The International Foundation of Employee Benefit Plans (IFEBP) conducted its first live on-site survey of plan sponsors attending the 42nd Annual Canadian Employee Benefits Conference last November. The purpose of the survey was to benchmark the strategies and approaches that sponsors are using to address current issues, allowing them to return to their benefits plans with important take-aways that can have an immediate impact on beneficiaries.
IFEBP received 535 completed survey responses—representing a cross-section of multi-employer, public sector/governmental plans and private sector plans—for a response rate of nearly 70%.
Funding Concerns
While IFEBP studies in the U.S. indicate that large numbers of plan sponsors thought the impact of the economic downturn on their plans has been severe, this is not the case in Canada. Most Canadian sponsors reported that the impact of the financial crisis on their funds has been minimal or moderate (69%) rather than severe (5%).
Looking at the impact of the economic and financial crises on plan members, sponsors identified the prospect of pension benefits being reduced and delaying retirement as members’ primary concerns (45%). Representatives of multi-employer and public plans also perceive decreased job security and plan participants’ inability to save as much for retirement as major concerns (28% and 21%, respectively).
It’s not surprising that within the last year, as many as 85% of boards have re-evaluated the funding position of their pension or benefits programs. Yet only a small percentage (12%) found it necessary to reduce plan benefits. Advising the parties responsible for contributions that additional monies are required to fund the plan was a far more common strategy (nearly 40%).
Plan Conversions
On the pension side, only one in 10 sponsors reported that their boards have considered converting from a defined benefit (DB) or target benefit pension plan to a defined contribution (DC) plan in the past five years. It is more common for DB plans to have examined their actuarial cost methods and assumptions (35%), reviewed or changed their investment policies (33%) and sought increased contributions (27%).
While most boards have not considered converting from a DB to a DC plan, the majority (53%) believe that funding deficiencies in
DB plans will lead to the growth of DC plans.
Pension Reform
Plan sponsors were also asked if they agreed or disagreed with a series of statements on pension reform. While many of the results were mixed, a large majority (69%) of respondents agreed that pension standards, provisions and regulations should be uniform across all provinces. Close to 70% also favour requiring plan sponsors to establish a Statement of Funding Policy in conjunction with the Statement of Investment Policies and Procedures.
About half of the sponsors believe multi-employer pension plans should be allowed to have at least 15 years to fund benefit improvements and should be excused from meeting solvency funding requirements. Furthermore, about one-third (34%) of respondents said that immediate vesting of benefit entitlements for all members should be required, and 32% said that all provinces should require member consent as a precondition to implementing pension relief measures.
Sally Natchek is senior director of research with the International Foundation of Employee Benefit Plans.
sallyn@ifebp.org
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© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the January 2010 edition of BENEFITS CANADA magazine.