Increased volatility, stubborn inflation and erratic interest rates are making for financially uncertain times, where it can be more reassuring to seek safety in shared risk, rather than shouldering financial ambiguity alone.

Celebrated for their pooled assets and shared risk, multi-employer pension plans are gaining traction. Tami Dove, director of member experience at the Co-operative Superannuation Society pension plan (No. 2 on the 2023 Top DC Plans Report), calls MEPPs actively growing options supported by policy-makers as a reputed and favourable source of retirement income.

Read: A look at MEPPs in a shifting pension landscape

The promotion seems to be working. A recent annual survey by Saskatchewan’s Public Employees Pension Plan (No. 1 in this year’s report and Canada’s largest defined contribution plan with nearly $11.2 billion in assets under management), found 81 per cent of its more than 71,000 members are very satisfied with their plan.

So what are the benefits of MEPPs and what can single-employer DC plan sponsors learn from them?

Economy of scale

For MEPPs, the biggest driver for both employers and plan members is the economy of scale, which allows for greater risk-sharing, lower management fees and a reduced administrative burden.

The Christian Labour Association of Canada pension plan (No. 12 in this year’s report) is a MEPP with nearly $1.1 billion assets under management. The total cost of running the plan is less than one per cent, says Jim Doornbos, the CLAC’s benefits and retirement director. “Fees are lower, administration simpler.”

For the Canadian Baptist Pension Plan (No. 48 in this year’s report), the power of the collective unites more than 925 churches under one plan. “Some of the churches covered by this pension plan are so small they wouldn’t normally be able to receive a pension on their own,” says Loyda Ortiz Sinanan, the Canadian Baptist Ministries’ manager of pension and benefits.

Read: Canadian MEPPs facing challenges due to provincial funding requirements, plan growth

Indeed, MEPPs are a good solution for organizations unable to meet the fiduciary requirements of maintaining their own plan. In addition to including small employers, they can also drive down administrative costs, says Adam Rennison, a partner and senior consultant at PBI Actuarial Consultants Ltd. “Do the math — if you can save even 50 basis points in expenses each year, that’s a big deal over the long run.”


Portability — essentially, a worker’s ability to maintain and transfer accrued pension benefits when changing jobs — is another big advantage of some MEPPs, as long as employees stay in the same sector or industry.

This flexibility and extended support is only fitting, given that MEPPs were born out of shared interests and needs, says Dove. “Sectors such as construction, retail and religion banded together to take care of their employees and their families right into their retirement.”

For Jeremy Phillips, assistant deputy minister of the Public Employees Benefits Agency, which manages the PEPP, says the ability to change jobs and still stay with the same MEPP is a big deal. “It’s an even bigger deal to be able to leave the MEPP and still let your funds grow in it as an inactive member,” he adds, referring to decumulation.


Indeed, while the ability to accumulate funds in a pension plan is critical to achieving a decent drawdown in retirement, it’s equally critical to have a strategy for the decumulation phase.

Dianne Tamburro, principal of investments and DC at Eckler Ltd., underscores the need for DC plan sponsors to start thinking beyond accumulation and offer effective decumulation options for improved retirement outcomes.

As more baby boomers reach retirement, there’s a growing rumble among DC plan sponsors to consider letting members reap the benefits of pooling in the decumulation phase.

Read: ACPM urging CAPSA to prioritize decumulation in draft 2023-2026 strategic plan

In 2006, CBM was one of the first Canadian plan sponsors to offer in-plan decumulation options, including registered retirement income funds and life income funds. “We tend to have what we call bookends,” says Ortiz Sinanan. “Those who are exiting the workforce and those who are entering it. And with so many boomers set to retire, the balance of funds could topple. We need to mitigate that because our plan is not just a savings plan, it’s also an income plan. So when boomers retire, even though no new money will come into the plan from them, we’ll still retain part of their money within the plan.

“You’re going to see more and more employers start to offer [in-plan] decumulation to their retirees, not just to take care of them post-retirement, but also to keep the funds in the plan,” she adds.

The CSS pension plan offers two in-plan decumulation options — a fixed monthly pension and variable benefits payments.

