Top five pension and benefits developments of 2013
1| In January, the Mental Health Commission of Canada issued voluntary workplace mental health guidelines, Psychological Health and Safety in the Workplace. The new national standard is applicable to organizations of all sizes. Its goal is to reduce the stigma associated with mental health problems and ensure the introduction of practices that support employees who struggle with mental health issues.
2| In May, Alberta became the last province to introduce compassionate care leave, which allows employees to take an unpaid leave of up to eight weeks to care for terminally ill family members. When the leave is over, the company is obliged to offer the employee his or her original position or a comparable one, with no loss in wages or benefits.
3| In July, the Canadian Institute of Actuaries released updated mortality tables to reflect Canada’s longer lifespans. The life expectancy of a 60-year-old male today has increased by 2.9 years—from 24.4 to 27.3 years—compared to the mortality tables currently in use. The life expectancy of a 60-year-old woman has increased by 2.7 years, from 26.7 to 29.4 years. Increased longevity poses a risk for DB plans, which will need to cover more retirees for longer periods of time, as well as for DC plans, whose members could end up with insufficient savings.
4| In December, Quebec passed Bill 39, which creates voluntary retirement savings plans (VRSPs) in the province. (VRSPs are Quebec’s equivalent of the federally endorsed pooled registered pension plans.) The introduction of VRSPs affects mainly small- and medium-size employers, since the new law requires companies with five or more employees to offer a workplace retirement savings plan to those with at least one year of continuous employment. Small and mid-size employers would be able to band together to form low-cost pension plans administered by an insurance carrier, a trust company or an investment fund manager. The new law comes into force July 1, 2014.
5| Throughout the year, the Canada Pension Plan (CPP) expansion debate raged on. Canada’s finance ministers met in December but were unable to come to an agreement regarding an enhancement to the CPP. Supporters argue that it’s the only way to provide retirement income security for all Canadians, but critics counter that employers and individuals cannot afford the increased CPP contributions.
CPP to remain sustainable
The Canada Pension Plan (CPP) is forecast to meet its obligations and remain financially sustainable over the long term—despite the fact that the benefits paid will increase as a result of an aging population—according to a recent report.
The 26th Actuarial Report on the Canada Pension Plan reveals that, with the legislated contribution rate of 9.9%, contributions are projected to be more than enough to cover the expenditures during the period between 2013 and 2022.
“Thereafter, a proportion of investment income is required to make up the difference between contributions and expenditures,” the report notes. “In 2050, 27% of investment income is required to pay for expenditures.”
The report also shows that the plan’s total assets are expected to grow to $300 billion by the end of 2020 (from $175 billion at the end of 2012); the number of contributors is expected to grow to 14.5 million by 2020 (from 13.5 million in 2013); contributions are expected to increase to $56 billion in 2020 (from $42 billion in 2013); and the number of retirement beneficiaries is expected to increase to 10.2 million in 2050 (from 4.6 million in 2013).
Meet an Advisory Board Member: Sarah Beech, president, Pal Benefits, Inc.
What attracted you to a career in employee benefits?
I actually started in the benefits industry by chance versus design. I was offered a good job out of university as an underwriter with a major Canadian company. I have stayed in the business because I am able to solve problems, understand many different industries, and meet and work with great people. And I continue to learn every day.
From your perspective, what is the biggest challenge facing the group benefits industry today?
I believe our challenge is to work collaboratively as an industry to help plan sponsors provide sustainable benefits plans that employees value for the long term.
What’s your New Year’s resolution?
As an industry supporter of health and wellness, I am going to focus on my own increased fitness regimen (and stick to it!).
The Month in Numbers
$66.4 billion: the total amount that Canada’s life and health insurance carriers pay out in benefits annually — Canadian Life and Health Insurance Association
80% of Canadians who divorce at age 50 or later plan to delay their retirement because they need to work longer than expected — 2013 Investors Group survey
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