The Canadian Institute of Actuaries (CIA) says the federal government’s launch of consultations on a potential federal framework for target benefit plans (TBPs) is a potential game changer.
The Institute’s members have been calling on governments to adopt a regulatory framework that opens the door to implementing TBPs.
“Canadians’ rising longevity and an environment of low investment returns over a long period are just two critical factors impacting the retirement savings world,” says CIA president Jacques Lafrance, adding that providing new tools and developing more adaptable approaches through TBPs is very welcome.
While the CIA does not favour TBPs over other types of designs, he notes that they represent another option available to employers for designing pension plans that suit their needs and those of their employees.
Lafrance says the government will need to avoid creating a framework that is too restrictive and ensure that the plan provisions are clearly communicated to plan members, especially the conditions governing how benefits will be increased or decreased. Moreover, he says the new legislation will need to clearly allow TBPs regardless of the type (multi-employer, single employer, unionized, non-unionized, etc.).
“With a bottom line of increasing pension coverage by allowing new plan designs that are somewhere between traditional defined benefit and defined contribution plans,” Lafrance explains, “all stakeholders should be engaged in this effort and supportive of it.”
Related articles: