A little more conversation
With different design considerations, new accounting rules and the growing desire of corporations to eliminate risk, Markham says 2011 heralded a renewed focus on arming pension boards with the knowledge they need to understand the implications of plan decisions.
“It takes considerable effort to understand how pension financials fit into the overall corporate financials,” he explains. “There is very much a mood in the private sector for short-term results, yet the journey into a gradual de-risking for a pension plan is something that takes place over many, many years.”
Markham adds that, traditionally, pension boards have focused on understanding assets and investment options, whereas liabilities and how they relate to assets have been harder to grasp. It’s a point that Forestell agrees with—however, both believe that those who sit on the boards are committed to understanding both sides of the issue.
“There’s a more holistic view in the education now. And I think boards—lay or professional—are more educated now. You can’t pick up the papers without reading about these issues,” says Forestell.
Plan members, too, may be taking on a more active role in their pension plans. According to Ofelia Isabel, leader of the Canadian rewards, talent and communication division with Towers Watson, a growing number of employees believe it’s their responsibility to ensure that they are saving adequately for their retirement. At the same time, they don’t feel they have the necessary tools to do so.
“It’s a good-news story, in that employees feel it’s their responsibility,” she says. “But it’s a little scary that they don’t feel they have the tools and resources to do that effectively.”
Plan sponsors appear to be taking notice of this education gap: according to Towers Watson’s 2011/12 Pension Administration Survey, 79% intend to make improvements in how they communicate with members. Isabel says the key is making plan communications easy to understand and engaging for the member. “Traditionally, because plans have had a compliance focus, a lot of communication has been written to be technically accurate, written by actuaries and lawyers,” she explains—at the expense of creating language that members can connect with.
Finding more effective ways to communicate may also mean incorporating new media such as video to augment the paper-based booklets and statements that have made up the bulk of pension plan communications, says Jackie Gallant, assistant vice-president, marketing and communications, with Sun Life Financial. “Print communications are not going away. But we need to recognize that we have three generations in the workforce,” all of whom learn and absorb information in different ways.
Whether pension plan sponsors are looking at design or communication solutions or both, a common link is the increasing cost of offering these plans—and the growing impact they have on an organization’s already-squeezed bottom line. According to Isabel, it’s more important than ever for sponsors to focus on engaging employees to ensure that they appreciate and understand the resources, financial or otherwise, that employers devote to pensions—and, most important, that they make use of the plan to save for retirement. “If we don’t have the money to make things richer, can we get more bang for our buck just by making employees more aware and comfortable with what’s actually there?”
Neil Faba is associate editor of Benefits Canada. neil.faba@rci.rogers.com
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