Gavin Benjamin is a partner in the retirement and benefits solutions practice at LifeWorks Inc. These are the views of the author and not necessarily those of Benefits Canada or his employer.
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contact with inactive members, over time personal data, such as spousal status and mailing addresses, tend to become outdated and inaccurate.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.
Many Canadian companies will soon start preparing disclosures for their fiscal year-end corporate financial statements. For most organizations that account for their pension and other post-employment benefits plans in accordance with International Accounting Standard 19, significant changes to the disclosure requirements for these plans will come into effect at this year-end.
Many employers would like to reduce the risk in their DB plan so that the level of pension risk meets the company’s overall risk management objectives. One of the reasons employers may be waiting to de-risk is because they intend to "lock in" future gains resulting from strong investment returns (which increase plan assets) or increasing bond yields (which decrease plan liabilities). However, it’s important to recognize that de-risking opportunities may emerge quickly and could be short-lived.
Today, most Canadian single employer DB pension plans have large solvency deficits, and there continues to be significant focus on the large minimum contributions required to fund these deficits. What has received little attention in recent years is that there is also a cap, prescribed in the Income Tax Act, on contributions that can be […]
A unique aspect of Canada’s private pension system is that the responsibility for regulatory oversight falls primarily within the provincial domain, with the federal government having jurisdiction over minimum standards for certain industries (e.g., transportation and banking). The result is a diverse and relatively complex regulatory framework for employer-sponsored plans. Over the years, many stakeholders […]
Historically, Canadian pension accounting standards were viewed as one of the barriers encountered by employers wishing to reduce pension risk. These barriers included the ability to defer and amortize experience gains and losses, the inclusion of expected additional returns from risky assets in the expected return on assets (EROA) calculation, and the ability to use a smoothed value of assets to calculate the EROA.