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Earlier this year, Joe wrote about the governance issues at the CAAT Pension Plan in his blog, CAAT – Trouble in Paradise. It was a pointed piece – appropriately so. The facts then available raised obvious questions about executive compensation, workplace relationships, Board oversight, leadership turnover, and trustee oversight in a large, complex, high-profile pension plan.

Joe’s blog framed the issue as a governance story, not a funding story. That distinction remains important.

CAAT has now issued a letter to members and employers following the conclusion of an independent governance review. The letter outlines several governance enhancements, including stronger succession planning, additional oversight of CEO and senior executive compensation, updated workplace relationship policies, clearer application of HR policies to all employees, continued review of trustee skills and experience, and recent changes to Board and executive leadership.

This is welcome progress. But it is also fair to say that trust in governance takes longer to rebuild than it takes to issue a letter.

This is not about financial weakness

The first point should be stated carefully: CAAT’s public reporting presents a financially strong picture.

CAAT reported a 124% funded status on a going-concern basis as at January 1, 2026, $25.4 billion in assets, and $6.7 billion in funding reserves. CAAT also reported a 9.6% annualized net return over the past 10 years and an 8.4% net return for 2025.

Those are strong numbers, and they matter. Pension promises require assets, a sustainable funding policy, disciplined investments, and enough margin to absorb future surprises. At the same time, the reported margin should not be treated as self-explanatory. Its adequacy depends on the assumptions, stochastic modelling, funding objectives, and risk measures behind it.

But financial strength and governance strength are not the same thing.

A well-funded plan can still have governance problems. A strong investment program can still have weak controls. A pension organization can deliver good long-term results and still need to improve how decisions are overseen, documented, explained, and challenged.

That is not a contradiction. It is the nature of pension governance.

The dust may be settling, but it has not fully settled

CAAT has taken several visible steps since the original concerns became public, including leadership and Board changes, the CEO’s departure, repayment of the 2025 vacation payout, a new senior leadership team, and a formal search for its next permanent CEO. Those steps matter. They show CAAT is not pretending nothing happened. But they also point to an organization still working through significant transition.

The next permanent CEO appointment will be especially important. CAAT has said the search is focused on a leader who can combine strategic vision with operational discipline, inspire stakeholder confidence, and build on CAAT’s culture and performance. That sounds right. The next CEO will need to run a large pension organization while also helping rebuild confidence internally, with employers, with members, and across the broader pension community.

Transparency is improving – and should improve further

One encouraging part of CAAT’s response is its increased attention to transparency. The Board’s letter says CAAT has strengthened oversight of CEO and senior executive compensation and made executive compensation more transparent through its 2025 Annual Report and planned compensation disclosure. That is positive, but CAAT should not stop there.

Large pension plans operate with a significant public-interest dimension, even when they are not government agencies. Members and employers fund these plans, and members rely on them for retirement security. Many large pension plans in Canada already provide detailed public disclosure of compensation for their top executives. CAAT is not a public company, and members are not shareholders, but that does not make transparency less important. Their protection comes from strong trustee oversight, clear policies, and enough public disclosure to understand whether compensation decisions are reasonable, disciplined, and aligned with the Plan’s long-term interests.

CAAT does not need to copy any one organization exactly. But for a plan of CAAT’s size, profile, and growth ambitions, fuller disclosure would be healthy. Not because compensation must be low – running a large pension plan requires specialized talent, and specialized talent costs money – but because compensation must be explainable, carefully governed, and clear enough that stakeholders do not have to guess how major pay decisions are made.

Expenses deserve the same discipline

It is useful that CAAT has again shown investment returns before and after expenses near the end of its annual report. That helps stakeholders understand both the cost of investment management and plan administration, and the value delivered after those costs are paid.

Net returns are ultimately what matter for pension funding. A high-cost investment program that delivers strong net returns can still be worthwhile. But that does not mean costs stop mattering.

Pension plans should be efficient. Expenses should be controlled. Complexity should earn its keep. Every dollar spent on administration, investment management, compensation, consultants, systems, communications, or governance comes from the pension fund. Sometimes that spending is necessary and valuable. Sometimes it is not. The only way to know is to measure it, challenge it, and report it clearly.

Trustee education is not optional

One of the broader lessons from the CAAT situation is the importance of trustee education.

Trustees do not need to become actuaries, investment managers, lawyers, accountants, HR specialists, and compensation consultants all at once. But every board of trustees needs enough pension-specific education to ask good questions, understand the answers, and recognize when an issue is more than routine administration.

That education should include funding basics, investment risk, benefit design, legal duties, conflicts of interest, executive compensation, succession planning, expense oversight, stakeholder communications, and pension operations. For large jointly sponsored plans, the bar is higher because the decisions are larger, the stakeholders are broader, and the reputational consequences of poor governance are more significant.

The danger in any successful organization is that success can make challenge feel unnecessary. If returns are strong, funded status is strong, membership is growing, and the organization is widely respected, it becomes easier to assume that management has things under control. Often they do. But good governance is not based on assuming management is right. It is based on respectful challenge, informed oversight, and clear accountability.

That is not adversarial. It is the job.

Due diligence still matters before joining any pension plan

None of this means CAAT is a bad option for employers.

For some employers, CAAT may be a good answer. It can offer access to a large, professionally managed pension arrangement, with risk pooling, established administration, and a benefit design that may be attractive to employees. Many employers do not want to run a stand-alone pension plan, and for good reason. Governance, administration, investment oversight, funding risk, member communication, and regulatory compliance are not small jobs.

Employers should undertake meaningful due diligence before joining any arrangement. They should understand the contribution requirements, benefit design, funding policy, governance model, decision-making authority, expense structure, communication obligations, risks, limitations, and long-term implications for both the employer and employees.

In plain English: do not join because it is easy to explain in a sales deck. Join because, after careful review, it is the right answer for that employer and its employees.

The pros and cons will not be the same for every organization. A solution that works well for one employer may not work as well for another. It is not about being anti-CAAT or pro-CAAT. It is about making a thoughtful decision.

Governance trust is earned over time

CAAT’s recent governance letter is a useful step. The public financial metrics appear strong, while still requiring context about the assumptions and risk measures supporting them. The Board has acknowledged the need for improvement, leadership changes have been made, a permanent CEO search is underway, and transparency appears to be improving.

These are all positives.

But trust is not rebuilt by announcing a governance review. It is rebuilt by what happens after the review: consistent decisions, clearer disclosure, stronger controls, better oversight, and a willingness to keep improving after the headlines fade.

FSRA’s role also matters. CAAT’s March announcement thanked the Financial Services Regulatory Authority of Ontario for its “constructive engagement,” and earlier media reporting indicated that FSRA was reviewing the situation for potential governance failures. While regulators cannot always speak freely about specific supervisory activity, some principles-based public communication would be helpful. A high-profile governance issue at one of Ontario’s largest pension plans is an opportunity to reinforce that governance, conflicts, compensation oversight, risk management, and member confidence are central to pension regulation.

That may be the most useful lesson for the rest of the pension community. Good governance is not measured only when things are calm. It is tested when something goes wrong, personalities are involved, decisions are uncomfortable, past practices need to be challenged, and the board must decide whether it is truly exercising oversight or simply endorsing management’s recommendations.

CAAT has an opportunity to show that it has learned from this period. Given its size, growth, and profile, that matters not just for CAAT members and participating employers, but for the broader conversation about large pension plans in Canada.

The plan appears financially strong. Now the harder work is making sure the plan’s governance becomes just as strong.