How can employers prepare for the CPP expansion?

Employers should start reviewing their current retirement plans to prepare for the 2019 expansion of the Canada Pension Plan, according to a Willis Towers Watson retirement consultant.

For companies that offer defined benefit pensions, the main question will be whether or not to integrate the CPP benefits into their existing plans, says Jeff Kissack, senior retirement consultant at Willis Towers Watson, during a webinar on Thursday about the changes. “Do you want to offset contributions or benefits . . . or do you want to modify [existing] integration to reflect provisions?”

While the majority of plans have already integrated the CPP, that’s not the case with many defined contribution plans, according to Willis Towers Watson. As a result, the impact of the changes will depend on the type of plans that’s offered.

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Employers with defined benefit plans will need to ensure their plan documents reflect their intentions and that they strike the right balance between “materiality versus practicality,” said Kissack.

And while most companies with defined contribution plans will likely refrain from integrating with the CPP, the changes may still affect them by potentially inciting a drop in member contributions, according to Kissack. Employees who will contribute more toward the CPP “will see a decrease in their take-home pay . . . which can be onerous,” he said.

The monetary questions also apply to employers looking for ways to meet their obligations and reduce costs. According to Willis Towers Watson, companies may choose to reduce salary increases, cut benefits or hire fewer employees. Alternatively, some may just end up increasing their total spend.

Regardless of whether employers decide to modify existing plans, Kissack said they should develop strong communications efforts that clarify how the increase will affect employees and how they can maximize their retirement benefits by leveraging both their workplace pension and the CPP.

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