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

The objective of new regulations should be limited to creating an environment in which retirement plans thrive and provide more Canadians with valuable retirement benefits. The benefits of group plans include: wholesale investment management fees that provide, on average, 20% more retirement income than the same investment in an individual retirement plan; employer contributions; dollar-cost averaging; and convenient payroll deductions.

Keeping this in mind, regulatory proposals should focus on two goals. The first is to clarifiy the role that key stakeholders play in a DC plan. These parties consist of members, sponsors, advisers and suppliers. The most important role is the plan member. After all, employees decide how much money to set aside for retirement and, in most cases, make their own investment selections.

The plan sponsor is next in the hierarchy. Employers manage retirement programs that serve the interests of plan members, helping them to make suitable fund selections and establish an adequate contribution level. The sponsor's adviser and supplier take on the other two important roles. Clarifying all these roles will allow all the parties to work together and manage a successful plan.

SETTING THE STANDARD
The second goal of regulatory change should be to set a common standard for all plans, regardless of the provider. A level playing field for all providers ensures that the needs of the member will be met, regardless of who administers the plan. A common standard should be developed on a best-practices model and include: affordable and appealing plan designs; access to wholesale investments; an employer/provider role in selecting and monitoring appropriate managers and funds; a disciplined planning and investment selection process; employee education; and diverse service and product features.

There are a number of reasons for not proceeding with any legislative reform in the DC sector. First, providers and employers will have to deal with numerous, conflicting standards as each province establishes its own rules. Another drawback is the fact that regulations will not allow for flexibility under special circumstances. They will also be quickly dated due to the ongoing changes in the group retirement market.

Most worrisome, if applied to all DC plans, new regulations may result in more red tape. Employers may simply offer cash compensation instead of setting up a group retirement plan.

If reforms are indeed required, regulators should limit them to clarifying the role of stakeholders, publishing a best-practices guide and providing a safe harbour for plan sponsors that demonstrates compliance with best practices. This way regulations for the DC market will not impede its growth but help to increase retirement benefits for working Canadians. This is to everyone's advantage. BC

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."