OSFI Issues Guidance for Member Choice Defined Contribution Plans

The Office of the Superintendent of Financial Institutions (OSFI) has issued a guidance note with 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 Pension Benefits Standards Act, 1985 (PBSA) explicitly provides that, with respect to defined contribution accounts or additional voluntary contribution accounts in a defined benefit plan, a pension plan may permit members to make investment choices from among investment options offered by the plan administrator. However, if a member does not make an investment choice from among the investment options offered by the administrator, the investment option selected by the administrator as the default investment option will apply to the account of that member. Given the requirements of section 8 of the PBSA, the administrator must select a default investment option in accordance with the prudent person rule.

Plan administrators should pay particular attention to how the default investment option is described in communications to plan members.