CHARLOTTETOWN, Prince Edward Island--Canadian pension plan sponsors want to aid members' retirement preparation, but they also want a legal shield similar to a relatively new law that protects U.S. sponsors, a consultant says.

Such a law could spur automatic enrollment in defined contribution plans and result in more advice to Canadian plan members on investment strategies, experts told the Assn. of Canadian Pension Management at its annual conference held Sept. 10-13 in Charlottetown, Prince Edward Island.

The Pension Protection Act of 2006 gave plan sponsors in the United States fiduciary relief in implementing automatic enrollment or automatic escalation provisions in their defined contribution plans, said Matthew Smith, managing director of Russell Retirement Services for Tacoma, Wash.-based Russell Investment Group.

A Hewitt Associates Inc. study shows more than two-thirds of 401(k) plans in the United States likely will have automatic enrollment by the end of this year, but the trend is unlikely to gain similar traction in Canada because there is no equivalent legislation to the PPA, said Zaheed Jiwani, head of DC investment consulting for Hewitt in Toronto.

Although Canadian sponsors want to help members better prepare for retirement, they "want some of the legal protections" available to their U.S counterparts, he said.

The PPA also encourages U.S. plan sponsors to implement automatic escalation provisions--or those that automatically increase the percentage of employee pay placed into a 401(k) as years of service increase. However, there is no legislation that would allow Canadian plan sponsors to utilize such a feature, Mr. Jiwani said.

In addition, maximum contribution levels are "significantly lower" in Canada than they are in the United States, which make automatic escalation provisions less beneficial to Canadian plan members, he said.

Canadian plan sponsors are adopting target-date funds, a rapidly escalating trend in the United States, he said. Currently, 57% of U.S. plan sponsors offer target-date funds--mutual funds that automatically shift toward a more conservative mix of investments as they approach a particular date--and that number will likely reach about 80% in 2008, according to the Hewitt study.

About 19% of Canadian sponsors of defined contribution plans now offer target-date funds, according to Hewitt. "We are seeing it trend upward and I suspect we'll see the number shoot through the roof over the next few years," Mr. Jiwani said.

Plan members want investment advice, something that Canadian plan sponsors have been reluctant to provide with less than one-third offering investment advice in any form, according to the Hewitt study.

"Members need guidance," Mr. Jiwani said. "They need some advice. Some members don't even know the difference between an equity and a bond."

The PPA allows U.S. plan sponsors to provide a fiduciary adviser, but Canadian plan sponsors lack the same legal protection, he said. "A lot of plan sponsors want to offer advice, but they also want that reassurance."

Canada's capital accumulation plan guidelines, which govern the rights and responsibilities of plan sponsors, merely say that a plan sponsor may choose to offer advice or provide the name of an adviser. If a sponsor does offer an adviser, it is the sponsor's responsibility to select and monitor the adviser, a "confusing" prospect for plan sponsors, Mr. Jiwani said.

The cost associated with offering advice to plan members is another uncertain issue. "The reality is members want plan sponsors to pay and plan sponsors usually want the members to pay," Mr. Jiwani said. "Until we figure out how that's going to work...we don't see this trend taking off."