Is Your Default Investment Option Appropriate For Your Employees?

Choosing a default investment option for employees is not easy. Employers who make an inappropriate choice could liable for damages. The Office of the Superintendent of Financial Institutions ("OSFI") recently issued a Guidance Note, providing assistance in this regard. The Guidance Note provides OSFI's interpretation and expectations relating to the requirements for the investment option selected by the administrator of a member choice account plan as the default investment option.

The federal pension benefits standards legislation imposes a statutory standard of care on pension plan administrators. Oftentimes, for single-employer pension plans, the employer is the plan administrator. This includes investing the assets of the pension fund in a manner that a reasonable and prudent person in respect of a portfolio of investments of a pension fund (the "Prudent Person Rule"). This also includes the plan administrator being required to use all relevant knowledge