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

Employers that sponsor defined benefit (DB) pension plans could see costs rise as a result of negative equity returns experienced in 2001. This finding comes from a paper that Towers Perrin released last month.

The report says the combined impact of lower pension fund assets and higher plan liabilities will force many employers to make up the gap through higher pension contributions in the future. In the 10-year period ending Dec. 2000, the study says the average Canadian pension fund earned an 11% annual return, or 9% over inflation. As a result, many DB plans had surplus assets, lower pension costs and took funding holidays.

This year many employers may see the end of funding holidays and pension costs are more likely to have a bigger impact on corporate earnings. The report says that while there is no way to avoid the impact of the increased costs, there are ways to "alter the incidence or timing of those costs."

Gerry Schnurr, a consultant in Towers Perrin's retirement practice in Toronto, says there are two funding levers or management tools outlined in the report. One is a deferral in the timing of the next filed actuarial valuation. "You may be in a circumstance where as a plan sponsor you're not obliged to file," says Schnurr. "By choosing not to file currently, you can in effect defer the cost impact by a year."

The other option is to use smoothing adjustments in the various solvency tests for measuring assets and/or liabilities. Most provinces accommodate certain smoothing techniques, says Schnurr.

Manulife Financial is acquiring all the outstanding shares of Zurich Life Insurance Co. of Canada. The terms of the deal, which is expected to close by March 25, were not disclosed at press time.

Manulife will acquire Zurich Life's individual life insurance and wealth management, individual annuity, segregated fund and group pension businesses.

Manulife will acquire control of 547 Zurich Life group pension contracts, 2,900 individual annuity contracts and segregated fund assets of about $41 million. The acquisition will also add 193,000 individual life insurance policies to Manulife's combined Canadian individual life business, which will now total more than $1 billion in gross annual premiums.

Catherine Owens, vice-president of marketing of the Canadian pension operations at Manulife in Kitchener, Ont., says no changes are expected to be made to the pension side yet. "We'll look at the composition of the block of business and structure of customers and how the group registered savings plan (RSP) business is set up with those customers, and we'll look to offer Manulife solutions to their group RSP program," says Owens. "We will not begin to talk directly to customers to find out what their exact needs are and if there are some improvements in the products and services [we can make] until after the sale--probably in the next couple of months."

The two companies have forged ties before. In Dec. 2000, Zurich and Manulife formed a distribution alliance and in April 2001, Manulife bought Zurich's group life and health employee benefits business.

In February, drug manufacturer Hoffmann-La Roche Ltd. announced that Health Canada had approved Xenical, a weight management drug, for use in combination with anti-diabetic agents. Clinical trials reveal that the combination improved blood glucose control in overweight or obese type 2 diabetes patients. Up to 1.8 million Canadians live with type 2 diabetes.

Clinical studies with Xenical found that overweight or obese patients with type 2 diabetes lost up to three times more weight than those on a diet alone. As well, more overweight or obese patients with type 2 diabetes had clinically significant improvements in blood sugar control than those on a diet alone.

Xenical may also reduce the need for anti-diabetic medications in overweight patients with type 2 diabetes.

Jayne Bonnett, senior consultant at Watson Wyatt in Toronto, says while the addition of the drug to employers' formularies may be costly, it could offset other expenses. "If it is helpful in the treatment of type 2 diabetes then we should hopefully see some change in disability claims."

In fact, additional data shows that Xenical can improve certain risk factors for cardiovascular disease, such as cholesterol levels and blood pressure.

SSQ Financial Group has expanded its business across Canada. In February, the Montreal-based company opened a Toronto office.

The official opening of the new office will take place in September. Darryl Ingham, a Toronto consultant in group insurance, will be vice-president. Pierre Hall, a 17-year veteran of SSQ and sales director of the public sector market for the last five years, will be director of administration and sales. --Antoine DiLillo, Avantages

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."