Shareholders and regulators may also be concerned about the risks that the insurance companies and banks would have to assume as sponsors of a pension plan that provides such broad coverage to diverse employer and member groups, even if it is a DC plan. Will a one-size-fits-all plan of such magnitude work? Disgruntled employers and their employees may launch class action suits if the sponsoring entity doesn’t live up to expectations. If we had another market meltdown like 2008, would the insurance companies and banks make an inviting target for lawsuits?
Flexibility and coverage
Bill 54 is definitely a step in the right direction. It advocates the creation of large multi-employer DC plans open to all employers. It addresses the coverage issue for employees yet provides flexibility to employers where cost issues prove to be financially challenging. It doesn’t mandate employer contributions, unlike the proposals to expand the Canada Pension Plan. It provides a new, innovative plan design solution.
Bill 54 is short on details. It will at a minimum require more extensive amendment to the Ontario Pension Benefits Act, as well changes to the pension plan registration policies of the Canada Revenue Agency, to make it work.
However, it’s encouraging that at least some members of the government see the benefits of expanding the concept of multi-employer plans to include more than just unionized employees.
Now if we can just get the government to go a bit further and see the merits of allowing this new plan design to be a defined benefit plan or a target benefit plan.
Dan Clark is an actuarial consultant with Buck Consultants, a Xerox Company.
To comment on this story, contact us.