Innovative Solution to Enhance Workplace Pensions Coverage
June 4, 2012
Toronto, Ontario, June 4, 2012 - Governments and stakeholders need to embrace a wide range of innovative solutions if Canada’s pension and retirement income system is to remain viable. “Too many Canadians do not have adequate access to efficient and effective plans to help them prepare for their retirement,” says Association of Canadian Pension Management (ACPM) President Chris Brown, “and it is up to governments and stakeholders to confront this issue directly. In our view, the private sector must step up and play its part.”
With this reality in mind, the ACPM is releasing its Target Benefit Plans (TBP) paper* which outlines an innovative approach designed to increase workplace pension plan coverage options for Canadians. This announcement follows the ACPM’s Institutional Defined Contribution (IDC) Pension Plan, released December 2010. These innovations stem from the ACPM’s Five-Point Plan** to improve retirement income coverage in Canada.
“Having options for accumulating retirement income is critical to Canadians,” said Mr. Brown. “We believe that viable and secure workplace pension plans remain the best solution for a large portion of Canada’s workforce in providing for their retirement needs. Our Target Benefit Plan paper puts forward an innovative concept, building upon input from numerous stakeholders, that we believe will provide another option for employers and employees to address the current shortfall in retirement income planning.”
The Target Benefit Plan (TBP) design could, at a minimum, help to manage the market and interest rate volatility behind recent workplace pension plan developments. Target Benefit Plans could help rekindle employer interest in defined benefit-type models, offer greater benefits to employees, help achieve public policy objectives of government and benefit capital markets. Target Benefit Plans, as one of a number of retirement income options, would give Canada one of the most comprehensive pension systems in the world.
While Canada’s three pillar*** retirement income system continues to be ranked as one of the best in the world, it is critical that workplace plans and individual retirement savings -- the so called “third pillar”-- be enhanced. This is widely recognized as one of the most effective ways to enable more Canadians to provide for their retirements.
To that end, the ACPM has been a strong supporter of the Pooled Registered Pension Plan (PRPP), proposed by the federal government, which we hope will soon be implemented. ACPM has also campaigned, and will continue to do so, for adjustments to certain pension rules governing defined benefit (DB) plans in order to ensure their future viability. The next step to improving the retirement income scenario is ACPM’s Target Benefit Plan paper. This document identifies contributing factors to declining employer sponsored pension plans and proposes an innovative additional option for employer and employee consideration.
“Planning for one’s retirement can be both challenging and complex,” said Mr. Brown. “It is incumbent on both governments and the private sector to provide a wide range of options tailored to the circumstances and needs of a wide range of individuals in planning for their retirements. This requires innovative solutions that make it as easy as possible for Canadians to save for their retirements. Target Benefit Plans are one such solution.”
The support for Target Benefit Plans is growing. On April 30, 2012, British Columbia introduced Bill 38, Pension Benefits Standards Act, for first reading. A key element of Bill 38 is the inclusion of Target Benefit Plans. Prince Edward Island has recently initiated Bill 41, Pension Benefits Act, which allows TBPs as well. Most recently, New Brunswick has introduced Bill 63 which contains the concept of a ’shared risk plan’. Similar legislation is expected in other provinces in the near future.
The ACPM Target Benefits Plan paper could assist governments in designing additional innovative workplace registered pension plan options for employers and employees.
“Target Benefit Plans are intended to add to, not replace, existing single employer Defined Benefit (DB) plans, as well as traditional Defined Contribution (DC) plans or new plan types like the Pooled Registered Pension Plan,” affirms Mr. Brown. “In a Target Benefit Plan, contributions and benefits are fixed according to a pre-determined formula (as in DB plans). Employers are not required to make additional contributions, and benefits are adjustable up or down should future conditions impact the amount of funding in the plan.”
The ACPM believes that Target Benefit Plans, if properly designed and implemented, can have features that may make them more appealing to employers and employees than some other retirement income arrangements and encourages governments to consider TBPs as a valuable retirement income option.
The Association of Canadian Pension Management (ACPM) is the informed voice of Canadian pension plan sponsors, administrators and their allied service providers. Our members represent over 400 pension plans consisting of more than three million plan members, with assets under management in excess of $330 billion.
(*) ACPM Target Benefit Plan Paper
(**) Improving Retirement Income Coverage in Canada ’ The ACPM Five Point Plan
(***) Canada’s three pillars are Pillars One & Two ’ OAS, GIS & Canada Pension Plan/ Quebec Pension Plan (CPP/QPP); and Pillar Three, workplace plans and individual savings
For more information contact
Director of Markeing and Communications, ACPM
Association for Canadian Pension Management
Phone: 416-964-1260 ext 223
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