Obligations of the plan administrator
In carrying out its
duties, the plan administrator must respect the relevant laws and the pension plan's provisions. Like all those who manage other people's property, it has the legal obligation to exercise the prudence, diligence and skill that a reasonable individual would exercise in similar circumstances. It must also act with honesty and loyalty, and in the best interest of the members and beneficiaries.
The purpose of the obligations is to ensure sound pension plan governance. To do so, the plan administrator must adopt
- The people to whom the plan administrator has delegated duties, as well as those having discretionary powers, assume the same legal obligations as the plan administrator.
- If a pension committee is of the opinion that one of its members should no longer act as such, the committee should discuss with the person(s) who appointed this member because they can remove them from office.
Complying with the relevant laws and the pension plan's provisions
The pension plan must be administered in compliance with all applicable laws, including the
Supplemental Pension Plans Act and the
Income Tax Act . As a result, if the plan has members in other Canadian provinces, it must also be administered in compliance with the
laws governing pension plans in those provinces.
The pension plan must be administered in accordance with the plan's provisions. Registration of the plan with
Retraite Québec does not mean that its provisions are in compliance with the
Supplemental Pension Plans Act. If the text of the pension plan has provisions that do not comply with the Act, the Act prevails.
A helpful example...
Martine is hired on 1 June 2022. By 1 January
2023, she has worked 700 hours. The plan administrator must now have the worker enrolled in the plan since she has reached the number of hours required by law, even though the plan text provides for her enrolment after a year's service, that is, on 1 June 2023.
The plan text can provide for provisions that are more advantageous than the minimum requirements of the
Supplemental Pension Plans Act. For example, a defined benefit plan can offer an
indexed pension although there is no requirement to do so.
Acting with prudence, diligence and skill
The plan administrator must act as a reasonable individual would, including the following:
If it does not have the knowledge required to make an informed decision, it should consult an expert; the more limited its knowledge, the more important it is to consult.
In addition, the
Supplemental Pension Plans Act, provides that the plan administrator is presumed to have acted with prudence where it follows an expert's advice.
- If it is unable to carry out certain duties, it should entrust those duties to competent persons. It can do so by means of a mandate, a delegation or a service contract.
It must make decisions and take action at the appropriate time.
For example, the plan administrator must respect the time limits set by law. Where no time limit is imposed, it must act within a reasonable time frame.
It must adequately supervise the plan.
For example, the plan administrator must regularly monitor the pension fund's performance.
Pension committee members who have particular knowledge because of their profession or business experience must use such knowledge or experience. For example, a member who knows something about investing must help the other members select a competent expert in the field of investment.
Acting in the best interest of the plan's members and beneficiaries
The pension plan administrator must consider the best interest of the plan's members and beneficiaries as a whole, not favouring one group over another, nor acting in his or her own self interest.
Making decisions independently
It is important that each member of a pension committee makes their decisions independently. Each member does not represent the person(s) that appointed them.
Avoiding conflicts of interest
A pension committee member cannot exercise his or her powers in his or her own interest or that of a third party. He or she cannot place himself or herself in a position where his or her personal interest is in conflict with his or her obligations to the plan.
The pension committee must adopt, in its internal by-laws, the rules of ethics to which the committee members are subject, particularly with regard to conflicts of interest.
When a pension committee member has interest in a business that is likely to put his or her personal interest in conflict with his or her duties, whether or not the situation has monetary advantages:
- the member must declare in writing his or her interest to the pension committee
- the committee must keep a register in which any interests that are brought to its attention are recorded.
That interest does not prohibit the member from sitting on the pension committee. However, should the interest put the member in a potential conflict of interest situation, the committee should take the necessary measures to avoid the member from being in a real or apparent conflict of interest situation. The member should avoid participating in deliberations or the making of decisions regarding the interest.
In addition, when a member can assert rights in the pension fund or against it, other than the benefits resulting from the plan:
- the member must inform the pension committee in writing of his or her rights, their nature and value
- the committee must keep a register in which any rights that are brought to its attention are recorded.
At the annual meeting, the pension committee must allow for the employer, plan members and beneficiaries to be informed of the register in which the interests and rights are recorded.
2 helpful examples...
A member of the pension committee is an actuary. The firm for which he or she works is likely to obtain contracts from the pension committee. The member must inform the pension committee that the firm is his or her employer. The committee must enter that information in the register. When the firm is involved, for example, when the committee must choose who will produce the actuarial valuation, the member should not participate in deliberations or vote.
A member of the pension committee is an attorney who has, in the past, obtained a contract from the pension committee. Amounts are still owed to him or her for this contract. He or she must declare the claim, its nature and the amount to the pension committee, and the committee must enter that information in the register.