Since the early 1990s, when pension plan sponsors began in earnest to convert their DB plans to DC, Canada has seen a sustained shift in the pension landscape. Between 1991 and 2006, according to Statistics Canada, the number of members covered by employer-sponsored DB plans shrunk by 4%, while DC membership grew by 93%.
In Greek mythology, the god Apollo granted the princess Cassandra the ability to see the future. When she later rejected his advances, he cursed her so that no one would believe her prophecies. Her story segues nicely into the Canadian DC pension landscape of 2013. When pension lawyers warn about the legal risks of DC plans, we sometimes all feel like Cassandras.
With funding risk in a DB pension plan borne by the employer, DB plan sponsors have little need or incentive to engage members—beyond annual statements—until they terminate plan membership or retire. In contrast, the shifting of investment responsibility and risk to members in a DC plan means those members need access to more information about investments, as well as education around the options available through the plan and how to select those options.
According to Jean-Daniel Côté, vice-president, capital accumulation plans and retirement, with ACT Conseillers Inc., the main concerns of many capital accumulation plan (CAP) sponsors used to be signing up employees, offering as many investment choices as possible and then letting the rest take care of itself. But that all changed with the introduction of the CAP Guidelines in May 2004.
While plan sponsors across the country are retreating from DB arrangements that are costly to the bottom line in good times—and even more so in economic downturns such as those we’ve faced over the past decade—more and more are looking to DC as an alternative retirement savings option for their employees. According to the 2011 […]
More than eight years have passed since the Joint Forum of Financial Market Regulators released its Guidelines for Capital Accumulation Plans (the “CAP Guidelines”) in May 2004. As more employers choose to sponsor DC pension plans, this may be a good time to take a look at whether the CAP Guidelines have improved investment decision-making […]