With pension-related litigation on the rise, employers who offer defined-contribution plans and group RRSPs require safe harbours, or legal protection, for good-faith actions to foster smart employee choices. Without such protection, the continued availability of these plans to employees is at risk, says a new analysis by the C.D. Howe Institute.

In the study, “Safe Harbours: Providing Protection for Canada’s Money-Purchase Plan Sponsors,” William Robson, president and CEO of the institute says employers who would like to encourage their employees to save, invest and withdraw more wisely in defined-contribution pension plans may nevertheless pull back for fear of lawsuits.

Safe harbours for such employers could improve the outlook for Canadians who will do most of their retirement saving in such plans, he says.

To illuminate where safe-harbour provisions might help plan sponsors, Robson reviews several common problems in self-directed retirement saving — and ways plan sponsors might mitigate them.

Legal problems could arise for employers who, in good faith, encourage potential participants to join, save more, invest in lower-cost vehicles, or cash out in certain ways — in each case, a disappointed ex-employee might argue that the employer’s actions had caused harm.

Robson identifies ways to address potential legal problems with safe harbour provisions.

The study is available at http://www.cdhowe.org/pdf/backgrounder_110.pdf.