The Changing Parametersv1bpm.com/02_archives/2014/04_Apr/Digital_Issue_BPMapr14.pdf · Sylvie...

1 Go to page 3 CONTENTS

The FronTier

MarkeT GrowTh

Curve pg 26

MenTal healTh

work in ProGress pg 34

reTiree BeneFiTs:

are ChanGes

iMPossiBle? pg 38

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Benefits and Pensions April 2014Volume 24, Number 2

The Canadian Magazine of employee Pension Fund investment and Benefits Plan Management

The ChangingParameters

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April 2014 | Benefits and Pensions Monitor 3

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DeParTMenTs4 EDITORIAL

6 PEOPLE

8 NEWS

10 TREND SPOTTINg

12 HEALTH MATTERS

43 CONfERENCES

45 LETTERS

46 THE BACK PAgE

FeaTures14 ADVISOR INSIgHT reMeDiaTinG risinG BeneFiTs CosTs karen e. Treml

18 SPECIAL REPORT ON RISK CarPe DieM! andrew Janz

20 De-riskinG The oDDs oF livinG Too lonG lorraine allard

22 DeFininG risks Bruce Curwood & heather Myers

24 usinG sPeCial risk To Fill-in eMPloyee BeneFiTs insuranCe GaPs linda waldherr

26 INVESTMENT riDinG The FronTier MarkeT GrowTh Curve: FinDinG oPPor- TuniTies while liMiTinG risk Gerhard Pries

28 DC PENSIONS reThinkinG reTireMenT: a Fresh aPProaCh For a new era Philippe Toupin

30 VRSPS insurers PrePare For ManDaTory PrPPs Joe hornyak

34 MENTAL HEALTH work in ProGress: exPanDinG The noTion oF workPlaCe healTh anD saFeTy To inCluDe MenTal healTh louise Bradley & Charles Bruce

36 WELLNESS wellness keePs aGinG workForCe younG serafina Morgia

38 BENEfITS reTiree BeneFiTs – are ChanGes iMPossiBle? rachel M. arbour

40 BENEfITS sPousal Pension BeneFiTs – vesTiGes oF a ByGone era Marilyn lurz

42 BENEfITS iMProvinG The GrouP DenTal Plan ross Perry

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| EDITORIAL |

Just over a year ago, the Mental Health Commission of Canada (MHCC), along with some private partners, launched the world’s first ‘National Standard for Psy-chological Health and Safety in the Workplace.’

The standard was designed as a solution to combat mental health incidents in the workplace for small, medium, and large businesses across the country. Similar to health and safety standards designed to protect an employee’s physical safety, the intention of the standard is to do the same for mental health. It provides a framework that includes resources to help organiza-tions promote mental health and prevent psychological harm.

In some ways, that point is being obscured and much of the attention at various seminars and events is, instead, focusing on identifying workers suffering from mental difficulties. For example, at an Employee Assistance Program Association of Toronto (EAPAT) session, a retired member of the Canadian Armed Forces discussed how one of the biggest challenges is not just the stigma attached to mental illness, but overcoming the self-stigma which keeps victims from coming forward.

While very important, the point was missed.

Under AttackAre we trying to put employers in the role of identifying

those in their workplace with mental health issues, or are we trying to create workplaces where employee psyches are not under attack? In their article on page 34 of this issue, ‘Work In Progress: Expanding The Notion Of Workplace Health And Safety To Include Mental Health,’ Louise Bradley, pres-ident and chief executive officer of the Mental Health Com-mission of Canada, and Charles J. Bruce, chief executive officer of the Nova Scotia Public Service Long Term Dis-ability Plan Trust Fund, make the point that the standard is designed to assist employers in protecting the mental health of employees.

So clearly the intent is to prevent these incidents, not identify them. Indeed, prevention is more important than identification. First, there is the moral issue. People should be able to go to work and do their job without facing pressures that are damaging them mentally and emotionally, just as they should be able to expect to go to work and come home each day without suffering some sort of serious physical injury. There are the legal considerations as courts have been finding employers liable in cases where the employee can show they are a cause of their mental illness. Of course, there is the financial side. The estimates are that mental illness costs Canadian businesses $20 billion annually.

Pay For TreatmentHowever, by focusing on detection rather than prevention,

we also raise the possibility of who is going to pay for the treat-ment of these individuals once detected. What will an employer facing steep benefit plan costs do about the costs associated with the treatment for these individuals? We could see a shift of focus with disability issues associated with mental health becoming productivity issues. Instead of treatment, the solution could become termination.

Clearly, the real goal of the standard is prevention and that is where the focus should be and where the real benefits can be realized from productivity, employment, and societal viewpoints. BPM

Prevention, not Detection real GoalBy: Joe Hornyak, Executive Editor

Volume 24, Number 2 April 2014

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| PEOPLE |

Couture Newton

Koo Perlman

Aarssen Crowley

Wright Mayrhofer

Kremer gallant

SLIChris Wright is vice-president, institu-tional sales, central Canada, at Standard Life Investments. Previously he was vice-president, business development, at Aurion Capital Management and, prior to that, he was vice-president, institu-tional sales, at Fidelity Investments.

Aon HewittJames Koo is a partner in the retirement consulting practice at Aon Hewitt. Most recently, he served as vice-president and chief risk officer for Canada and employee pensions at Sun Life Financial.

BuckRenée Couture is retirement practice leader in Canada for Buck Consultants, A Xerox Company. Most recently, she was vice-president at the National Hockey League Pension Society where she over-saw the administration, communication, and governance for all of its pension plans. She has also worked at Canada Post as director of benefits and pension policies and pension director of regulation, compli-ance, and member information.

OMERSPatrick Crowley is executive vice-president and chief operating officer of OMERS. He joined OMERS in December 2006 and served as executive vice-presi-dent and chief financial officer until taking this post. Prior to joining OMERS, he was CFO of ATI Technologies Inc. Jonathan Simmons is executive vice-president and chief financial officer. He brings more than 20 years of experience in financial ser-vices to this role. Prior to joining OMERS, he was a partner at PwC for more than a decade. Kent Thexton is managing direc-tor of OMERS Ventures, the venture capi-tal investment arm of the OMERS pen-sion plan. In this role, he is responsible for leading investment activities in the North American market focusing on high-growth companies in the technology, media, and telecommunications sectors.

Great-West LifeJeff Aarssen is senior vice-president, group retirement services, at Great-West Life. Most recently, he was vice-president, sales and marketing, for group retirement services. He joined the firm in

She joined the firm in 2007 as a marketing specialist and was, most recently, man-ager, marketing and communications, for group retirement services.

