When it comes to protecting the environment and our planet—sustainability is a word people can usually get behind. But ask plan members how they feel when sponsors start talking about sustainability in the context of pensions, and chances are you’ll get an earful.
It’s not that assessing a pension plan’s long-term viability isn’t a good and valid pursuit. In fact, it’s an absolute necessity in today’s economic and demographic environment. The problem is that in Canada over the past few years, discussions around plan sustainability are almost always initiated after the plan sponsor has already decided that their plan isn’t sustainable and already determined what needs to be done about it. And it most often ends badly for plan members by way of higher contributions, reduced benefits or plan conversion.
So, is it any wonder that members have relegated the term sustainability to the ranks of management doublespeak, alongside such other corporate euphemisms as rightsizing and rationalizing? From the members’ perspective, sustainability (or more accurately, lack of it) is code for being handed the dirty end of the stick.
But it doesn’t have to be this way. When managed and communicated well, discussions with members around pension plan sustainability can serve to:
- improve member understanding;
- enhance member engagement; and
- increase members’ appreciation for their pension benefits.
The first step toward having this conversation is to establish the facts and, unfortunately, this is often where the trouble begins. Plan sponsors have access to knowledge and information that may not be readily available to plan members. Even when members are given access to it, whether “it” involves economic scenario testing or other types of predictive modelling, they often have little ability to understand it, interpret it, or test the credibility of the source. This leaves them with a limited sense of personal control over the sustainability exercise. Left unaddressed, this can breed cynicism—and even outright rejection—of any sustainability issues that might be identified and how they should be addressed.
Trust is key. Issues of pension plan sustainability cannot be successfully explored or addressed in the absence of trust between plan sponsor and plan members. The seeds of this trust are credible and empathetic leadership, open and honest communication, and the involvement of plan members every step of the way. This process takes time and effort, but it’s worth it—especially if your starting position is a trust deficit. At the end of the day, even if the outcome is negative change, most members will accept it if they truly believe that it is necessary, appropriate and fair.