The Canadian Institute of Actuaries’ president has called for bold public policy measures and strong leadership by plan sponsors and members to stop the decline in defined benefit(DB)pension plans.

In a speech to the Economic Club of Toronto earlier today, Norman Gendron said there is a steady decline of private sector DB plans. “If this trend continues, in a few years the only working Canadians with a defined benefit plan will be in the public sector or in large unionized environments. We do not think that the private sector workers will support this imbalance.”

To secure the health of DB plans, the institute has developed a 10-point pension prescription.

1. Pass legislation to allow employers to set up 100 percent employer-funded Pension Security Trusts that would be separate from, but complementary to, regular defined benefit pension plan funds.

2. Pass legislation to allow the use of irrevocable letters of credit to secure solvency deficiencies.

3. Pass legislation to improve the transparency of plan funding and governance by requiring plan sponsors to establish a written funding policy for defined benefit plans.

4. Expand annual disclosure required by plan sponsors to include funding policies, investment policies, the plan’s current funded status and the date of the next plan valuation.

5. Pass legislation to require each defined benefit plan to build up a Target Solvency Margin.

6. Establish a task force, with representation from the profession and pension regulators, to develop guidance on appropriate levels of solvency margins.

7. Change the tax rules to allow plan sponsors to develop larger surpluses.

8. Pass legislation to protect underfunded pension benefits by according them treatment similar to that of unpaid pension plan contributions in bankruptcy and restructuring proceedings.

9. Bring responsibility for pension matters within the authority of provincial finance ministers.

10. Examine alternate ways of handling underfunded plan wind-ups for insolvent employers, such as establishing a new pension insolvency insurance vehicle.

Gendron said actuaries feel a responsibility to raise these public policy issues and it’s part of their duty to serve the public interest.

“We believe a healthy environment for defined benefit pension plans is in the country’s best interests,” he said. “It’s also vital to the financial security of a great number of Canadians.”

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