Newton HR Law Mark Newton has launched Newton HR Law. Formerly a partner with Heenan Blai-kie, his new firm offers specialist legal coun-sel to employers and law firms in the area of pensions, benefits, and compensation. He is also a member of the Benefits and Pensions Monitor editorial advisory board.

Medavie Blue Cross Anthony Perlman is vice-president, group business Ontario, at Medavie Blue Cross. Most recently, he was a sales leader – health and group benefits at Towers Watson.

BMODenis Senecal is senior vice-president and CIO, fixed income, at BMO Finan-cial Group. Most recently, he was vice-president, head of fixed income and cash, at State Street.

Sun LifeJackie Gallant is assistant vice-president, institutional marketing, at Sun Life Invest-ment Management Inc. She has been with the firm since 1997, most recently as assis-tant vice-president, marketing and com-munications, group retirement services. Jennifer Elia is assistant vice-president, health and wellness, market development, at Sun Life Financial. In this role, she will lead its organizational and employee health and wellness mandate.

CenturionStephanie (Charette) Kremer is vice-president, business development and institutional sales, at Centurion REIT. Most recently, she was an institutional relationship manager at Sionna Invest-ment Managers. She also has experience with RBC Dexia Investor Services and Invesco Trimark. BPM

1997 as a vice-president in individual dis-tribution and prior to that spent 17 years at its London Life subsidiary. Jennifer Mayrhofer is director, group retirement services, marketing and communications.

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Consider the alternatives.Invesco has.

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Faced with low bond yields and volatile equity markets, a growing number of plan sponsors are turning to alternative investment strategies to enhance returns and reduce risk. Alternatives currently make up 19% of global pension fund assets, compared to just 5% in 1997.†

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| NEWS |

commitment of $450,000 to support Money Matters, a financial literacy pro-gram helping adult Canadians improve their knowledge and confidence around finances and money management. Launched in 2011, it brings TD employ-ees into community learning centres across Canada as volunteer-tutors to teach Canadian adults about numeracy, money management skills, and educa-tional savings opportunities. “It is evi-dent that these programs are making an impact, but there is still work to do,” says Linda MacKay, senior vice-presi-dent, retail savings and investing.

DB Retiree Spending Boosts Economy

Ontario defined benefit retirees spend approximately $27 billion a year on goods and services, creating employ-ment and boosting the economy, says a Healthcare of Ontario Pension Plan (HOOPP) white paper on retirement ade-quacy. ‘Retirement Income Crisis: Inevi-table or Avoidable? The Economic Real-ity’ shows they also contribute approxi-mately $3 billion a year in income taxes and a further $3 billion in sales and prop-erty taxes. “The white paper shows the importance of retirement security. Cer-tainty about income means people are more willing to spend their money on goods and services,” says Jim Keohane, HOOPP’s president and CEO. BPM

Real Estate On Upswing

Real estate around the world is on an upswing, presenting a golden opportu-nity for Canadian investors to diversify away the risk of being overly exposed to their home market, says Richard John-son, managing director of UBS Global Asset Management. Participating in a Globe and Mail report on the risks asso-ciated with Canada having one of the hot-test commercial real estate markets in the world, he said with most Canadian insti-tutional real estate investment focused on domestic real estate, “pension funds could be seriously over-exposed in the event of a downdraft in the market. At the same time, we are expecting attrac-tive returns over the intermediate term in some markets in Europe and Asia, so this is an excellent time to think about diversification and look at opportunities in those markets.”

Time Past To Save DBThe horse has long since left the barn when it comes to saving defined benefit pension plans, says Priscilla H. Healy, a consultant at Fogler, Rubinoff LLP in the area of pensions and benefits. Writ-ing in its ‘Pension Alert,’ she noted that at a recent Healthcare of Ontario Pen-sion Plan session, the Boston Consulting Group advocated employer-sponsored defined benefit plans as benefiting not only individual plan members, but also the economy. She says while DB plans are superior retirement vehicles to DC plans or RRSPs, employers will not establish new DB plans for a number

of reasons including accounting rules, over-regulation, and surplus rules. If private sector employers will not spon-sor DB plans, the logical response to the HOOPP advocacy of DB plans is a fairly substantial increase of the CPP on a defined benefit basis.

Wait Time Cost Canadians

Canadians lost a combined $1.1 billion, or an average of $1,202 per patient, as a result of lengthy waits for medically necessary healthcare in 2013, says a Fra-ser Institute study. ‘The Private Cost of Public Queues for Medically Necessary Care’ calculates the average value of time lost during the work week for each of the estimated 928,120 patients wait-ing for surgery in Canada last year. “The negative impact of wait times on the productivity of patients and their ability to participate fully in life is an issue too often ignored in the healthcare debate. Reduced productivity in the workplace, or reduced ability to engage with fam-ily and friends, may impact family income and increase stress for Canadian patients,” says Nadeem Esmail, study author and the institute’s director of health policy studies.

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Hedge Fund Assets To Rise

Institutional investors predict hedge fund assets under management will increase by 12 per cent to a record $2.8 trillion this year, says Credit Suisse’s annual hedge fund investor survey. This would result in an additional $300 billion in assets to the industry, from both perfor-mance gains and new capital inflows. “Investors were also more optimistic about performance of the overall hedge fund industry, increasing their expecta-tions for returns this year,” says Robert Leonard, managing director and global head of capital services.

New Tables Increase Liabilities

New mortality tables for defined ben-efit pension plans will increase U.S. pension liabilities, says a Russell Investments research paper. ‘How Will the New RP-2014 Mortality Tables Affect My DB Plan Strategy?,’ says the new tables, which were produced by the Society of Actuaries, reflect the longer lifetime of plan participants. Longer lives for participants means total expected benefit payments will increase, as will plan time horizons. Other effects of the new mortality tables include higher employer contri-bution requirements and lower balance sheet funded status.

Risk Buyout Products Rising

Sales of pension risk buyout prod-ucts topped $3.8 billion in 2013, says a LIMRA Secure Retirement Institute (SRI) survey. This represents the best sales year for these products since 1999, with the exception of 2012 when General Motors and Verizon trans-ferred their group pension obligations causing sales to spike to $35.9 billion for the year. In a year-to-year compari-son, 2013 sales represent a decrease of 88 per cent. However, if the GM and Verizon deals are excluded, sales in 2013 increased compared to 2012. An improved interest rate environment in 2013 enabled more companies to make gains on full funding of their pension plans, a prerequisite to consider a pen-sion risk transfer.

