions and incorporating the input of key industry stakeholders The key responsibilities of a plan sponsor go beyond setting up the plan and include – Providing initial and ongoing information and decision making support to members – Selection and monitoring of providers

5. 5 103897 Mercer – Joint Forum Important Issues Many of the plan sponsor obligations under the Guidelines can be delegated to a service provider – However, the plan sponsor is obligated to monitor the performance of the service provider, to ensure that they are properly discharging their responsibilities Investment advice does not need to be provided – However, where advice is provided, the plan sponsor must prudently select and monitor the advice provider The Guidelines outline obligations for the plan member – To utilize the tools and information provided to make effective decisions – Consider obtaining independent investment advice The Guidelines outline the need to document all decisions and to have a clear policy on maintenance of records

6. 6 103897 Mercer – Joint Forum Impact on Plan Sponsors Many large plans already have formal governance processes in place – Small changes to practices may be necessary – Confirm and document plan purpose – Review communication strategy and content – Document retention strategy will need to be established – Clarify role of recordkeeper – Review and confirm monitoring process

7. 7 103897 Mercer – Joint Forum Impact on Plan Sponsors Other plans have no formal governance processes in place – They will need to establish a pension committee – Review the plan design – Review recordkeeper relationship – Review investment structure – Establish a communication plan – Review existing communication material an tools – Introduce formal monitoring process – Document retention strategy will need to be established

8. 8 103897 Mercer – Joint Forum What Should Plan Sponsors Do Initial questions – Does our plan qualify as a CAP? – What processes do we currently have in place to ensure effective plan management? – How do we periodically assess our plan and our processes? Establish formal governance structure: – Regular committee meetings – Properly documented meetings and decisions – Formalize reporting structures and accountabilities Audit current practices against the standards established by the Guidelines and make changes where gaps exist Perform regular self-assessments