Here is an interesting story out of Saskatchewan that offers an extreme example of the risks of defined benefit pension plans in the current environment.
The Saskatchewan Government and General Employees Union (SGEU) has 35 employees and a defined benefit pension plan. On January 14, 2010 the SGEU planned to increase the employee contribution to the pension plan to 54.25% of wages to help overcome funding problems. However, on January 8 the employees were able to obtain a court injunction freezing the current contribution rate of 19.6%. This contribution rate was instituted on November 5 from a previous rate of 9%. The employees claim that their employer is using the tactic of raising contribution so swiftly to pressure employees to consent to ending the defined benefit plan. The SGEU claims it is following the direction of its actuaries and the superintendent of pensions.
We will continue to follow this story as it develops.
Posted in Defined Benefit Governance, Governance.
Tagged with contribution rate, defined benefit pension plan, saskatchewan government and general employees union, sgeu.
By admin
– January 15, 2010
The 2010 limit for tax-deferred contributions to a registered pension plan is $22,450, which is equivalent to an income of $124,722.22. Persons below this limit will continue to be restricted to 18% of earnings.
Click here for a table showing the 2010 limits for various retirement plan types.
Click here for the 2010 limits for the Canada/Quebec Pension Plans and Old Age Security.
Sponsors of retirement plans will have to update their administration practices to accommodate these new limits.
Posted in Governance.
Tagged with 2010 contribution limits, CPP, Defined Benefit Plan, Defined Contribution Plan, DPSP, Money Purchase Plan, OAS, retirement plan administration, RRSP.
By admin
– January 5, 2010
On December 9, 2009, the Government of Ontario tabled legislation proposing changes to the provincial system governing private pensions.
Bill 236 stems from recommendations of the 2008 Ontario Expert Commission on Pensions.
The reforms in the Bill include:
• Clarifying the benefits of plan members affect by lay-offs and eliminating partial wind-ups
• Facilitating the restructuring of pension plans affected by corporate reorganizations
• Increasing transparency and access to information for plan members and pensioners
• Enhancing regulatory oversight
• Improving plan administration and reducing compliance costs
Click here for more information.
We are continuing to analyze the proposed changes. Stay tuned for more information and implications for Defined Benefit and Defined Contribution pension plan sponsors.
Posted in CAP Governance, Defined Benefit Governance, Governance.
Tagged with bill 236, ontario pension reform, Pension Benefits Amendment Act.
By admin
– December 11, 2009
The recent Supreme Court of Canada decision in the Kerry Case highlights the importance of sound pension plan governance practices.
According to Simon Archer of Koskie Minsky in the article Nolan v. Kerry and its Place in Pension Deliberation “Although Kerry (and others in the line of cases) will not create or erode pension plan provision in Canada, they do perhaps have the effect of putting employees and retirees on notice about the governance of pension plans and funds. These cases draw attention to the standards that will be used in managing these (very large) financial assets.”
The Court found it possible for one plan to hold both defined benefit and defined contribution components and for Plan expenses to be paid from the Trust Fund provided the proper structure and documentation are in place. From a pension plan governance perspective this demonstrates the importance of:
• taking care when drafting and amending Plan documents
• retaining accurate and complete copies of all documents
• ensuring Plan expenses are reasonable and necessary
• ensuring Plan expenses provide benefit to plan members
Note: the above commentary is not intended as legal advice.
References:
Nolan v. Kerry and its Place in Pension Deliberation
The Last Word on Kerry by Davis LLP
Blake, Cassels & Graydon articles on the Kerry Case
Posted in Governance.
Tagged with kerry case, pension plan governance.
By admin
– November 12, 2009
Proteus consultant, and Vice President, Ryan Kuruliak gave an institutional investment consultant’s perspective on real estate usage in pension plans, endowments and foundations for an article written by Jerry Moskowitz, Director of Business Development, FTSE Americas.
“Ryan Kuruliak, a vice president with Proteus Performance Management in Toronto, says that of his clients who invest in real estate, the majority use pooled (private) vehicles. “We have seen some concerns from plan sponsors regarding the drying up of liquidity in some investment products which have direct holdings of real estate,” he says. “On the other hand, although publicly listed real estate may be more transparent and liquid in comparison, it also has a high correlation to the overall equity market, which can diminish its diversification benefits.” He advises that pension plan sponsors and endowment and foundation investment committees considering real estate investment become educated about the unique characteristics and constraints of the asset class, including the fundamental difference between public and private real estate. “
For the full article, follow this link.