Smart Beta ETF Use Rises

Institutional investors report they are increasingly using smart beta exchange traded funds (ETFs), says a study by Cogent Research, a division of Market Strategies International. The results reveal that more than half (53 per cent) of insti-tutional decision-makers will increase their use of smart beta ETFs over the next three years – higher than any other ETF category, including market-cap weighted ETFs (48 per cent). BPM

Capital Market Growth Fuels GDP

Growing capital markets by one-third could fuel a long-term real growth rate in per-capita GDP of around 20 per cent, says research by two academics commissioned by AIMA. The paper, by Christoph Kaserer, professor of finance, chair of financial management and capi-tal markets, at the TUM School of Man-agement in Munich, and Marc Steffen Rapp, professor of finance, accounting and finance group, school of business and economics, at Philipps-Universität Marburg in Germany, says capital mar-kets are significant drivers of economic growth and increasing their size could compensate for the post-financial crisis decline in bank lending. It finds that cap-ital markets support economic growth by providing new sources of funding for long-term investment and facilitating improvements in corporate governance.

DC Tax Treatment Overhauled

The UK government plans to overhaul the tax treatment of defined contribution pen-sion funds and the way savers can begin the decumulation of pensions. It has removed the tax surcharge for DC members wish-ing to withdraw their full savings, charging only the normal income tax rate. Capital rules allowing savers to access retirement products other than annuities or capped drawdown were also removed. The new system would offer consumers greater flexibility to choose between retirement options of annuities or drawdown or to use a combination of the two.

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| HEALTH MATTERS |

The Magic of MassageBy: Caroline Tapp-McDougall

Throughout many parts of the world, massage ther-apy has become widely recognized as an effective way to treat soft tissue pain and disability in people of all ages. It has earned its place as an integral part of many employee benefits programs.

Interestingly enough, the word ‘massage’ itself is from the Arabic root ‘mass h,’ which means to touch, knead, or squeeze. The oldest written documents recording the therapeutic benefits of massage date as far back as 4,000 years ago to about 1800 BC where treatments are mentioned in a Chinese medical text Con-Fu of the Toa-Tse.

Benefits Of Massage TherapyMassage therapists are regulated health professionals in

many parts of the country and work in collaboration with phy-sicians, dentists, chiropractors, physiotherapists, and other healthcare professionals. It is said that there are currently over 70 massage modalities practiced in North America – from Swedish massage to reflexology.

There are proven benefits that can be realized for those who receive regular massage therapy treatments. Whether it’s a moment of relaxation, a need to reduce muscle tension, to attain relief from chronic pain, or a goal of stress reduction, research shows that a therapeutic massage can enhance the overall sense of emotional and physical well-being as well as quality of life.

While therapeutic massage benefits those who have been in motor vehicle or certain industrial accidents and those who are unwell for other reasons, its additional strength lies in sup-porting health and wellness, disease and illness prevention, and

ongoing stress reduction. Research is now showing that mas-sage should be an important part of a person’s health mainte-nance plan because it has the ability to: Reduce or eliminate pain Improve joint mobility Improve circulation Improve immune system function

Newly Understood ApplicationsToday, the stretching, remedial exercise and gentle mobiliza-

tion techniques of massage that are known to reduce stiffness and bring relief to aches and pains are also being touted as an effective treatment for a variety of additional conditions: Depression and Anxiety: At any time, one in 20 of your

employees will be experiencing depression, according to the Canadian Mental Health Association. Recent research has shown promising results for the reduction of anxiety and to a lesser extent depression.

Hospice Care: While healing at the end of life is an intensely personal and subjective experience, massage is often a posi-tive and integral part of holistic hospice palliative care. Feed-back has indicated that palliative residents who received a treatment were more relaxed and reported they slept better.

Alzheimer’s Care: With the aging population, many of your employees will be caregivers for aging relatives. The power of touch in Alzheimer’s care can function as a therapeutic tool to provide reinforcement of verbal or non-verbal communication.

Massage Therapists As Resource Massage therapists are primarily self-employed health profes-

sionals, working in a variety of settings from massage therapy clinics and chiropractic offices to private practice, rehabilitation centres, health spas, fitness clubs, long-term care facilities, com-munity health clinics, and hospitals. Many local massage therapists are willing to provide workplace treatments if you are able to offer employees flexible schedules and a private treatment area.

Today with the emergence of ‘preventative medicine,’ modal-ities such as massage are no longer considered alternative, but rather cornerstones of good personal care and well-being. Widely available and frequently covered by employee benefit plans, it’s wise to encourage your employees to incorporate the magic of massage into their health and wellness plans. BPM


Caroline Tapp-McDougall is the publisher of Solutions: Canada’s Family Guide to Home Health Care and Wellness and the author of The Complete Canadian Eldercare Guide.


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remediating rising Benefits CostsBy: Karen E. Treml

The rising costs of benefits can be man-aged through a number of means, says Jeffrey Stinchcombe, a partner with Health Source Plus. These can include

altering the funding model, implementing wellness initiatives, increasing employee awareness, and promoting good con-sumerism.

A good place for companies to start, he says, is to assess and understand a main metric – their cost per hire, per year, per line of benefit. It is easy to see that costs have gone from say $250,000 last year to $350,000 this year, but what is the nominal cost per hire? Were more people hired? Did other changes occur? In other words, perhaps the cost per hire actu-ally went down, says Stinchcombe. “Good reporting helps to mea-sure real costs by showing cost per certificate by line of benefit. This outlines whether the cost went up per hire.”

Funding ModelsOnce costs are

assessed and the increases are understood, a company can then undertake to manage the increases. One way is through funding models. There are two types of benefits – pooled benefits such as life, LTD, and travel, which are unknown, and experience rated ben-efits such as health, drug, dental, and vision, which are ‘dollar in and dollar out’ and, therefore, known. With experience rated benefits, there are many ways to fund those other than buy-ing insurance. One could opt for administrative services only, retention accounting, or to remain fully insured, but negotiate all the cost factors – administration fees, inflation factors, and trends – built in. Each of those funding models has levers within it that can be negotiated including moving from one model to another. This a change in benefits, says Stinchcombe, as groups are moving from fully insured to administrative services only

and, in many cases, permanently save between five and 30 per cent. Renewal time is always a good

time to analyze all of the funding models and determine which one may be best.

Wellness WorksRising costs can also be impacted

through wellness programs. If an employer wishes to keep the benefits plan the same, he can focus on the health

of his employees through well-ness as a method to help control

cost escalation in the com-ing years. For example, if

an employer can get one person to quit smoking, two people to lose 10 pounds, and five people to de-stress through an active engagement, pro-

active wellness program, it stands to reason the employer will have lower drug costs over the com-ing years.

