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

William M. Mercer Ltd. released the results of its 2001 Survey of Current Pension Governance Practices among 199 of Canada's largest pension plans at a conference in March. The respondents represented both defined benefit and defined contribution plans in the private, not-for-profit and public sectors.

Nelson Tishcoff, principal and national partner at Mercer in Toronto, says the most complicated part of the survey is the area that covers how governance is structured in organizations or "who does what."

Tishcoff adds the survey raises the issue of the "two-hat" problem. The problem arises because a sponsor has a duty to shareholders, but as the legal administrator of the pension plan, it also has a fiduciary duty to all beneficiaries. While responses to the survey vary, Tishcoff says "the key is that most companies had given the matter thought and recognized that decisions about possible conflicts of interest have to be made."

The survey also found that 39% of respondents are not familiar with the Office of the Surpervisor of Financial Institutions' paper called Recommendations of the Joint Task Force on Pension Plan Governance and Self-Assessment. That paper, says Kevin Moriarty, principal at Mercer in Toronto, lists six principles of good governance.

Tishcoff says most of the plans that are aware of the paper have not conducted a self-assessment and most did not have a formal, written mission statement. Tishcoff says while this doesn't indicate the plans are poorly governed, it may indicate that "future improvements in pension governance will probably not be led by regulators."

Other findings include:

- In terms of future improvements, over 60% of respondents list communication and education as first.

- Governance practices around funding policy are not rigorous, Tishcoff says. Only 41% of plans, outside of the private sector negotiated contribution plans, have a formal written policy.

- More than 80% of respondents say the pension plan pays for trustee or custodian fees, investment manager fees, transaction fees, the cost of funding valuations and consulting and actuarial fees for the ongoing administration of the plan or fund.

- Over 70% of respondents say the pension plan pays for benefit calculations, filings, annual member statements and investment monitoring charges.

The Commission on the Future of Health Care in Canada wants all Canadians to speak out on what they would like to see reflected in the healthcare system. Canadians can fill out a workbook online at: www.healthcarecommission.ca/workbook.

Regular updates on the Commission's work can be found online at www.healthcarecommission.ca/default.asp?DN=2.

Interested parties can contact the Commission on the Future of Health Care in Canada at: www.healthcarecommission.ca/Default.asp?DN=19,11,2.

--Kathryn Dorrell

Research in the journal Health Affairs says that obese people's healthcare costs can rise by up to 36% and their medication costs by up to 77%. Obese people also have higher healthcare costs than smokers.

What does this mean for plan sponsors in Canada? Tim Clarke, consultant with the health management practice at Hewitt Associates in Toronto, says sometimes obesity can drive diabetes costs up and sometimes it's the other way around. But for the most part, many of the costs associated with each disease are "borne by the government or taxpayers in Canada."

Clarke says obesity has received a lot of attention recently due to several new drugs. The drugs are created for those with a body mass index of 30, they're expensive, and for certain obese people, they're highly effective. The issue, says Clarke, is that plan sponsors fear employees who are slightly overweight may also demand these drugs, seeing them as an easy way to shed extra weight. Clarke adds that the evidence he has seen so far is only anecdotal but it shows that some people are being prescribed the drugs when they're not necessary.

The struggle for plan sponsors is giving employees "the coverage when they need it, but limiting the coverage when it may not be medically necessary," he says. To keep costs in check, Clarke says sponsors can cover part of the cost of the drugs, not cover them at all or have plan members who have prescriptions for these drugs fill out a form that requires them to meet certain criteria.

Canada's retirement system is based on a flawed, outdated model, says pension expert Paul Owens, speaking at a conference in Toronto recently. Unless the system is reformed, he argues, coverage and security will decrease. But Owens, chief executive officer and manager of the Mississauga, Ont.-based Colleges of Applied Arts and Technology pension plan, says he doesn't see the political will for change.

There are also serious problems with the registered retirement savings plan (RRSP) program. "We have an absurd 30% foreign content rule. And we have a system where if you have RRSP contribution room, you have no disposable income and if you have disposable income, you have no RRSP room."

The real obstacle for change is pension regulation, Owens says, noting that Canada has 11 pension benefits acts. "The maintenance of the political system is more important than the needs of pension plan sponsors and beneficiaries," he adds.

Long-term, Owens expects to see some type of funded healthcare plan operated like a pension plan. "There will be a move to money purchase pension plans and more group RRSPs," he adds. Owens also predicts the end of the foreign content rule "simply because capital markets are finding ways around it and it will become irrelevant."

--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."