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© Copyright 2000 Rogers Media. The following article first appeared in the November 2000 edition of
BENEFITS CANADA magazine.
Industry
By Andrea Davis
OSC/FSCO merger questioned
The Ontario government has released a discussion paper on the proposed merger between the Ontario
Securities Commission (OSC) and the Financial Services Commission of Ontario. Improving Ontario's Financial
Services Regulation: Establishing a Single Financial Services Regulator outlines how the new body would
operate.
According to the paper, the Ontario government's "intent is to introduce legislation in the upcoming fall
session of the legislature to merge the Ontario Securities Commission and the Financial Services Commission
to create the Ontario Financial Services Commission--a new, more effective financial services regulator
that will have the tools to promote a healthy environment for business activity, financial market integrity
and consumer, investor and pension plan member confidence and protection."
Key points in the discussion paper include:
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The new commission, to be called the Ontario Financial Services Commission, would have decision-making,
rule-making and adjudicative powers, similar to the current OSC.
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It would be accountable to the Ontario minister of finance and be composed of at least nine, but not
more than 18 members, appointed by the lieutenant governor in council.
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A separate pension tribunal is also proposed, of which at least three members would also be members of
the new merged commission.
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The pension tribunal would only have adjudicative authority. For pension hearings, the panel would be
chaired by a member of the commission who is also a member of the pension tribunal.
Some players in the industry, however, have concerns about the merged entity and its focus on rule-making
authority.
"I question whether that's an appropriate authority to give the supervisory authority in the context of the
pension field," says Lyle Teichman, lawyer and consultant with Towers Perrin in Toronto. "The proposal
leaves open the possibility of having rule-making authority extended to a wide area of regulatory
issues--not just procedural issues, but substantive issues, including wind-ups, surplus issues, marriage
breakdown issues, employer funding obligations, methods of calculating assets and liabilities under pension
plans and circumstances under which you can withdraw assets from a prescribed retirement arrangement."
In addition, Teichman doesn't believe the new body will actually simplify regulation.
"I think in some ways it will make regulation more complicated because it's not moving in the area of
harmonized and uniform pension legislation. It moves away from that," he says. "So I don't think it will
achieve the objective of simplicity from the perspective of plan sponsors."
The paper says the new commission will "create a more level playing field for financial services products
and institutions."
Teichman questions the validity of levelling the playing field between plan sponsors--who voluntarily offer
pension plans--and other industry players who need access to capital markets for the purposes of raising
money for their businesses.
"Plan sponsors already have fiduciary obligations to act in good faith and avoid conflicts of interest. So
the common law and the regulatory environment we have [now] already provide a suitable measure of
protection for the consumers of the pension plan services--the employees," he says. "Whereas corporations
trying to raise capital on the stock market don't have these same fiduciary standards to live by."
Some plan sponsors are concerned about the merger as well. The discussion paper calls for the
superintendent of the new body to be appointed from among the commission members.
"If the superintendent, acting in their normal management role, makes a decision and there's an appeal
through the pension tribunal, how could the commission be independent if the superintendent is one of its
members?" says Joyce Stephenson, director, pensions with Maple Leaf Foods Inc. in Toronto. "To me, it's
poor governance and compromises the independence of the commission."
Stephenson also expresses concern about the proposed pension tribunal. The discussion paper makes no
mention of what kind of industry experience might be necessary to sit on the tribunal.
"The pension tribunal that's proposed would have at least three members who would also be members of the
new commission," she says. "And the concern I have is that nowhere do they [the government] talk about
people with pension expertise. What's the purpose of having a separate pension tribunal if the people
sitting on it don't have pension expertise?"
As for the new commission's impact on defined contribution plans, which are not currently subjected to the
same strict regulatory requirements as defined benefit (DB) plans, Teichman says it's too early to tell.
"It may provide impetus for employers to switch from DB registered pension plans to group registered
retirement savings plans. It depends on how far the supervisory authority extends," he says.
Healthcare innovators celebrated
Innovative leaders in Canada's healthcare industry were honoured last month by BENEFITS CANADA's sister
publication, Canadian Healthcare Manager(CHM).
"The Who's Who in Healthcare award winners share a real passion for their work and the healthcare system,
and they have strong opinions on what's positive and what needs to be changed in the system," says Robin
Kalbfleisch, editor of CHM. "They have all stuck their necks out and said 'why don't we do it this
way, why don't we change this?' "
This year's winners in the second annual Who's Who in Healthcare are: Richard Alvarez, president and CEO of
The Canadian Institute of Health Information, Toronto, in the government category; Jim Norton, senior
vice-president, health strategies with Aon Consulting, Toronto, in the group insurance category; Shirlee
Sharkey, president of Saint Elizabeth Health Care, Toronto, in the healthcare provider category; Michel
Bilodeau, president and CEO, SCO Health Service, Ottawa, in the hospital management category; Dr. John
Foerster, director of St. Boniface General Hospital Research Centre, Winnipeg, in the medical research
category; Sanjiv Sharma, director of market access strategic planning for Aventis Pharma, Montreal, in the
pharmaceutical category; Gretchen Van Riesen, senior director of pension and benefits policy at the
Canadian Imperial Bank of Commerce, Toronto, in the plan sponsor category; and Brenda Rusnak, founder of
Active Health Management, Toronto, in the technology category.--Kathryn Dorrell
Exchange-traded funds launched
Exchange-traded funds seem to be gaining in popularity, with State Street Global Advisors launching a new
product last month and BGI Canada announcing it has filed prospectuses with securities regulators for six
new funds.