Employee communi-cation can also mitigate rising benefit costs. In many cases employ-ees do not know that employers are the ones paying for the drug and the dental. They think an insur-

ance company pays for those things, says

Stinchcombe. What is true is that the insurance

company adjudicates the claims, but at the end of the day, it is the employer paying the cost plus an administrative fee. “What we try to do is educate employees that the cost is being borne by their employer and it often surprises them. Then we advise them on what they can do to help control costs.” For example, instead of getting a 30-day supply of drugs, get 90-day supplies which reduces the cost of dispensing fees. As well, different pharmacists charge different fees and employees can be encour-aged to shop around for the best price. This can lower fees by as much as 60 per cent.

“What we try to do as practitioners in communications for employers,” says Stinchcombe, “is to help engage employees to become better consumers and, therefore, assist in being part


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of the solution.” In effect, it involves moving the employees from a mindset of entitlement to one of consumerism through repetitive employee engage-ment sessions both in person and online, as well as through things like corporate intranets, which are becoming popular.

Shopping AroundAnother, often very effective, means

of controlling costs is to shop the mar-ket. “A lot of people think there are only three real group carriers out there because they bought everybody and, in fact, they do own about 80 per cent of the market. But there is still a lot of com-petition inside the group market where you can shop it out and find a new group insurer to create a relationship for the long term.”

One of the big emerging trends in Canadian benefits is third-party admin-istration (TPA). Plan sponsors tend to engage insurers on a silo basis. How-ever, this means if they want to change insurers, they have to change every-thing. What TPAs do is work through an administrative platform which deals

with all the insurers at the same time. Employers can buy their life insurance from one, their LTD from another, and their health and dental from yet another. But they will only have one point of con-tact, one enrolment, and receive one bill from the TPA.

Value AddsEven with rising costs, employers can

seek out value adds. It is easy for compa-nies to spend literally hundreds of thou-sands of dollars on benefits. The average employer will spend about $4,000 per benefit per year. Multiply that by 100 employees and the cost approaches half a million dollars. When spending a half a million dollars on anything, people are going to ask what value they are getting for their money. Stinchcombe says insur-ers are starting to include value added items to their offerings in order to entice employers to buy their half million dollar basket of goods. “We are seeing every-thing from embedded travel insurance with complimentary cancellation insur-ance to embedded employee assistance programs inside the LTD packages,

which used to charge employers on a per employee, per month basis. We are also seeing embedded medical second opin-ion and wellness programs at no charge. These types of offerings can add value for the employer.”

While getting the most bang for the buck is important and value adds can sweeten the pot, undoubtedly the costs of benefits will continue to rise. Stinch-combe says this makes it more impor-tant for employers to know their nomi-nal cost per hire in order to help them properly assess and understand their true benefits costs. Once those costs are determined, they can more accurately weigh the viability of various fund-ing models, wellness programs, and employee education, as well as shop around in an effort to budget for and remediate their costs. BPM


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As the previous 2008 financial crisis was labeled the defined benefit pension plan’s perfect storm, 2013 illustrates what happens when the exact opposite occurs. Interest rates, one of the main drivers of a defined benefit plan’s financial

health, experienced a long awaited material increase in early May, with the long Government of Canada benchmark gaining approximately 0.9 per cent. At the same time, the Cana-dian equity market returned 13 per cent and global equity markets gained 35 per cent in Cana-dian dollar terms.

Consequently, the result for a typical pension plan invested in a traditional asset mix of 60 per cent equities and 40 per cent universe bonds is a decrease in the solvency liability of approximately nine per cent while the asset portfolio returned 16.5 per cent over the year. These returns mean that for a plan which started the year with a 75 per cent solvency ratio, the funded status improved by over 21 per cent to approximately 96 per cent due solely to mar-ket forces. We also observed a similar positive outcome on an accounting basis, where, for the same typical plan, the account-ing funding ratio improved by approxi-mately 20 per cent over the year.

It may not ever feel like a good time to de-risk, but it is always a good time to consider a liability-driven investment (LDI) policy.

Inherent RisksOver the last few years, many plan sponsors have begun to

take steps to evaluate the inherent risks within their plans. This led to a review of their investment beliefs and values towards

achieving the long-term viability and success of their plans. The key result was shifting the focus

from managing the pension plan assets with an emphasis on achieving strong

returns to managing assets with an emphasis on risk in order to

meet the pension promises made to the participants

of the plan. However, in light of these discus-sions, some decided to stay on the sidelines hoping for the markets to revert back to more normal levels both in terms of interest rates and equity markets, in addition to waiting for a stronger funded posi-

tion.With the strong equity-

market returns seen in 2012 and 2013 and higher

interest rates, this coming year presents plan sponsors

who have yet to act with the opportunity to put these revised

beliefs into actual investment and risk management decisions and to begin imple-

menting policy changes.

Few MisconceptionsThere are a few misconceptions when it comes to liability-

driven investing. Often, it is thought of as immunizing (a very tailored asset structure and/or annuity contracts) your plan assets to your liabilities or buying long bonds. LDI is also thought to imply de-risking, but it’s actually about understand-ing the risks taken and, more specifically, about designing an investment policy for plan assets that is based on the liabilities of the plan; the assumed/expected outcome should not defer the very valuable discussion.

Assets are set aside in advance for the purpose of paying the benefits to the members in the future. These benefits, which become the plan liabilities, can be modelled and predicted and thus we can understand some of their characteristics and their behaviour in different circumstances. In theory, each plan would select the investment policy that, when linked with their benefit policy and funding policy, provides them with the most appropriate position on the risk/reward spectrum relative to meeting their various objectives.

By: Andrew Janz

SPECIAL REPORT ON RISK



The key is to define risk and reward appropriately. Risk, for a pension plan, is the possibility of having to increase con-tributions and/or having to cut member benefits. These risks are often directly related to the plan’s ability to withstand an adverse event and still maintain a strong financial position. Often, risk needs to be evaluated using the time horizon imposed by regulatory require-ments, balanced by longer time hori-zon goals for long-term planning, such as achieving good long-term returns. This differs significantly from the gen-erally used asset-only framework for risk which defines risk as the volatility of the returns of the asset portfolio. The ‘reward’ portion of the risk/reward bal-ance will vary by plan, but examples of possible goals may be to lower expected costs, manage funding volatility, or to provide higher benefits.

Liability-driven investment policies generally lead to customized solutions. The customization is specific to the plan’s liabilities as well as the desired goals and risk tolerances of the stake-holders involved. This customization, while a significant benefit versus an ‘off the shelf’ approach, also creates the difficulty of identifying a similar peer group for monitoring the performance of the strategy and the managers. This con-cern can be mitigated by defining a com-prehensive set of benchmarks for both specific managers and the total plan. Another potential challenge that comes with implementing an LDI policy is the potentially increased amount of required governance. There are mitigants to this – for example, time spent reviewing active managers and replacing them with new managers might be better spent on more strategic policy issues. A reallocation of the governance budget might help.

