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© Copyright 2000 Rogers Media. The following article first appeared in the February 2000 edition of
BENEFITS CANADA magazine.
Letters
COMING TO TERMS
Talk about striking a chord. Kevin Press's December editorial on the great pension terminology debate
(which umbrella term is correct--money purchase plan or defined contribution plan) has produced its first
batch of responses. So far DC is ahead by a two-to-one margin. E-mail your vote to kpress@rmpublishing.com.
I must admit to never having thought of colons of either type to any great degree before. A major sentence
error was a heinous crime, punishable by dangling your participles. And the whole idea of thinking about my
colon gives me gas.
Speaking of gas, the pundits who proclaim that the correct terminology is defined contribution
rather than money purchase must have little else to do than to think of such things. Tell Lori Bak
that in our part of the world clients understand the term money purchase just a little bit better
than they do defined contribution. They also understand positive rates of return, and frankly could
care less what kind of plan gave it to them.
Frank McKitterick, group insurance manager
RWAM Insurance Administrators Inc.
Elmira, Ont.
The umbrella term should be money purchase plan, not defined contribution plan. The ordinary
Joe has relatively little understanding of pension industry jargon and I have met quite a few who get
confused when they see the term defined as the lead word of a descriptor.
The term should describe what you get at the end, not how the contributions are made. In my view the
industry ought to clearly state what the product is that they are selling. You are either getting a block
of money to purchase a benefit, or your benefit is defined in a defined benefit plan, which I
believe would be the choice of the masses given a relative understanding of the benefits attributable to
each one.
John Irvine, special assignments officer, benefits
CUPE, Local 500
Winnipeg, Man.
I vote for defined contribution plan. It's more precise, easier to understand and better helps
employees distinguish those plans from defined benefit plans. I've often explained that a DB plan defines
the retirement benefit; what you'll get out while the DC plan only defines the annual contributions; what
goes in. How does one easily explain a money purchase plan? Is it money purchasing something, or
something purchasing money, or money purchasing money? Or all the above, for that matter?
Bruce Cohen
Udora, Ont.
I think the umbrella term should be defined contribution plan (not money purchase plan). A
money purchase plan is a type of defined contribution plan. Those are my two cents worth.
Catherine Mitchell, director, business development
Fidelity Group Pensions Canada
Toronto
The umbrella term is definitely defined contribution and includes group RRSPs. When you use the
umbrella term money purchase plan, it totally confuses me. I look forward to seeing a change soon!
Trish Reid, sales alliances and institutional services
Trimark Investments
Toronto
I have to agree with the response of "a few key industry players" that the correct umbrella term is
defined contribution plan.
You should note that this terminology is used in the Mercer Handbook (page 14) and in the CEBS
program that is sponsored by Dalhousie University and the International Foundation of Employee Benefit
Plans. (I was the co-author of Course IV--Pension Plans and Other Retirement Income Arrangements.)
Bryan Belyea, senior industry advisor
CEBS
Scarborough,Ont.
CORRECTION
In the December 1999 issue's Insights department, a sentence was inadvertently omitted from Marcia Lewis
Brown's "Debunking the myths of passive management" (page 17). Myth No. 1 should have read: "Active
management is preferable to indexing because indexing requires that you be fully invested. This hurts you
in down markets."
Brown's point is that passive investors are not necessarily hurt in down markets. Indexing does require
full investment, but it does not hurt the investor over the long run.
Also in the December 1999 issue, the Money Purchase Plan Report included incorrect assets under investment
management figures for Phillips, Hager & North Investment Management Ltd. The firm has $5.8 billion in
total money purchase assets under management, not $25.7 billion as had been reported.
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