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Head to head: Are DC plan sponsors actually interested in variable benefits?

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Joe Nunes:

I was surprised that someone from CLHIA would argue against the idea of keeping more funds with recordkeepers that are predominantly insurers.

I disagree. DC members don’t generally terminate or retire and buy a fixed annuity. Rather, they transfer the funds to a bank, mutual fund advisor or insurance broker, and rarely to a new pension plan.

To me, creating an easy way for the funds to remain in a well run group plan with some clear guidance on withdrawal rates will benefit members long-term.

We just need the rules in place to protect employers that provide this in good faith. We are not far off from a PRPP/delegated model that will relieve employers of risks and responsibilities of former employees while providing a benefit that is tangible and helps get us to the end result the entire industry desires – cost effective retirement savings

Wednesday, March 13 at 11:27 am | Reply

Jean-Daniel Côté:

I’m in agreement with Joe’s comments above.

I would add that I disagree with Mr. Sanderson’s comments to the effect that group RRIFs/LIFs already exist with low costs comparable to those of DC plans. To my knowledge, only very large DC sponsors have been able to negotiate such arrangements, and some providers are simply closed to the idea.

The majority of retiring members’ assets staying at insurance companies goes to their retiree orphan plans, where fees, albeit lower than retail, are still significantly higher than what they would be in a large DC plan. A situation the industry should continue working on to improve.

At the very least, DC and other CAP sponsors should ensure they understand the fee structure applied to their retiring members – and negotiate them if possible. They should also review the information materials provided to members at decision time to make sure it is completely transparent regarding the fee increase they are looking at.

Wednesday, March 20 at 1:58 pm | Reply

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