Since LDI is a different way of approaching the investment policy, there may need to be some upfront education provided in order to fully understand it. While this may lead to an initial chal-lenge, over the long run, it leads to better plan governance and, hopefully, to better decision-making.

It is key to realize that LDI is a long-term approach and must remain dynamic. Ongoing analysis with the help of LDI specialists ensures that the strat-

egy stays in line with the evolving goals and status of the plan as well as changing market conditions.

LDI FrameworkWithin the LDI framework, invest-

ments are sometimes split into two groups: liability-hedging assets (LHA) and return-seeking assets (RSA). As plans across Canada have begun imple-menting revised investment policies following asset/liability investment policy reviews, we’ve seen a number of changes. Chart 1 lists a few of the changes for the two groups.

We have also seen plans transfer assets between the two groups primarily from return-seeking to liability-hedging assets. Generally, many of the changes lead to lower risk (relative to the liabili-ties), but that may just be an outcome of the move away from an inefficient 60/40 (equity/bond) asset mix. Generally, the 60/40 asset mix contains a significant amount of interest rate exposure as well as public market equity risk.

The first step would be to discuss the topic of liability-driven investing with your advisors to obtain more informa-tion. Liability-driven investing requires a change in beliefs and a clear under-standing of goals as you work towards creating an investment policy that reflects those beliefs and objectives.

Some of the initial wide-ranging questions your committee will have to consider are:

What are your goals?• minimize future contribution vola-

tility• provide ad-hoc benefits to members

What set(s) of liabilities are important to your plan and beneficiaries?• going-concern versus solvency

versus accounting versus multiple What is your acceptable risk tole-

rance level and how is this defined?• over a three-year horizon, the like-

lihood of the funded ratio decreas-ing by 15 per cent is less than five per cent

• over a five-year horizon, the like-lihood of the contribution rate exceeding 12 per cent is less than 10 per cent

Liability-driven investing should be seen as an approach to developing a plan’s investment policy rather than a specific asset mix. It will lead to a better under-standing of the interworking of a pension plan, specifically its risks. As such, plan sponsors would benefit from discussing its implications as well as obtaining addi-tional education from an LDI specialist in order to make an informed decision that is in the best interest of the plan. BPM

Liability-Hedging Assets Return-Seeking Assets

Moving to a long bond portfolio/lengthening the duration of fixed income assets

investing in income producing alternative invest-ments (e.g. infrastructure equity and real estate)

Managing to a target duration or target hedge ratio

allocating some of the equity allocation to low volatility equity funds or other smart beta strategies

Changing the sector mix within the fixed income assets to be customized to the plan’s goals and risk tolerances instead of being based on market-based indices

re-examining the allocation/split between Canadian equities and foreign equities

utilizing alternative fixed income investments (e.g. infrastructure debt and mortgages)

adding other alternative investments

utilizing derivative instruments

Chart 1LDI Framework

Andrew Janz is director, liability driven investment, at Fiera Capital.



De-risking The odds of living Too longBy: Lorraine Allard

De-risking and its techniques are the newest kids on the ‘buzz-word’ block. De-risking, broadly speaking, refers to the mitigation of various risks associated with pension plans. This primer focuses on de-risking strategies

for defined benefit pension plans which have received the lion’s share of attention to date.

A given de-risking technique will rarely address all risks in full. Many techniques may address a risk only partially and some may even generate a new risk. For example, one of the better known de-risking techniques consists of closing a DB pension plan to new entrants, freezing the existing participants’ DB service, and, sometimes, earnings,1 and adding a defined contribution component for existing and new participants. Con-versions to shared risk and target benefit plans are also part of the jargon. However, such conversions do not deal with the risks associated with the DB liabilities already in existence.

In August, the Office of the Superintendent of Financial Institutions, the regulator that oversees federally-regulated pen-sion plans, issued a draft policy on a de-risking technique which

is new to Canada – the use of longevity insurance and longevity swaps. This is the first policy statement of its kind from a Cana-dian pension regulator.

The following is a review of some de-risking techniques, particularly longevity insurance and swaps, and the risks that they are meant to deal with. Buy-outs

Although you may not recognize the term, buy-outs are a well-known de-risking technique. A buy-out is simply an annu-ity purchase. In a buy-out, the plan transfers assets and liabili-ties to an insurer. For funding purposes, the buy-out locks in the plan’s funded status2 and, for accounting purposes, these assets and liabilities are consequently removed from the plan’s bal-ance sheet. A buy-out deals with two major risks – investment risk and longevity risk.

Investment risk is easy to understand. It is the risk that the investment return on plan assets will be lower than the return which was assumed in determining plan contributions. Longev-ity risk is also easy to understand. It is the risk that plan partici-pants will live longer than assumed based on the mortality tables






used in determining plan contributions.A buy-out does not eliminate the risk

to the plan where the insurer, in the event of its eventual insolvency, cannot pay the annuities purchased (the counterparty or default risk). The counterparty risk is one which will be born either by the plan participants or the sponsoring employer. Unless legislation grants an effective dis-charge to the plan sponsor,3 the employer may remain liable for the difference on the theory that a pension is part of the terms of the employment contract and constitutes a form of deferred wages, while the pension plan is merely a means of funding and delivering the pension. Making sure that Assuris protection is available for the whole pension mitigates the risk for both the participants and the administrator/employer.4 Generally, this is accomplished by layering the annuity coverage, so that any one policy does not exceed the Assuris coverage limits. Buy-ins

A buy-in is a form of investment where the plan holds, as an asset of the plan, an insurance contract which it pays for with an up-front premium. The insur-ance contract pays to the plan a stream of annuity payments that matches the pen-sion payable by the plan. This de-risking technique has no impact on the invest-ment risk, but takes care of the longevity risk since the insurance contract guar-antees payments even if the recipients live longer than expected. The plan and, ultimately, the employer are subject to a counterparty risk.5

Longevity Insurance And SwapsIn both longevity insurance and lon-

gevity swaps,6 the pension plan makes fixed periodic payments to the insurer or other counterparty and receives from the insurer or other counterparty peri-odic payments. These periodic payments are equal to the difference between the plan’s expected mortality experience and its actual mortality experience and, therefore, vary, or ‘float,’ over time.