Exchange-traded funds track indexes and are bought and sold by brokers and dealers on behalf of
institutional and retail clients. They're traded on the Toronto Stock Exchange (TSE) in the same way as
equities and price is determined by the market.
"It's a great way for institutions to move in and out of the market quickly with very little market
effect," says Gus Fleites, principal director of exchange-traded funds for State Street Global Advisors in
Boston, Mass. "From the institutional perspective, it's a cash liquidization vehicle. For institutional
managers who have to deal with cash flows, or active managers, it's a way to have the money work for them
at a low expense ratio." The management expense ratio for State Street's new Dow Jones Canada 40 Index
Participation Fund is eight basis points. The fund has approximately $450 million in assets.
Barclays Global Investors (BGI) Canada, meanwhile, has announced plans for six new exchange-traded funds
based on Standard & Poor's/TSE indexes. New funds include the iEnergy Fund, based on the S&P/TSE
Canadian Energy index; the iIT Fund, based on the S&P/TSE Canadian Information Technology index; the
iGold Fund, based on the S&P/TSE Canadian Gold index; the iFin Fund, based on the S&P/TSE Canadian
Financials index; and the i60C Fund, based on the S&P/TSE 60 Capped index.
"Our strategy is to provide flexibility and choice for Canadian investors, both institutions and
individuals," says Steve Rive, general manager, iUnits division at BGI Canada in Toronto.
The firm has filed a preliminary prospectus with the securities commissions and other regulatory
authorities in each of the provinces and territories. Rive says he expects the new funds to be available to
investors by the end of the year.
Wellness waning
Corporate Canada scores low on workplace wellness, according to a new survey on the subject. Of 414
Canadian companies surveyed, only 17.5% offer a comprehensive workplace wellness program.
"That [poor performance] speaks volumes about the extent to which employers are taking this seriously,"
says Ed Buffett, president and chief executive officer of Buffett Taylor & Associates, the firm that
sponsored the study.
Stress is a big concern for companies, with 83% of respondents ranking it as the biggest health risk to
their organization, followed by smoking (57%), being unable to balance work and family (55%) and feelings
of loss of control over work schedules and environment (53%). The results are from the Buffett Taylor
National Wellness Survey Report 2000.
Other findings include:
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64% of companies surveyed offer some kind of wellness activity such as smoking cessation programs,
stress management seminars or ergonomic clinics.
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Among those companies offering wellness initiatives, 27% consider healthy employees a valuable asset;
26% want to promote a healthy lifestyle; 14% want to reduce absenteeism; 10% want to contain benefits
cost; and 3% implement wellness initiatives to improve their corporate image.
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Among those employers not offering a comprehensive program, the top three reasons cited for not doing
so are lack of budget (41%), lack of staff resources (39%) and concerns over the cost of a wellness
program (32%). Another 37% say they don't know if their firm measures the impact of such programs.
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Among those plan sponsors who do offer wellness initiatives, 39% say they don't evaluate the success of
their programs.
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55% of employers surveyed cited the prospect of healthier and more productive employees as the main
factor that would (or did) prompt them to implement a workplace wellness program. Improved employee
morale was the second factor, cited by 17% of respondents, while 15% cited the impact on long-term
healthcare costs.
"There's certainly a heightened awareness about workplace wellness and health promotion that simply didn't
exist when we did the initial survey two and a half years ago," says Buffett. "In that respect, I see it as
a positive."
Buffett says the results of the survey point to the fact that employers are still having a difficult time
making the business case for employee wellness.
"Personally, I think it's an easy case to make, once you've done your homework," he says. "But unless
you're thorough and really dig into this stuff, it has a tendency to be viewed by those at the senior
management level as being touchy feely stuff that's the first to go when times get tough."
Goodman goes back to roots
Industry veteran Ned Goodman is coming back to his institutional money management roots with the launch of
Goodman Institutional Investments.
"What we're looking at doing here is creating an institutional investment firm to service the North
American institutional market with a broad range of investment services, including innovative products that
aren't in the market yet," says Wendy Brodkin, president, Goodman Institutional Investments in Toronto.
"People like John Templeton and Warren Buffett established investment principles. Thirty years ago the
concept of diversification wasn't ingrained, buy low, sell high wasn't ingrained. There are new investment
principles for the next decade and that's what we want to build."
