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© Copyright 2000 Rogers Media. The following article first appeared in the February 2000 edition of
BENEFITS CANADA magazine.
Industry
By Andrea Davis
To contribute, call (416) 596-5998, or FAX 596-5071
Nova Scotia to regulate structured group RRSPs
The superintendent of Nova Scotia pensions has announced that structured group registered retirement
savings plans (RRSPs) that contain employer mandated restrictions will now be considered pension plans.
That means that such plans, which until now have existed outside the scope of pension legislation, will
have to register with the superintendent.
According to Nancy MacNeill Smith, superintendent of Nova Scotia pensions, the move is a simple recognition
of the fact that many structured group RRSP plans are in essence pension plans.
"If it meets the definition of a pension plan, we're saying it's a pension plan and not a group RRSP," says
MacNeill Smith. "We're not doing anything different. All we're saying is that if there are pension plans
out there that you happen to be calling structured group RRSPs, then those really should be registered."
Many group RRSPs put restrictions on the members of the plan, such as locking in, which, in MacNeill
Smith's opinion, makes them pension plans.
"Once the employer starts putting conditions on and restrictions on group RRSPs, that's when legislation is
needed to protect the employees because they've lost control," says MacNeill Smith. "Group RRSPs, where the
employer makes contributions, are still not pension plans. But when the employers are imposing restrictions
on the funds to such an extent that they say the money is locked in and can only be used to provide a
pension retirement, it becomes a pension plan."
For MacNeill Smith, the decision to do this was motivated by concern about her responsibilities.
"I've gotten a fair number of complaints from employees about their group RRSPs that employer contributions
weren't being remitted," she says. "And I have to say, if it's a group RRSP, I can't do anything about it
but if it's a pension plan, I can."
No one can say for sure how many structured group RRSPs there are in the marketplace but MacNeill Smith
thinks there could be as many as 200 of them in Nova Scotia.
Greg Hurst is a pension consultant at Heath Benefits Consulting in Vancouver. He says the number of
structured group RRSPs across Canada could be in the thousands.
"Recently there is news out of Stats Canada that the contributions to pension plans are on the decline, yet
we all know that RRSP savings have been growing rapidly. Much of those savings are going into these kinds
of plans," says Hurst.
Hurst says MacNeill Smith's action was necessary to correct a failure on the part of the industry. "The
regulators have quite reasonably depended upon the industry to engage in self-compliance and that hasn't
happened," he says.--Jeff Sanford
Shake up at Comstat
Barry Hitchens, founder of performance measurement and asset management consulting firm Comstat Capital
Sciences in Vancouver, has sold out his share of the company to a group of investors.
The group, made up of four individuals, three of whom are current employees of Comstat, will take over
Hitchens's 65% stake in the firm.
One of the four, Andrew Dawson, will take the lead as chief executive officer. Hitchens will still be a
familiar face around Comstat as chairman emeritus.
Along with his continued role as asset consultant of record, Hitchens will attend to 25 of the firm's
select clients, publish the company's quarterly newsletter and oversee the launch of a Web site that will
enable pension plan trustees to search for their next asset manager.
"There are approximately 100 investment mandates I've identified," says Hitchens with respect to the new
Web venture. "For each of these mandates, Comstat will provided five manager recomendations so that a
vice-president of finance will be able to pull down a short list."
The site is expected to be up by the end of March.
As he prepares to hand over the reins, Hitchens is eager to make a few predictions about the direction of
the industry.
He estimates that more than 50% of Canadian pension plan sponsors do not have a serious performance
measurement purveyor. And if they do, performance is often measured according to benchmarks, a method
Hitchens calls useless, especially in the current market.
"1999 is the classic example of the fallacy of using indexes and the appropriateness of using peer group
comparison," says Hitchens. "The TSE 300 is a capitalization-weighted index and as we know the TSE achieved
a 35% return."
But when heavy hitters like Nortel and BCE are removed from the index, Hitchens says, the return of the
other companies that make up the index is actually negative.
"So all of this benchmarking is completely erroneous," he says.
Hitchens attributes the heavy reliance on benchmarking to the American consultancies, who do not have
access to comparative databases.
"Much of that [benchmarking] work will be on the rocks and in shambles next year when boards come to look
at their benchmark against the Toronto Stock Exchange 300 composite index, or the Morgan Stanley Capital
International bond index and wonder why their fund is performing so poorly, when in fact, comparatively
they're in the second quartile when compared against a peer group," says Hitchens.
"I would think in this year there is going to be a migration back to the valid principles and precepts of
comparative analysis," he says.
--Jeff Sanford
TAL joins with Tremont to offer hedge funds
TAL Global Asset Management has announced that it is forming a joint venture with New York-based investment
firm Tremont Advisors to manage and develop hedge funds for the Canadian market.