In the case of longevity insurance, the counterparty is an insurance company. In the case of a longevity swap, the coun-terparty is typically an investment bank and a reinsurer.7

Longevity insurance and longevity swaps are meant to deal with longev-ity risk, while the administrator retains

the investment risk. The plan and, ulti-mately, the employer are subject to a counterparty risk. Since a plan will likely ‘outlive’ a longevity swap contract, there is also the risk that the pension plan will cease to be protected against longevity risk when the swap contract comes to an end and may not be able to enter into another longevity swap contract or at least not one with the same terms.

The draft policy refers to longevity insurance/swap contracts as “longevity risk hedging contracts” and identifies two types of such contracts – index-based and indemnity-based contracts. Index-based Longevity Risk Hedg-

ing ContractsIn this type of longevity insurance/

swap, the periodic payments to the plan by the counterparty are based on a mortality index. If the plan’s mortality experience reflects longevity beyond the mortality index, the longevity risk will be only partially covered. This is what is known as ‘basis risk.’ If the plan’s mor-tality experience consistently reflects longevity short of the mortality index, the plan will technically have overpaid for the protection afforded by the lon-gevity insurance/swap. Indemnity-based Longevity Risk

Hedging ContractsIn this type of longevity insurance/

swap, the periodic payments made to the plan by the counterparty are based on the plan’s actual mortality experience. Because the counterparty assumes the full longevity risk, there is no basis risk, but there is a risk, if the plan’s mortal-ity experience reflects longevity short of what was assumed, that the plan will tech-nically have overpaid for the protection afforded by the longevity insurance/swap.

In order to comply with privacy requirements, the plan administrator must be careful that the data used to determine the plan’s mortality experience is anony-mized, and that the terms of engagement of third-party service providers auditing the plan’s mortality experience also com-ply with privacy requirements.

Legal ConsiderationsDe-risking techniques vary in com-

plexity and sophistication. As a mini-mum, they all require a review of, and possibly amendment to, the plan’s terms

and statement of investment policies and procedures. The more esoteric tech-niques, such as buy-ins and longevity insurance/swaps, require a great deal more than that if the plan administra-tor wishes to ensure it is discharging its standard of care. The draft policy, although not dealing fully with the legal complexities, does identify some of the key considerations inherent in longev-ity insurance/swaps such as understand-ing the counterparty risk and whether and how longevity contracts may be amended or terminated.

Entering into this type of contract is not for the faint of heart. Longevity risk solutions can take months to negotiate and the key is to ensure that the structure and documentation is commensurate with the objectives. Any plan admin-istrator contemplating such techniques would be well advised to seek advice from counsel having knowledge of, and experience in, this area. BPM

1. For a discussion of ‘hard’ and ‘soft freezes,’ please refer to my August 27 primer ‘To Freeze or not to Freeze.’

2. As a consequence of low solvency ratios, buy-outs have not been popular in recent years.

3. There is no such discharge in any Canadian pension standards legislation.

4. Life insurance companies authorized to sell insurance policies in Canada are required, by Canadian insurance regulators, to become a member of Assuris, a not-for-profit organization which is funded by the life insurance industry. Assuris provides that, should the life insurance company paying a life annuity policy fail, the policy will be transferred to a solvent company and, on trans-fer, the annuitant is guaranteed the higher of $2,000 per month and 85 per cent of the monthly income benefit.

5. The Canadian Wheat Board recently purchased from Sun Life Financial an indexed buy-in annuity, which was described as the first of its kind in Canada.

6. Although Canadian pension plans have yet to enter this market, longevity insurance/swaps are being used in Europe.

7. ‘Reinsurance’ is the practice of an insurer (the ceding party) transferring portions of risk portfolios to an-other party (the reinsurer) in order to reduce its risks by spreading such risks across alternative institutions. A longevity swap contract is essentially a derivative instrument which is likely to be effected using stan-dard International Swaps and Derivatives Association (ISDA) documentation.

Lorraine Allard is a partner at McCarthy Tétrault LLP



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By: Bruce Curwood & Heather Myers

Fiduciary Risks Decision-making – It is imperative to

institute a clear accountability process, develop a consistent and well-structured decision-making process, and define who advises versus who decides each aspect of the management of the portfolio.

Publicity – Is there any aspect of management or investment in your portfolio which you would not want shared in public?

Outcomes – Historically, portfolios generally targeted a specific return and simple risk target usually measured by standard deviation. Today, we encour-age identifying the outcome desired which aligns with meeting the mission or matching a specific liability.

Risk means different things to different people. How-ever, most will agree that risk and return are com-panions. In the broad-

est sense, investors have two options – eat well or sleep well. Investors who choose ‘eat well’ accept higher risks in exchange for higher potential rewards and more downward pressure during market declines. Investors who choose ‘sleep well’ opt for less risk in exchange for less potential upside during strong markets and less downward pressure during weak markets.

In portfolio management, there is a long list of risks that all investors face. These sources of risk fall into six broad areas: Fiduciary – risks broadly arising from

poor policies and procedures Asset/Liability – risks regarding mis-

matching of assets and liabilities Structural – asset structure biases Implementation/Operational – these

risks relate to implementation of poli-cies and procedures

Market – risks associated with the market

Enterprise – consideration of the entire organization and the risks that impact itSome risks are unique to the par-

ticular type of organization, such as a corporate pension plan versus an educa-tional endowment a hospital foundation. Some are unique to the entity itself, such as the risks a small liberal arts college faces versus a large state university or the defined benefit plan for an auto com-pany versus a technology company. Still, there are also many risks which are com-mon across entities.

Fiduciary Road MapWhen identifying risks it is helpful to

keep in mind the fiduciary road map. The road map contains the key responsibili-ties that a fiduciary faces when manag-ing a fund. These responsibilities fall

into three main areas: Designing which includes govern-

ance, objective setting, and asset allo-cation

Constructing which includes asset class strategy, portfolio structure, and manager selection/monitoring

Managing which includes execution, risk management (though pervasive throughout the process), and perform-ance measurement and evaluation.We have developed a general matrix,

(see Chart), which lays out many of the key risks, grouping them by the areas of risk and the road map.

Let’s turn to defining some of the most critical risks that stakeholders of funds face:

Defining risks

A Fiduciary Road Map

DESI

gN

CONS

TRUC

TM

ANAg

E

FiduciaryRoad Map Fiduciary Asset/

Liability Structural Implementation/Operational Market Enterprise

Governance

Decision Making Legislative/Legal Documentation

Publicity

Benefits Maverick Resources

Objective Setting

Policy Outcomes

Spending Return

Assumptions

Asset Allocation

Actuarial Funding

Mismatch Assumptions

Model Diversification

Rebalancing CashflowInflation Currency Liquidity

Asset Class Strategy Regret Active/Passive

Benchmark Timing Hedging Interest Rate Volatility

Portfolio Structure

Style Sector Country

DiversificationPolitical

Manager Selection/Monitoring

Publicity ResearchHoldings

Concentration

Execution TransparencyTrading Transition

Management Securities Lending

Systems/Technology

PerformanceMeasurementand Evaluation

Tolerance Monitoring Oversight

BenchmarkGuideline Breach Custodial Ongoing

Due Diligence

Compliance Audit/

Accounting

* Not a comprehensive list of risks.

