A Capital Accumulation Plan (CAP) is a tax-assisted investment or savings plan provided by you (the plan sponsor) to your employees (the plan members), usually in the form of a DCPP, DPSP, group RRSP, IPP, or TFSA. Over the years, setting up a Capital Accumulation Plan has become increasingly difficult, creating new challenges for plan sponsors, such as: choosing the number, composition, and management of funds, monitoring fund performance, and making adjustments to the plan in tandem with the market.
- Your Limits: Courts are enforcing the once voluntary Guidelines for Capital Accumulation Plans (CAP Guidelines), giving them the effect of law. Employers are being sued for failing to meet their fiduciary responsibilities as outlined in the CAP Guidelines. Unless you are licensed to give advice on investments and insurance in Ontario, you are not qualified to advise your employees about their pension plan or group RRSP. The same is true of your HR department.
- Your Responsibilities: But as the fiduciary, you are responsible for ensuring that your employees understand the risks and rewards of the choices available to them. Balancing education and advice is difficult and can increase your liability, incurring unwanted litigation. The safest way to fulfill your responsibilities is to seek professional advice. Only a licensed and experienced insurance professional should manage your company’s retirement benefits
- Many group plans charge a deferred sales charge: Most group-RRSP’s are subject to a fee schedule, usually a 2-6% penalty on each withdrawal made before the plan matures. This schedule, called a deferred sales charge (DSC), decreases over time to zero, so that after six or so years your employees can draw on their investments without penalty. But your employees will continue to make contributions to their group-RRSP until they retire. Each contribution that they make has its own DSC schedule. After retiring, that means your employees will pay a DSC on the withdrawals they make for many years, reducing the precious amount of savings they have to live on.
These expenses, and failing to explain them to your employees, could cost you unwanted litigation as frustrated employees try to recover their unexpected losses.
Retaining valued employees in a competitive labour market is challenging. But it can become nearly impossible if blunders by you or your HR department cost you reputational damage and legal fees cut into your profit. With professional advice, you can navigate the new pension environment and avoid unwanted litigation. Your employees will be happier and more productive, and you will rest confident as we steer you safely through CAP Guidelines compliance.
Benefits of our managed plans
- Access to our professional staff for personalized investment advice to your employees
- Support to ensure compliance with CAP Guidelines and other regulatory requirements;
- Maintenance of your funds as the market fluctuates so that you can focus on what you do best; and,
- 15+ years of experience and the resources to continuously and effectively service your company
Plan sponsors can delegate their responsibilities to experts who understand the rules of capital accumulation plans. Reeves Financial Services will manage the entire plan. Through long-established relationships with our business partners, Reeves Financial Services can provide complete support to your team, including training, information, advice, tools, statements, and reports.
