Imperial Oil Ltd. is implementing a number of changes to its defined benefit pension plan which will take effect for current employees from Jan. 1, 2017.
These include: changes to employee and employer-matched contributions; a simplification of the payment options upon retirement; an alignment of the company’s surviving spouse benefit to provide a survivor pension to spouses at retirement versus at the retiree’s death; and an alignment in election timing so all pension members can choose a defined benefit formula option at the same time.
According to the pension website, the changes are part of Imperial Oil ‘s focus on ensuring its retirement savings plans continue to meet its objectives of being competitive, cost-effective and in line with its business strategy.
The pension fund had 5,800 active members and assets of $6,625 million at Dec. 31, 2015, according to the Canadian Institutional Investment Network, Benefits Canada‘s companion site.
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Contribution changes are due to factors such as increased life expectancy, low interest rates and regulatory changes, according to Imperial Oil. They include an increase to the minimum employee contribution from four per cent to six per cent for members of its three-tiered basic plan. For members of the two-tier Imperial Heritage Plan, minimum employee contributions will increase from three per cent to five per cent. There are changes to the employer-matched contributions as well, but Imperial Oil declined to comment further.
Before Jan. 1, 2017, plan members have three options for how the pension is paid to them upon retirement, including: a pension paid for their lifetime only; a pension that continues to their spouse for their lifetime if they predeceased their spouse; and a pension with a guarantee (i.e. if they died before receiving a certain number of monthly payments, the remaining amount would be paid to their spouse or beneficiary).
Beginning Jan. 1, 2017, payment options will be streamlined to make employees’ choice simpler and to reduce administration for the company. The plan will also be updated so the surviving spouse benefit will be payable to an employee’s spouse at retirement versus at their death.
And Imperial Oil will also align its pension election timing. All employees will have the opportunity to choose a pension option this fall before the changes take effect. According to the company, this means everyone will have the same timing for their five-year pension election decision, making communications and education easier and simplifying the process for employees and the company.
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