That was a key assertion in a new report by a Toronto-based public policy research organization C.D. Howe Institute. The report contends that Canadian organizations are hamstrung in their ability to field the most robust retirement plan for fear of participant lawsuits.
“Money purchase arrangements, and group registered retirement savings plans in particular, are where many, perhaps most, Canadians will do most of their retirement saving for many years to come,” the Howe Institute said in the report. “Their situation is far from ideal, and to let fear of litigation paralyze employers who would like to improve it is unwise.”
Plan features that sponsors could more effectively address with safe harbor protections include, according to the Howe report:
- Automatic enrollment to help beef up participation rates;
- Auto deferral increases with a participant opt-out provision that could start at a lower initial rate and automatically move up at regular intervals;
- Life cycle portfolios or lower-cost investment vehicles to deal with the problem of unwise investment decisions by participants;
- A default annuitization option to help combat premature account withdrawals; and
- A provision for group and individual advisory services to help guide employees to better savings decisions.
.”A reasonable near-term step for policymakers motivated to improve the situation would be legislative or regulatory endorsement of the Capital Accumulation Plan Guidelines as a safe harbor for employers. Giving the guidelines such standing would mean that they no longer raise the fiduciary bar without providing protection,” the report said. “It would also spur employers to ensure that their plans are up to standard – a desirable outcome since the problems surveyed in this paper guarantee that the design and governance of most such plans in Canada could improve.”
The report is here .