Pension plan governance
Pension plan governance is a set of rules governing the relationship between the plan administrator, employer, plan members and beneficiaries and service providers. The rules set out the rights and responsibilities of each of the above. They define the objectives to attain and the means for attaining them that must be implemented.
To facilitate sound pension plan administration, the administrator must set up governance rules that will guide it in carrying out its duties and allow it to prove it has met its obligations. They will assist the administrator in taking appropriate action in various situations.
The rules can be found in the internal by-laws. When the plan is administered by a pension committee, they also cover the committee's operating rules. Rules governing the makeup of the pension committee are provided for in the plan text.
The funding policy applies to defined benefit pension plans. The policy must be established by the person or body empowered to amend the plan. The policy helps the administrator manage the risks related to the funding of the plan.
For certain defined benefit pension plans, the person or body empowered to amend a plan can adopt an annuity purchasing policy that allows the plan administrator to begin paying benefits to members and beneficiaries through the purchase of annuities from an insurance company.
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