As employers struggle to determine the right governance structure for their defined contribution pension plans, one company going through the process found it could do the work even with a lean staff and in the midst of organizational change.
“It doesn’t have to be onerous to put in a governance structure,” said Tanja Fratangeli, director of human resources at the Canadian subsidiary of American company ConAgra Foods, during Benefits Canada’s 2016 Benefits and Pension Summit in Toronto last week. “Just prioritize and focus. You can’t bite off more than you can chew.”
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ConAgra’s Canadian branch, which has about 450 employees across the country, started setting up its governance structure a couple of years ago. At the time, the company was going through downsizing and an organizational change and the team tasked with governance was small with representatives from human resource, the finance department and the company’s American parent, said Fratangeli.
To improve its communications strategy as part of efforts to help employees maximize their use of the pension plan, the company created a distinct and recognizable brand around its retirement offerings. It also produced videos reminding employees that they’re in charge of their own retirement.
ConAgra also included information in employees’ total rewards statements about how much money they had left on the table by not contributing to the plan. As a result, more employees started contributing to the pension plan and some increased their contribution levels.
Governance, of course, is a growing concern for plan sponsors. But there’s no single way of going about the issue, said Janice Holman, a principal at Eckler, during the session. “There is no one governance solution for all,” said Holman. How a company implements the governance structure will depend on its resources and the complexity of its defined contribution plan, she noted.
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But setting up a governance structure to help employees get the most out of a defined contribution plan is crucial, she added. “You should be doing it because [otherwise] you might get sued.”
If retirees from defined contribution plans end up with a more downsized lifestyle than they’d imagined, they could get together with others and start a class action lawsuit, Holman cautioned.
“If we don’t get on board with the fact that it’s the right thing to do, I think the regulators will make it the compulsory thing to do,” she added.
In Canada, the number of capital accumulation plans will continue to grow and as that happens, regulators will introduce more rules focusing on retirement income adequacy, Holman suggested.
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But the thing all defined contribution plan sponsors need to remember is that their job is trickier than defined benefit plan sponsors, Holman added. In a defined benefit plan, employers have to manage investment and longevity risk, she said, noting that with a defined contribution plan, “you are also trying to manage human behaviour, which . . . is challenging.”
And, she cautioned, employers should avoid scenarios where their communication efforts are lukewarm because they secretly hope employees won’t take the maximum amount of money from the plan. “You will need to design a plan that you can afford,” she said, citing the need to actively communicate everything about the plan.