AREAS Of RISK*






Heather Myers is managing director, non-profits, at Russell Investments.


Bruce Curwood is director, investment strategy, at Russell Investments.


Asset/Liability Risks Assumptions – How accurate, well

thought out, and stress tested are the assumptions used in the understand-ing of the assets and liabilities?

Model – Model errors are a signifi-cant risk, whether it is the algorithms that make up the model or the inputs to the models, or the model becoming outdated?

Structural Risks Active/Passive – There are multiple con-

siderations within this category in terms of implementation of strategies and do these strategies behave as expected espe-cially during periods of stress?

Benchmark – Has the appropriate benchmark for the managers been identified and are the benchmarks utilized transparent, comprehensive, and representative of the specific investible market?

Diversification – Portfolios should be well-diversified and should be stress-tested to see how the diversification stands up during times of market stress.

Implementation/Operational Risks

Transition Management – Transi-tioning from one manager to another or one strategy to another needs to be properly managed. Maintaining mar-ket exposure and costs in this process requires skill.

Guideline Breach – Guidelines are there for a purpose and staying within these must be monitored.

Market Inflation risk – A significant change

in inflation can impact a portfolio and needs to be managed, whether mov-ing into a deflationary or high infla-tionary environment.

Interest rate – As with inflation, a sig-nificant change in interest rates can

impact the enterprise and the port-folio in certain cases. All investors should be considerate of

the many potential risks that their enter-prise and fund face. Therefore, to make this matrix relevant, it must be customized for each institution so that the numerous risks outlined are prioritized. BPM


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using special risk To Fill-in employee Benefits insurance Gaps

By: Linda Waldherr

age for the specific needs of those non-employees and board members, includ-ing personal accident policies and travel and security products.

War Risk – Standard AD&D poli-cies have exclusions that can severely impact both employer and employees such as definitions of war risk that use broad terms, such as ‘events of riots and insurrections’ and ‘war whether declared or not,’ for example. As more Canadian companies focus on inter-national travel as a means to achieve business objectives, it is common for employees to find themselves in potentially volatile countries. Uncer-tainty surrounding how a policy would respond, if an employee was injured while conducting business on behalf of the employer, leaves a gap for both employees and the employer.

Many carriers are not comfortable amending or removing these exclusions; if so, add a layer of protection with war risk coverage through a special risk underwriter. The policy will mitigate the

Linda Waldherr is assistant vice-president, marketing, at ACE Special Risk Canada.

More often than not, seemingly complete group benefit plans leave risk gaps for plan sponsors and

their members. Typical group benefit plans address

the common needs of employees living and working in Canada. However, risk gaps in coverage often exist. Here are some of the most common ways employ-ees and plan sponsors remain exposed.

Eligibility – The most common gap relates to who is actually covered by the group benefits plan. Eligibility clauses generally state that a person must be a full-time, active employee of the com-pany. Today’s employers have many non-employee arrangements with self-employed and contract personnel, part-time employees, and external board of director members which may leave a plan sponsor open to a potential liability risk in the event of injuries.

These gaps could be offset by using a specialty underwriter to provide cover-

risk and ensure the safety of employees during business travel. For employees who are consistently traveling to high risk destinations, consider a product that includes security evacuation.

Travel – A group plan will cover travel in a commercial aircraft, but a gap may exist for employees travelling on company owned or leased aircraft, a special risk carrier will underwrite those risks so all air travel is covered.

Travel is not limited to air; employ-ers have a general obligation to ensure that the health and safety of every per-son employed by them is protected while they are working. This includes while they are travelling to a country with higher than normal risk or driving across town to pick up refreshments for a meet-ing. Providing a business travel accident plan for all employees fills the gap by ensuring international and local risk is addressed.

Using a carrier that specializes in the inherent risk associated with inter-national business travel ensures a safe return for employees and employers will have fulfilled their duty of care on their behalf.

Guarding your plan against all risks is a formidable task. The risk gaps iden-tified here are more common than you may think. Depending on the employer’s specific circumstances, most gaps can easily be filled with a policy underwritten by a special risk carrier. Speak to a bro-ker about exploring solutions to bridge potential risk gaps that expose plan spon-sors and their employees. BPM



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Every company is unique. That’s why we partner with you to understand your company’s needs and develop tailored solutions.

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CONTACT

Ken Millard Vice President, National AccountsGreat-West Life Group Retirement Services(519) 435 [email protected]

Great-West Life and the key design and “Retirement Solutions that never stop working” are trademarks of The Great-West Life Assurance Company.

RETIREMENT SOLUTIONS THAT NEVER STOP WORKING

T:8”

T:10.75”

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In the first months of this year, an estimated $30 billion was withdrawn from emerging mar-ket bourses, equalling the total amount with-

drawn in 2013. Has the shine come off of emerging markets, before most investors even had a chance to participate?

Not so fast; there are a few counter trends that suggest otherwise.

Firstly, private equity flows into emerging markets have risen by a third in the last year. And even more interestingly, capital allocations to private equity in frontier markets, a subset of emerging markets, has doubled since a year ago.

Investor InterestClearly, private

equity players see opportunities that the public markets don’t. The Emerging Mar-ket Private Equity Association recently wrote that investor interest is propelled by an opportunity for “exposure to a wide spectrum of companies in some of the fastest growing economies in the world and the opportunity to take advantage of a financing gap.”1 And because public bourses in these economies often offer exposure to only a limited number of companies and sectors, private equity is

much better able to reflect the growth of the real economy.

But where do the most compel-ling opportunities lie and how are they

accessible? Sarona Asset Management Inc. and its

predecessor firm have been investing in private companies in frontier markets for over 60 years. And what many see as a challenging environment in frontier mar-kets today, we see as a treat compared to

60 or even 20 years ago. So, after all of those years, what is the sweet spot?

Like everyone else, we love the head-line GDP growth story in frontier and

emerging markets. But one can’t eat GDP, so we must look deeper. As we do that, we find the rising middle class population most compelling. Or rather, the consumer demand expressed by that mid-dle class. Or rather, the small to mid-market companies serving that demand (See Chart 1).