Brodkin joins Goodman Institutional Investments from Gluskin Sheff & Associates. She is currently in
the research and product development stage, drawing on the resources of the Dundee companies, which include
Dundee Bancorp, Dynamic Mutual Funds, Dundee Securities, Dundee Private Investors, Dundee Insurance Agency
and Goodman & Company Investment Counsel. Brodkin expects the new company to officially launch next
June.
"If we can define 10 new investment principles and build services around that, it will be truly innovative.
And I think that's what the industry needs right now," she says.
Sun Life opens real estate sub.
un Life Assurance Company of Canada has established a real estate advisory subsidiary. Sun Life Financial
Realty Advisors Inc. offers an open-ended pooled vehicle and customized segregated pools. Services include
real estate portfolio advice, asset and property management and asset construction and development
management.
"We believe real estate is a key component of a well-diversified investment portfolio, a view which is
supported by the recent activity among the major pension funds in Canada," says Philip Gillin, president,
Sun Life Realty Advisors.
Peter Andrews joins the new subsidiary as vice-president, business development. Wayne Walton rounds out the
new management team as vice-president, acquisitions. Previously, he was director, real estate investments
with Sun Life Assurance Company of Canada.
ESI Canada to acquire CAPSS
harmacy benefits manager (PBM) ESI Canada announced plans today to acquire Montreal-based PBM Centre
d'autorisation et de paiement des services de santé (CAPSS).
The move will net ESI Canada an additional 1.5 million lives, representing a 75% increase in business. The
deal gives the company its first operational presence in Quebec. The firm will open offices and a call
centre in Montreal to service CAPSS's Quebec customers.
"We entered this agreement with full confidence that our plan members will continue to receive excellent
service and CAPSS carriers will benefit from access to ESI Canada's world class technology and services
across Canada," says Camille Fortier, president of CAPSS.
She says the deal will not cause any changes to employers, associations, unions or CAPSS plan members.
The two companies have had a collaborative relationship since 1998, when CAPSS began using ESI Canada to
process its prescription drug claims outside Quebec.
Vets' money mismanaged
ttawa has been found guilty of mismanaging billions of dollars in the pension and benefits money of
thousands of disabled war veterans.
The Ontario Superior Court said Ottawa failed to pay interest on veterans' military and old age pensions
and disability benefits until 1990. In some cases, Ottawa improperly confiscated the accumulated money when
veterans--many of whom were disabled or suffered from mental illness--died. It also failed to inform their
beneficiaries or heirs.
The government estimates that about 10,000 First and Second World War veterans were affected. benefits
canada law columnist Murray Gold will analyze the implications of this ruling in next month's
issue.--Kathryn Dorrell
LTD costs up by 8%, study says
he cost of employee absenteeism has jumped to 7.1% of payroll from 5.6% in the past three years. The
average direct cost of employee absenteeism in Canada now stands at $3,550 per employee each year,
according to Watson Wyatt & Company.
The 2000 Canadian Staying@Work survey polled 281 organizations on the effectiveness and costs of their
absence and disability management programs, and compared the findings to a study conducted in 1997. This
year's survey reports that direct and indirect costs combined account for a whopping 17% of payroll.
Long-term disability (LTD) costs have increased by 8% since 1997, while short-term absence costs as a
percentage of total payroll costs have more than doubled, rising to 4.2% from 2% in 1997.
"These findings represent a pressing need for action by employers to contain the rising costs of employee
absenteeism," says Jane Petruniak, senior consultant with Watson Wyatt. She adds that the situation will
only worsen as the population ages and employers face increased pressure to implement work/life balance
policies.
Plan sponsors can play an active role in curbing their disability and absenteeism costs however. The study
found that organizations with low disability costs conducted independent medical evaluations as well as
offering employee assistance and work-life balance programs.
"The answer lies in a combination of culture and benefits," says Petruniak. "One good solution is a nursing
hotline combined with access to emergency daycare services and flexcare. Many employee assistance programs
are now starting to offer these services."
Petruniak adds that one of the most important things organizations can do to remedy absenteeism issues is
to have an open dialogue about how they can accommodate employees.--Kathryn Dorrell
T+1 effort to cost big bucks
he Toronto Stock Exchange says it will take hundreds of millions of dollars to gear up for one-day trade
closing (T+1) that it plans to implement in June 2004, in-step with the U.S. securities industry.
In Canada, the effort--which will reduce three-day delays on institutional trades and cut the risk of a
trade failing--will cost more than the entire industry spent preparing for the Y2K bug.--Kathryn Dorrell
Canagex changes name
ontreal-based money manager Canagex has changed its name to Elantis Investment Management Inc. The firm,
ranked No. 28 in this year's Top 40 Money Managers report, has $4.6 billion in assets under management. The
name change comes just a few months after the firm inked a partnership deal with U.S.-based Sanford C.
Bernstein & Co.
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