TAL has signed a letter of intent with Tremont that allows TAL access to Tremont's experience in the
developed U.S. hedge fund business, says Gordon Fyfe, president of TAL International.
"What we're doing is creating a range of products that will be able to strip out the market and simply
collect together the value added from the managers," says Fyfe. "There are a lot of hedge funds, or
alternative investments, over 2,000. TAL does not have the expertise to follow all of those managers so we
went looking for a partner who could be the expert in these different managers."
Pointing to the U.S. experience, Fyfe is confident new hedge fund products will take off in Canada.
He predicts that retail investors will adopt hedge funds first, with institutional investors following in a
couple of years.
"Some clients, like our private clients, will adopt it very quickly. Some of our other clients, like the
institutions, will be slower," he says.
Fyfe believes hedge funds will become more popular when the next bear market hits.
"When everyone gets worried that their returns aren't 20%, or even 5% but negative, I suspect that that's
when it will happen," says Fyfe.
--Jeff Sanford
Eaton's employees'
benefits restored
Eaton's employees who lost their health benefits in Eaton's financial meltdown will see some of those
benefits restored, at least until September.
Susan Philpott, a lawyer with Koskie Minsky in Toronto, the firm which filed court proceedings against both
Imperial Life and Eaton's on behalf of the employees, says the parties came to an agreement in December to
continue payment to Eaton's employees until the end of September.
Since Eaton's filed for protection under the Companies Creditors Arrangement Act, former employees of
Eaton's haven't been receiving their benefits.
Imperial Life Insurance Co., the administrator of the program, had been refusing to process the claims of
Eaton's employees because it said Eaton's was in arrears on its payments to Imperial.
Under the agreement, all Eaton's employees in the benefits plan at the time the retailer filed for
protection will have their drug expenses covered until September. The deal also applies to about 160
members of the Eaton's long-term disability plan who have been struggling since they stopped receiving
benefits.
"Their long-term disability income hasn't been restored, but their benefits to the end of September have
been," says Philpott.--Jeff Sanford
New investment
body in B.C.
The assets of British Columbia's public sector employees entered this millennium under the control of a new
investment body.
On Jan. 1, the Office of the Chief Investment Officer of the Province of British Columbia was replaced by
the the new British Columbia Investment Management Corporation (BCIMC).
The BCIMC, a Crown corporation of the B.C. government, is legislatively similar to the Ontario Municipal
Employees Retirement System. It will manage the $54 billion in assets owned by B.C. public employees.
The former employees of the Office of the Chief Investment Officer have moved to the BCIMC, created by an
Act of the B.C. legislature to allow for joint employer/employee trusteeship.
The new governance structure will have a seven-person board--six members will come from public sector
stakeholders like municipalities, colleges and B.C. Hydro--while the seventh member will be the deputy
minister of finance.--Jeff Sanford
Caisse assets reach
$100 billion
Quebec municipal employees should be feeling particularly well off this year as their pension fund
management company, the Caisse de dépot et placement du Québec, has announced that the
institution ended 1999 with over $100 billion in total assets.
Last year marked a shift in direction for the Caisse that has seen it diversify into new areas of asset
management. The resulting look of the Caisse is an organization that acts as much as a typical financial
services firm than as a pension fund manager. New on the Caisse's list of business areas are consulting and
management services.
In a partnership with Mouvement Desjardins, the Caisse has leveraged its depth of asset management
experience by acting as a mutual fund manager. In 1998, the Caisse launched the Asia Equity Infrastructure
Fund, which it manages for a global roster of clients including the Asian Development Bank, Axa Asset
Management of France and Nippon Life of Japan.
The Caisse also launched commercial mortgage-backed securities worth $254.1 million in 1999 and a bond
portfolio worth close to $4 billion by the end of the year.--Jeff Sanford
Manulife launches group benefits Web site
Manulife Financial has made the jump to cyberspace with the launch of a Web site for members of its group
benefits plans.
Plan members logging onto the site will have a personal "view" served up to them from the Manulife
computers.
"The site will register who the visitor is from their personal identification number and then serve up that
individual's particular plan information. For example, if the dental coverage is 80% of that plan member's
account then that's what the screen will show them," says Steve Knapp, Manulife's product director for
group marketing.
The site also includes an educational component with a set of glossary terms. Information about specific
drug or dental procedures is linked to documents with information on the drug or procedure.
But the real strength of the site, says Knapp, is in its facilitation of customer service.
For example, members can view their claims online for the last six months.
"If the customer has a question about one of their claims, they simply click on that claim to send an
e-mail to administrators with the question and the relevant information about that claim attached," says
Knapp.
According to Knapp, delivering benefits servicing online is still in its infancy. The next step is to
expand the scope of the site to include vision care and more unusual health claims. Eventually, says Knapp,
he hopes to automatically manage flexible benefits plans through the site.
--Jeff Sanford
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