Risk management measures
Risk management measures must be provided for in the internal by-laws. The plan administrator must
understand and evaluate the main risks to which the plan is exposed.
A risk is any event related to the operation and administration of a pension plan that may have adverse consequences, particularly anything that endangers benefit security, member and beneficiary rights or plan funding.
There are many risks. Here are some examples:
- pension committee members' have insufficient knowledge
- problems with committee operations (meetings having inappropriate content or not held frequently enough, undocumented decisions, etc.)
- bad investment choices
- inappropriate actuarial assumptions
- unpaid contributions
- reductions in benefits that are not permitted
- unauthorized use of plan surplus
- administrative errors (miscalculations, payments to wrong party, etc.)
- unjustified administration costs
- lack of awareness of the most recent legislative, jurisprudential and regulatory amendments
- in the case of a defined contribution plan:
- inappropriate investment options (too much or not enough choice, insufficiently diversified choice, etc.)
- lack of member information and education.
The administrator must
determine the measures making it possible to manage the main risks. The measures must be proportional to the magnitude of each risk.
A helpful example...
The internal by-laws provide for the pension committee to obtain confirmation on a monthly basis that contributions are paid into the pension fund, and if they are not, the committee must request that the employer pay them without delay. The by-laws also provide that the committee must notify Retraite Québec of the measures taken within 60 days of their coming due.
The internal by-laws do not necessarily have to specify the details of the risk management measures. They can refer the reader to other existing procedures or documents such as a manual of administrative practices showing the procedures to follow for each situation.
A helpful example....
According to the internal by-laws, the committee must ensure that the provider of administrative services it has chosen has reliable administrative manuals, guides or computer systems for paying benefits.
For more information about other subjects that the
internal by-laws must cover, refer to:
Another useful link