It’s a win-win situation for plan sponsors and members that’s triggering a revolution of sorts with dynamic pension pools in the form of variable payment life annuities, which were proposed by the federal government in its 2019 budget.

When the accompanying legislation is set out, VPLAs will combine some of the features of a traditional fixed pension with those of a variable benefit payment, paying an annually adjusted retirement income for life. “Each year, the payment amount of a VPLA will increase or decrease based on the performance of its supporting assets,” says Dove. “As a result, members will receive a fluctuating income stream, similar to a variable benefit, but with a greatly reduced risk of running out of funds.”

Pooled risk and stability

While DC plan sponsors and members await the long-term financial security promised by VPLAs, they continue to cherish one of MEPPs’ biggest advantages — the stability of pooling risk.

But when it comes to the performance of these pooled assets and risks, Doornbos says a lot depends on a MEPP’s structure. “A lot of DC plans, even if they’re multi-employer, require an individual plan participant to make investment choices and decisions. While you’re gaining size, scale and reduced fees, you’re also leaving the responsibility of investment choices up to the individual.”

Read: CAPSA developing multi-jurisdictional VPLA framework for DC pension plans

The CLAC pension plan’s focus is on try-ing to achieve the best possible returns for its members, he says. Its investment options include the CLAC balanced funds, the CLAC conservative fund and an investment glide path. The balanced fund is the default option, while the investment glide path kicks in at age 53 after which funds become incrementally more conservative until members reach age 65. Plan members have the choice to opt out of the glide path.

The CSS pension plan has four investment options: a balanced fund, a money market fund, an equity fund and a bond fund. Plan members can use any or all four options to set an investment mix that meets their goals, risk tolerance and investment comfort, says Dove.

The CSS plan’s balanced fund — a multi-asset fund — is its default fund and is designed to protect downside risk with its longstanding tilt toward value. According to Dove, about 90 per cent of members are currently in the balanced fund. The money market fund is focused on providing more fluidity and access to cash in the retirement years. Of the CSS’ 55,000 members, 8,000 are retirees.

Key takeaways

• DC MEPPs offer a compelling framework for retirement savings that capitalizes on shared risk, pooled assets and reduced costs

• By providing the benefit of pooling through both the accumulation and decumulation phases, MEPPs can help to ensure a secure and financially sustainable retirement.

• Dynamic pension pools like VPLAs are the newest innovations in retirement planning that could help revolutionize the landscape by offering low-cost income for life.

The PEPP portfolio offers a customized steps fund, a lifecycle investment fund with 13 steps that applies a three-pronged approach involving equities, fixed income and private markets. “That’s not something you can typically get in other DC plans,” says Phillips. “Members don’t move within funds. Instead, when they reach the next step, we move them on their birthday. There’s more risk at the beginning and it tapers off towards the back half of their career.”

Depending on what step plan members are in, the administrative fee fluctuates between 55 and 88 basis points.

The underbelly

Even though MEPPs offer some unique benefits to employers and employees, they may not be for everyone.

“An employer that views control as being important — in a whole host of aspects — will probably have less desire to participate in a multi-employer plan,” says Doornbos. On the other hand, some employers may be more comfortable being hands off. “[An employer that] just wants to make their contributions and then not have to think about them.”

Read: An update on MEPPS, JSPPs and PRPPs

The multi-employer landscape can pose other challenges for fund administrators, says Ortiz Sinanan, referring to some churches within the CBM plan that aren’t great at communicating payroll changes. “Sometimes, employees of the church get salary increases but [the church] forgets to let us know, which impacts the amount they should be contributing into the plan. Then we have employers that do their payrolls differently and have different pay cycles. It’s hard to keep track. The onus to educate them and apprise them of our expectations is on us.”

The plan member perspective is an important one as well. “Members who don’t like to select their investments might consider a managed plan a benefit, but those who like to be more involved may find it a disadvantage,” says Tamburro.

The benefits of a managed approach to pension plan design could become even more pronounced as the risk of longevity plays out, making the financial future a lot more unsettled and retirement planning a lot more complex.

Kanupriya Vashist Handa is a freelance writer.

Download a PDF of the 2023 Top 50 DC Plans Report.