Gavin Benjamin is partner of retirement solutions at LifeWorks Inc.
These are the views of the author and not necessarily those of Benefits Canada.
The interest in pension funding rules is as great as ever, with changes taking effect in Quebec in 2016 and a review of funding rules in Ontario currently underway. For plan sponsors, members and other interested parties that would like to have a better understanding of how defined benefit pension funding rules work, it’s useful […]
We may be witnessing the most significant changes to the funding rules of Canadian defined benefit pension plans in more than 25 years. First, since Quebec’s Bill 57 came into effect at the beginning of 2016, minimum funding requirements for private sector plans registered in the province are now based on an enhanced going-concern valuation. […]
Defined benefit pension risk is as much in the spotlight today as ever and remains a significant issue for plan sponsors, even when the sponsor’s DB plan has been closed to new hires for years. This is because the obligations associated with a DB plan remain for many years into the future. Changes to the […]
When it comes to reducing pension risk, there’s an interesting dynamic between desire and ability. During periods when the desire to de-risk is high, the ability to de-risk is often low because economic conditions are seen as unfavourable. However, when the ability to de-risk increases, desire often decreases because the financial strain has eased, at […]
In recent years, pension plan sponsors were optimistic about upcoming de-risking activity. In a Towers Watson (now Willis Towers Watson) survey conducted in the summer of 2014, 67% of survey respondents indicated they intended to reduce pension risk by 2017. However, many plan sponsors also said conditions needed to improve in order for them to accelerate their […]
A pension management task that doesn’t receive much attention is the need to collect and maintain detailed data relating to individual pension plan members. While the data for active members are usually up to date and relatively accurate, this is often not the case for pensioners and deferred vested members (inactive members). Because an employer no longer has regular contact with inactive members, over time personal data, such as spousal status and mailing addresses, tend to become outdated and inaccurate. However, the importance of maintaining clean membership data should not be underestimated.
Many employers that sponsor DB pension plans are considering reducing the risk in their plans. An approach to reduce risk that is gaining popularity is to purchase a group annuity in respect of all or a portion of a pension plan’s retiree (and in some cases deferred vested) obligations.
The financial health of Canadian DB pension plans improved dramatically in 2013. While employers have begun reaping the rewards from this improvement, they should not become complacent with respect to pension risk. The events of 2013 created a range of risk management opportunities that could be short-lived. Now is the time for employers to focus on their pension risk and to consider taking de-risking actions.
Most regulators do not view a buyout group annuity purchase from an ongoing pension plan as a complete settlement of the obligations covered by the annuity. Some DB plan sponsors with a desire to reduce pension risk face this barrier.
As part of the ongoing reforms to the Ontario Pension Benefits Act, major changes were made to Ontario’s pension asset transfer rules, effective Jan. 1, 2014. These changes apply to asset transfers that are either between separate employers’ plans because of a sale, assignment or other disposition of a business, or between plans of the same employer.