What does a generous benefits plan look like? Don’t ask Canadian Auto Workers national president, Buzz Hargrove. He says he doesn’t know any employers that offer one. Hargrove joked about the stinginess of pensions and benefits plans in Canada as he launched the Great Debate in Quebec City at the Canadian Pension and Benefits Institute’s National Conference in May. The session pitted Hargrove against Roy Stuart, a senior consultant with Hewitt Associates, to tackle the question: “Generous Benefits Programs: Do Employers Have a Choice?” While claiming to be a stranger to generous benefits, Hargrove did indicate a strong preference for defined benefit(DB)pension plans. And he was blunt about his distaste for nontraditional plan designs—whether defined contribution(DC)pension plans or flexible health benefits plans— that offer more choice but shift financial risk or cost to plan members. “I don’t see [flex plans] as anything but less coverage for people. It’s like a choice between hanging or shooting yourself,” said Hargrove. For his part, Stuart pointed out that flex plans don’t always mean fewer benefits for employees. Flex plans are more transparent in terms of how funds are allocated and invested. There’s also no cross-subsidization with such plans, so more expensive members aren’t paying the freight for the less expensive ones. And while a flexible benefits plan may be less generous for a married member with three kids who need braces, it could be more generous for a young single employee who can use his or her flex dollars for massage therapy or acupuncture. Stuart also noted that there are other considerations beyond just generosity. “It’s far more important to talk about plans that are valued by employees,” he said, adding that flexible plans offer choice. “Employees like to have the ability to cater the benefits to their needs.” But one important reality was largely overlooked during the debate—the fact that millions of Canadian employees are without employer-sponsored pension or benefits plans of any kind, let alone generous ones. And the situation’s getting worse. According to Statistics Canada, the percentage of workers covered by a registered pension plan dropped to 39% in 2003, from 45% 12 years earlier. If the second pillar of the Canadian retirement system continues to erode, we could end up with a serious social problem on our hands as more senior citizens are left without an adequate retirement income. But with large pension deficits, rigorous accounting rules, unfavourable court rulings, legal risks and an aging population, what incentive is there for employers to provide pension and benefits plans? Yes, pensions and benefits are a key attraction and retention tool. But clearly many employers don’t think that advantage outweighs the risk. So, we can argue about whether DB is better than DC or whether flex benefits plans are more valued than traditional plans. But perhaps the better question is: How do we convince more employers to offer their employees at least something—anything—in the way of pensions and benefits. Don Bisch |