DB and DC plans should be more similar, according to Jim Leech, Ontario Teachers’ Pension Plan president and CEO.
Speaking at the Pension Management Experts Speaker Series at the Rotman School of Management in Toronto on Monday, he said that “the old, stereotypical inflexible DB plan has to move a little bit down the spectrum toward DC, and there’s more risk sharing involved.”
And he added that DC plans have to move closer to DB plans and introduce things such as deferred annuities.
“One of the big issues is the regulatory regime,” Leech said. “It only recognizes one or the other. They have trouble when you start talking hybrid.”
He said the Air Canada hybrid plan was a “a very imaginative solution.”
Leech also explained that the myth about DB plans being more expensive than DC plans is incorrect.
“Operated properly, it is far less expensive than a DC plan,” he said. “Clearly, it is somewhere between 20% and 40% less expensive to save for the same amount targeted under a DB plan.”