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How Husky Energy included active members in its DB plan annuitization

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Adam Kehler:

Great article Yaelle and team!

Thursday, May 30 at 12:56 am | Reply

Greg Hurst:

This is not a new idea. Defined benefit pension plans are a life insurance product, and the insurance industry was once the dominate player in supplying pension plan administration and investment under deferred paid up group annuity contracts. Every year, the pension benefit accrual for each of the plan members would be calculated, along with the insurer’s premium to fund the additional benefit. All record keeping, administration and liability for supplying benefits remained with the insurer.

Insurers’ dominance over defined benefit pension plans in Canada started a slow decline beginning in the mid-1940s, as insurance company actuaries found they could reduce employer costs and earn more income themselves by assisting employers to self-insure their pension plans and holding plan assets under trusts. This was a very successful endeavour – as an example, William Mercer founded his actuarial consultancy in Vancouver in 1945 and the company that continues to bear his name is now the largest HR consultancy in the world!

Independent actuaries were so successful that by the 1970’s only a few paid up group annuity contracts still survived, and most of them by then were fully paid up.
Insurers transitioned to single premium group annuities, usually used on plan wind-ups.

Group annuity contracts are still with us though, as insurers use them to fund and administer defined contribution pension plans. Most people do not consider DC plans to be insurance products, but every insurer-administered plan contains an element of insurance in provisions for a specified actuarial rate basis for an annuity payable at retirement.

Monday, June 10 at 12:13 pm | Reply

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