Canada's actuaries see federal interest in target benefit pension plans as a positive development
OTTAWA, April 25, 2014
OTTAWA, April 25, 2014 /CNW Telbec/ - Yesterday's announcement on target benefit (TB) pension plans by Minister of State (Finance) Kevin Sorenson is seen as a potential game changer by the Canadian Institute of Actuaries (CIA). The Institute's members—recognized experts in this field—have been calling on governments to adopt a regulatory framework that opens the door to implementing TB plans. There is strong interest in this type of risk-sharing instrument that features fixed contributions and relatively foreseeable pension benefits.
CIA President Jacques Lafrance said, "Canadians' rising longevity and an environment of low investment returns over a long period are just two critical factors impacting the retirement savings world. Yesterday's announcement about providing new tools and developing more adaptable approaches through TB pension plans is very welcome.
"While the CIA does not favour TB plans over other types of designs, they do represent another option in the toolbox available to employers for designing pension plans that suit their needs and those of their employees.
"TB plans offer considerable flexibility for plan sponsors and members. The consultation on the direction of eventual federal legislation and regulation is a positive step forward. Canada's actuaries have been giving these plans considerable thought in the last few years, and we will be putting together a comprehensive submission to the Government.
"My prediction is that the Government will be presented with many comments. Getting the TB framework right may seem a very challenging task. However, we believe that the Government will need to avoid creating a framework that is too restrictive. The key will be to ensure that the plan provisions are clearly communicated to plan members, especially the conditions governing how benefits will be increased or decreased. Moreover, the new legislation will need to clearly allow TB plans regardless of the type (multi-employer, single employer, unionized, non-unionized, etc.). With a bottom line of increasing pension coverage by allowing new plan designs that are somewhere between traditional defined benefit and defined contribution plans, all stakeholders should be engaged in this effort and supportive of it."
The Canadian Institute of Actuaries is the national organization of the actuarial profession. The Institute is dedicated to serving the public through the provision, by the profession, of actuarial services and advice of the highest quality. In fact, the Institute holds the duty of the profession to the public above the needs of the profession and its members.