DB plan sponsors still worried about de-risking

De-risking is top of mind for Canadian DB pension plan sponsors, according to Morneau Shepell’s 60-second survey for April 2014.

The survey, which polled 62 DB plan sponsors, reveals that the majority (71%) of respondents have already taken de-risking steps since the 2008 crisis. The most popular measure has been to modify DB plan design, which involves reducing ancillary benefits, requiring higher member contributions or converting the plan to a DC arrangement.

For 2014, more than half (53%) of respondents will be considering more de-risking measures, particularly further modifications to plan design. “It is very significant that more than half the plan sponsors are considering further de-risking measures, given that nearly three-quarters of them have already taken steps to de-risk,” says Fred Vettese, chief actuary with Morneau Shepell. “About 40% of the private sector DB plans in our pension database are already closed to new members, and this percentage will almost surely continue to rise.”

Only one survey participant will be considering annuities as a de-risking measure for 2014. “This was somewhat surprising, given the widespread expectation that many more sponsors would be winding up their pension plans in 2014 and buying annuities,” Vettese explains.

Nearly half (42%) of the respondents are sponsors of public sector DB plans. According to the survey, the percentage of public sector plan sponsors that are considering de-risking is virtually the same as the percentage of private sector sponsors.

About one-third (34%) of survey participants do not intend to take any de-risking measures this year because they think the worst is over for capital markets and de-risking would come with an opportunity cost.

Meet an Advisory Board Member

Rick Holinshead, senior partner, Canada health and benefits business leader, Mercer

What are some of the highlights of your career in benefits so far?
If I had to pick just three, in no particular order, one would be leading the health and benefits consulting business in the Canada and Latin America regions for over three-and-a-half years. Another highlight would be mentoring colleagues during their formative years—watching them become leaders and contribute to our industry. And the third would be direct involvement in some of our industry’s ‘firsts’ in Canada (e.g., drug formularies, flex plans, administration outsourcing, group universal life).

What is the No. 1 challenge for employers today?
I think the single greatest challenge for most employers is the increasing war for talent and the continually evolving employment contracts they have with their workforces. While we can point to a competitive benefits plan as one attraction and retention tool, there are many other things that employers must constantly consider to sustain their competitive position in the talent market.

What are you reading right now?
I’m just finishing An Astronaut’s Guide to Life on Earth by Chris Hadfield. I recently had the privilege of meeting Commander Hadfield and, with that, the opportunity to spend about an hour with him discussing a wide range of subjects. I personally consider him a Canadian hero and a great ambassador for Canada.

Market Watch

Green Shield Canada has upgraded its online services to incorporate new features such as drug, provider and claims history search, as well as the ability to upload online audit documentation. The upgrade also includes improved co-ordination of benefits statements, as well as an expanded list of providers that can submit claims and check eligibility for services online.

Sun Life Investment Management has launched three pooled funds: one focusing on private fixed income, one on commercial mortgages and one on real estate assets. Initial portfolios of assets total about $650 million and were contributed by Sun Life Assurance Company of Canada and Sun Life Financial.

SSQ Financial Group now offers compassion insurance to help employees caring for a gravely ill loved one. The new benefit allows those insured to parcel out their periods of financial assistance, giving them greater flexibility and the ability to return to work as soon as possible.

Russell Investments Canada Ltd. has launched the Russell Inflation Linked Bond Fund, expected to invest mainly in inflation-linked Canadian government bonds. The fund aims to provide a stable level of interest income that is hedged against inflation, targeted toward pension plans and other institutional investors that are applying de-risking strategies.

Book review

Type “S”uperWoman by Dr. Jaime Kulaga

If you can overlook the appalling editing— as well as the overly familiar writing style and lazy execution—Dr. Jaime Kulaga does offer a few helpful nuggets of advice to women who are struggling to find self-fulfillment. For example, she talks about the myriad roles that women play in their personal and professional lives (mother, wife, employee, etc.) and encourages women to prioritize them, explaining that “you have to drop a role to add one.”

Kulaga also encourages women to be more confident and avoid second-guessing their decisions. “Don’t make decisions out of fear,” she advises, adding that women are most critical of themselves and that being confident will not jinx the outcome.

As Kulaga notes, she wrote this book in order to share the messages from her SuperWoman workshops with a broader audience. Fair enough. But here’s my suggestion: if you like her ideas, investigate the workshops instead. The book really isn’t worth it.—Alyssa Hodder

Work less, produce more?

The Swedish city of Gothenburg recently announced that it will test six-hour workdays.

The experiment will apply to one municipal department. Some of its members will work six-hour days, while the rest will put in eight hours. Both groups will receive full pay. After a year, the city will compare the two groups. If the experiment is successful, it will hopefully cover other municipal employees, according to Gothenburg’s deputy mayor, Mats Pilhem.

He says the move is expected to reduce absenteeism and increase efficiency, which is usually stifled during longer shifts. But critics dismiss the experiment as a costly populist ploy that would have no effect on productivity.


Healthy Outcomes Conference
June 11–13, 2014
Four Seasons Hotel, Vancouver

The theme of our 13th annual Healthy Outcomes Conference is Mindful Wellness — Challenging the Status Quo. Employers are increasingly realizing that the health and wellness of their employees affects the health and wellness of the organization. But when it comes to developing a strategy that truly delivers ROI, many long-held beliefs may not be what they seem. What are the gaps in incentivizing wellness? How can employers get the whole picture? This exclusive conference—held in a think-tank setting to maximize opportunities for dialogue and debate—is dedicated toward debating wellness topics in good conscience: what’s working, what isn’t and how to create more effective wellness initiatives that reward both employees and employers.

Find more information on this and other industry events at benefitscanada.com/conferences

This month in numbers

30%: the average portion of wealth that rich Canadians plan to leave to their children — 2013 BMO Harris Private Banking survey

58% of Canadian workers feel they have just a job as opposed to a career (42%) — 2013 CareerBuilder.ca study

51% of Canadian employees see poor co-operation with colleagues as the top work stressor — 2014 Randstad Award survey

Mental Health Week: Taking Action in the Workplace

By Marcia McDougall, freelance writer and president of InteGreat Marketing PR Events Inc.

Employers have both direct (claims costs) and indirect (productivity, risk management, employee attraction and retention) financial incentives to focus on improving employee mental health. In fact, the rationale for helping employees with mental health issues extends beyond workplace causes: many employers are not only providing employee and family assistance programs but also proactively encouraging employees to use them, along with other initiatives that help promote better mental health (e.g., information, one-on-one counselling) while protecting confidentiality. While many employers recognize the business case for investing in improving mental health and genuinely want to help their employees, they aren’t sure where to start….

How can employers introduce meaningful mental health programs, and what is the cost of inaction? Read the full article at benefitscanada.com/takingaction

Get a PDF of this article.