©  Copyright 2002 Rogers Media. The following article first appeared in the January 2002 edition of BENEFITS CANADA magazine.

Sun Life Financial Services of Canada Inc. is hoping Clarica Life Insurance Co.'s shareholders will approve a friendly takeover bid that would see Clarica become a wholly-owned subsidiary of Sun Life. The combined operation would be No. 1 in Canada, based on total revenues in both the group life/health and retirement markets.

The deal isn't expected to be approved until the spring, though, leaving the door open for another offer to win over investors.

There are mixed reviews on the impact of a large industry merger on plan sponsors. Mary De Paoli, vice-president of national marketing and sales with Sun Life's group retirement services in Toronto, maintains it will allow more investments in technology and product development. "We will operate with better economies of scale that will lead to better pricing propositions," she adds.

Jane Petruniak, a senior consultant with Watson Wyatt Canada in Toronto, is less optimistic. "There is less choice for employers. If a plan sponsor isn't happy with their provider, they are looking at this, shaking their head, and asking: 'where do I go now?' " Petruniak concedes that the deal will create "a greater opportunity for niche operations to stand out."

Rick Headrick, an investment consultant with Hewitt Associates LLC in Toronto, says the deal's impact on competition depends on the strategy Sun Life adopts for Clarica. He says both firms serve different ends of the benefits and retirement market. "If this is the case going forward, there may not be less competition."

Clarica and Sun Life will maintain separate brands until the integration is complete in 18 to 24 months. But Donald Stewart, chairman and chief executive officer of Sun Life, could not comment on what would happen if and when the merger was finalized. "We are still deciding how that will play out."

--By Kathryn Dorrell

A new report on Canada's private equity scene calls pension funds a "powerful force" in this market. The study, Canada's Private Equity Market in 2001, by the Toronto law firm Goodman and Carr LLP and Macdonald & Associates Ltd., also of Toronto, tracks trends in the market during August and September 2001.

Of all parties surveyed, assets total $23.5 billion, with 46% coming from venture capital. Kirk Falconer, director of research and analysis with Macdonald & Associates, says when actual assets are taken into account (as opposed to those that the survey was able to obtain) the market is actually $36 million. Still, this pales in comparison with the private equity market in the U.S. which stands at US$680 billion.

The report also notes the different roles that U.S. and Canadian pension funds play in their respective private equity markets. "In America, the involvement of pension funds, insurance companies and other institutional investors is predominantly facilitated by limited partnerships and related vehicles," says Falconer.

"In Canada, several large institutional investors, such as Manulife, Ontario Municipal Employees Retirement System and the Ontario Teachers' Pension Plan Board, have taken the unique step of hiring in-house teams of senior private equity professionals who conduct a significant portion of their overall activity on a direct basis," he adds. Overall, pension funds account for 14% of total capital under management that is reported in the survey.

--By Kathryn Dorrell

Canadian gays and lesbians have launched a $400-million class-action lawsuit in Ontario and B.C, involving approximately 10,000 same-sex couples. Lawyers for the couples say the federal government has discriminated against them by denying pension benefits to those whose partners died before Jan. 1, 1998.

Patricia LeFebour, co-counsel on the case with the Toronto-based law firm Elliott & Kim LLP, says the Jan. 1 date was arbitrarily imposed by the government. The same-sex couples argue that April 17, 1985 is a more appropriate cut-off because it's the date on which Section 15, the equality provision of the Charter of Rights and Freedoms, came into force.

If they're successful, LeFebour says gays and lesbians will receive payments as far back as 1985. If their partners died between April 17, 1985 and Jan. 1, 1998, they will also receive payments in arrears plus ongoing survivor payments.

Patrick Charette, a spokesperson for the Justice Department, says the government chose the Jan. 1, 1998 cut-off date in an attempt to balance "the desire to be generous with the need to be fiscally responsible." He could not comment further on the case.

JJ Camp, a partner at the Vancouver-based law firm Camp Fiorante Matthews that is also representing some of the couples, says some individuals have brought cases against the government and were getting a "fair result," but always on a "one-off" basis.

"The government was not moving to amend the Act or to create a situation where all same-sex couples would be treated equally." He adds this case won't impact employers.

The provinces' actions on the healthcare front leading up to the release of the federal budget in December suggests they were anticipating no new healthcare funding.

For instance, Fred Holmes, national practice leader for group health & welfare at Buck Consultants in Toronto, says Alberta delayed its report on healthcare reform until 2002 and Ontario chose to reserve ruling on its cost-shifting proposals until February. Other provinces hinted at cut-backs in services before the budget was announced, he adds.

Susan Bowyer, an associate at William M. Mercer Ltd. in Toronto, adds that the Employer Committee on Health Care in Ontario "fears that the reaction to the budget (by the provinces) will be drastic measures that amount to cuts to healthcare as opposed to primary care reform and long-term solutions to improve the system."

B.C. was going to delay its healthcare reform until the new year, says Holmes, but a report was leaked just before the release of the budget that showed the provincial Liberals plan to make cuts to Pharmacare and the Medical Services Plan. Those cuts took effect Jan. 1.

Under healthcare, Finance Minister Paul Martin's budget included an additional $75 million per year for the Canadian Institutes of Health Research and $95 million to be paid out in 2003 to keep the Canadian Institute of Health Information operating for another four years.

Membership in registered pension plans (RPPs) rose 3.5% from 1997 to 1999, according to a recent report by Statistics Canada. It credits the increase to a strong economy and healthy job creation in 1998 and 1999.

Nearly 5.3 million workers belonged to either defined benefit plans or defined contribution plans at the end of 1999, contributing $19 billion for the year. At the end of 1999, assets in Canada's three main retirement income programs, RPPs, registered retirement savings plans (RRSPs) and the Canada Pension Plan (CPP) hit $995 billion.

In 1999, Canadians contributed $68 billion to retirement programs. RRSPs accounted for 41%, the CPP 31% and RPPs 28%. Since 1994, RRSPs have consistently surpassed RPPs both in number of contributors and in total annual contributions.

However, participation in RRSPs slowed considerably from 1997 to 1999. The amount contributed rose only about 1% during that period, compared with increases of 20% to 28% since 1991. Contributions to RPPs peaked in 1993 at $20 billion.

--Doug Watt, advisor.ca

The Romanow Commission has released its final report on the future of healthcare in Canada.

For Commissioner Romanow's recommendations, click here.

Click here for Senator Michael Kirby's report, "The Health of Canadians – The Federal Role: Recommendations for Reform."