Posted in Investment Consulting, Real Estate.
Tagged with FTSE, NYSSA, Private, Public, Real Estate.
By Ryan Kuruliak
– November 11, 2009
More news on the pension regulation front, this time from the Canadian Federal government. Although OSFI (the Federal pension regulator) regulates only a small minority of pension plans in Canada (most plans are regulated by provincial bodies), the Feds do control the Income Tax Act, which has implications for all pension plans.
One of the proposals would see a lifting of the 10% cap on surplus for DB plans. While this would be a welcome change, the reality is it is coming about 10 years to late for most DB plans, as very few find themselves with a surplus these days.
Other changes could see stricter and more frequent reporting from Plan Sponsors to OSFI on the state of their pension plan.
The Canadian Press has a good summary of this and other aspects of the proposed changes.
Posted in Defined Benefit Governance.
Tagged with 10%, Defined Benefit, Income Tax Act, OSFI, Surplus.
By Ryan Kuruliak
– October 27, 2009
The Globe and Mail has been featuring all week, an expansive examination of the Canadian retirement landscape. Topics covered have included:
- underfunding
- sponsor bankruptcy
- coverage
- financial planning
- hybrid pension plans
- coverage for small employers
- Canadian pension from the global perspective
If you are interested in reading more, the complete series can be found here. The last part of the seven part series will be posted tomorrow.
Posted in CAP Governance, Defined Benefit Governance, Governance.
By Ryan Kuruliak
– October 23, 2009
Summary of changes
The Federal Finance Minster Jim Flaherty announced, after meetings with his provincial counterparts, proposals to make some changes to the Canadian Pension Plan (CPP). The changes are designed to increase the flexibility of the CPP and to adjust the rates for early and postponed retirement:
- Allow individuals to draw on CPP benefits early and continue working and contributing to the CPP (along with the required CPP contributions from their employer). This implies the removal of the current Work Cessation Test.
- Individuals who are 65 and older that draw on CPP, but continue to work can continue to make contributions to the CPP (along with the required CPP contributions from their employer).
- Early retirement reductions will change from 0.5% per month to 0.6% per month (phased in over 5 years, commencing in 2012).
- Individuals who wait until age 70 to commence CPP benefits would see their benefits boosted by up to 42% (from 5% per month to 7% per month), compared to the current maximum increase of 30% (phased in over 3 years, commencing in 2011).
- Increase the amount of low / no earnings years that can be dropped off of the career average earnings used to determine benefit payout (from the current 15% to 16% in 2012 and 17% in 2014).
These changes will need to be approved by both the Federal Parliament and the Provinces that belong to the CPP. Stay tuned, as we will keep you posted on the progress of the proposed changes.
Posted in Governance.
Tagged with Canada Pension Plan, CPP, Finance Minister.
By Ryan Kuruliak
– October 8, 2009
Unique Capabilities
What unique capabilities and deliverable can we expect from your firm? How will these be of benefit?
In short, you will want to see what tools are available that will assist you, as a busy fiduciary, make better decisions and monitor the investments. Leading consulting firms have the ability to make the complex intricacies of investing and distill them into a clear and concise format.
Ask yourself, will these unique services benefit the fiduciaries and will these services benefit the members? The answer of course should be YES!
Unique Tool / Capabilities
5) What unique capabilities and deliverable can we expect from your firm? How will these be of benefit?
In short, you will want to see what tools are available that will assist you, as a busy fiduciary, make better decisions and monitor the investments. Leading consulting firms have the ability to make the complex intricacies of investing and distill them into a clear and concise format.
Ask yourself, will these unique services benefit the fiduciaries and will these services benefit the members? The answer of course should be YES!
Posted in Investment Consulting.
Tagged with unique capabilities.
By Ryan Kuruliak
– September 26, 2009
Service Model
4) Describe your service model in terms of deliverables and the mechanism for delivery?
As a fiduciary will want to know what to expect from your consultant, in terms of level and detail of reporting. Who will attend meetings to present reports and discuss results. You will want to ensure that the service model aligns with your requirements (i.e. is it designed to encourage long-term relationships?, is it project orient?, is designed to maximize their profit and promote short term thinking?) and that the process the consultant uses to make recommendations is transparent.
Posted in Investment Consulting.
Tagged with alignment of interests, service deliver, service model.
By Ryan Kuruliak
– September 24, 2009
