© Copyright 2006 Rogers Publishing Ltd. The following article first appeared in the February 2005 edition of BENEFITS CANADA magazine.
A cross-border comparison of administering DC plans.

Plan sponsors on both sides of the border face many of the same issues when it comes to their defined contribution(DC)pension plans. And a recent survey by Mercer Human Resource Consulting shows that companies in the U.S. and Canada are tackling the issues in similar fashions.

Participation rates tend to be lower in the U.S. with 75% participation. In Canada, median DC plan participation is 99%.

Companies facing low participation rates offer programs such as immediate enrollment and automatic enrollment.

In both countries, one-quarter of plan sponsors reported that employees contribute 4% of salary or less, on average. Even after an employer match, this contribution level is well below most estimates of savings levels required for a comfortable retirement.

Two techniques that are being used to combat low contributions are targeted communications and highly facilitated enrollment processes.

Automatic enrollment into DC plans with annual increases are only used by three per cent of U.S. companies whereas 17% of Canadian companies employ the strategy to boost participation.

Pre-mixed funds, also known as lifestyle or lifecycle funds, have become popular on both sides of the border. Their prevalence in the U.S. has more than doubled from 25% in 2000 to 63% of companies offering them today. In Canada, about 45% of companies make them available to DC plan participants.

Canada is lagging the U.S. when it comes to communicating and evaluating the practices of market timing and late trading. Here at home, about one quarter of plan sponsors evaluate their recordkeeper’s trade practices. In the U.S., half of plan sponsors have a monitoring program in place.

Source: Mercer Human Resource Consulting survey of a total of 434 companies. There were 288 U.S. respondents, 134 Canadian respondents, and 12 companies with an unspecified country. The survey was conducted in April 2004.