In the context of this massive growth of middle-class spending, companies that supply food, housing, educa-tion, healthcare, finan-cial services, technol-ogy, and consumer goods to this growing population are attrac-tive. We want profit-able companies with an enterprise value of under $150 million; companies that need both growth equity and professionaliza-tion; companies grow-ing at a heart-quicken-ing pace to match the growing demand for their wares.

How then, can one access such growing companies? Not through a spray and pray model. And neither through a fly-in, fly-out model. As one might imagine, growth equity is, by definition, a hands-on business. The best value can be derived by transform-ing good, entrepreneur-run businesses

riding The Frontier Market Growth Curve: Finding opportunities while limiting risk

By: Gerhard Pries


| INVESTMENT |




to world-class excellent companies that are then sold either to an IPO market or, more commonly, to larger strategic buy-ers. Any private equity investor employ-ing such a value-add strategy must be locally based. Putting out fires from half a world away just doesn’t work.

Massive GrowthFortunately, over the past 20 years, we

have witnessed the birth and subsequent massive growth of a local private equity industry in these markets. As this has taken shape, we have shifted our own strategy from direct investments in companies to

a fund investment model. Where 20 years ago there were no private equity firms in these markets, we now review in excess of 200 PE funds per annum, selecting per-haps a half dozen each year as our local partner. In our funds-of-funds, we build portfolios of 150 to 250 private companies, diversified across approximately 20 local managers in over 30 countries.

While PE funds-of-funds have fallen out of favour in North America and Europe, for frontier and emerging mar-kets they continue to offer the compel-ling growth of the rising middle class, with the stability and risk mitigation of great diversification. BPM

Gerhard Pries is managing partner at Sarona Asset Management Inc.


1. Emerging Market Private Equity Association: Frontier Markets data Insight 2013

Chart 1

Middle Class Population And Spending Growth

Source: OECD Development Centre, The Emerging Middle Class in Developing Countries by Homi Kharas, Jan 2010

Middle Class Population Spending growth# millions % growth

2009 2020 2030 ‘09-’30 ‘09-’30

North America 338 333 322 -5% 4%

Europe 664 703 680 2% 39%

Central and South America 181 251 313 73% 103%

Asia Pacific 525 1,740 3,228 515% 558%

Sub-Saharan Africa 32 57 107 234% 223%

Middle East and North Africa 105 165 234 123% 147%

1.8bn 3.2bn 4.9bn

| INVESTMENT |

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rethinking retirement:a Fresh approach For a new era

By: Philippe Toupin

| DC PENSIONS |

The saving-for-retirement mantra has been in place so long that we take it for granted. And, indeed, why not? Plan members and sponsors got the savings message long ago and Canada’s public and private pension plans are relatively

healthy compared to those in the rest of the world. The financial industry and our governments have a lot to be proud of.

Over the past several years, how-ever, many in the industry have been looking at the subject with fresh eyes. In 2011, when the first wave of Boom-ers reached 65 years of age, Canada passed a historic milestone. Overnight, Boomers started putting away their briefcases and lunch pails and no lon-ger set their morning alarms. Ever since, their ranks have been surging and they’re a force to be reckoned with.

Rich … And AgingThe country’s largest demo-

graphic group, Boom-ers, also own most of Canada’s finan-cial wealth. They’re numerous, influential, rich … and aging. This means they’re facing hard questions about their longev-ity and a very human sense of their mortality.

They wonder whether they’ve saved enough for retire-ment and about the possibility of outliving their assets. If they have saved enough, what will retirement look like? And what about their ability to leave something for their heirs?

For the first time in their lives, many Boomers are forced to confront three novel words – sustainable net income: Sustainable because they need to ensure their assets last

for their entire life and are proof against inflation. Net because what really matters is the dollars they’re

able to spend, which means managing assets and income in a more tax-efficient manner.

And last, but not least, income because they were told over many years to grow their assets and save. Now

they have to rethink their entire approach by shifting to with-drawals and investing for income.Challenges like these keep Canadians up at night. Nor are

the solutions easy to come by. This is why the industry needs to look beyond accumulation to transition and de-accumulation if we want to serve Canada’s Boomer cohort to the best of our abilities.

The Turning PointThe industry has traditionally focused on making sure mem-

bers are enrolled, informed, and saving for retirement. But as Canada’s demographic face rapidly changes, we might well

ask whether the industry has given ample thought to the all-important transition phase. Are members and sponsors

prepared and knowledgeable about the impending changes?

To answer this question, in 2012 Standard Life launched a national survey polling 643 members app-roaching retire-ment and 162 sponsors. The sur-vey results con-

firmed our thinking. In a nutshell, members said

they were confused about their options and wanted to learn more about the subject years before

retiring. They also said they want support during their tran-sition and would like to receive it as part of their group plan. Significantly, more than 80 per cent said it’s important to have a formal financial plan, yet only 30 per cent had one. Finally, they also felt that the plan provider and sponsor could play a larger role.

As for sponsors, they were more informed and generally supportive of helping members meet their challenges. How-ever, most said they would engage with the plan provider, but at no additional cost. When asked about fiduciary risk related to investment advice, there was no clear consensus: some sponsors were concerned, others not. They expressed greater consensus on member interest, however. Having wit-nessed years of low turnouts at pension information meet-ings, sponsors were skeptical about attendance, especially at one-on-one meetings. As it turned out, they underestimated their members.





Using as a springboard what mem-bers and sponsors said, and guided by a strong sense that there’s an unmet need, we approached helping members through the three tiers of their transi-tional pre-retirement period. It’s about engaging, informing, and encouraging action (see Chart 1): Tier 1 – Education: Dedicated to rais-

ing awareness, Tier 1 includes a var-iety of ways to learn. From the trad-itional print materials designed to walk members through the planning steps and risks they face in retire-ment to an online education resource populated with information and tools. All of this should be catered to their specific phase and investment knowledge. Our own online educa-tion centre was designed to provide members with a customized learning path according to their life phase and investment knowledge. For example, a member approaching retirement will have access to videos and tools that discuss such things as their retirement options or the risks they may face in retirement. It includes a longevity cal-culator. Its purpose is not just to illus-trate overall life expectancy – useful in itself – but to also raise awareness about the risks of outliving assets at each age bracket.And, where members have more spe-

cific questions, they should also have access to phone support with a profes-sional. Our approach was to create a retirement centre. This centre is made-up of a team of certified financial planners (CFP) who are licensed and dedicated to supporting members approaching retire-ment. One way they help members is via phone, where internet technology can be used to make the discussion even more effective.

While members can get answers to most of their questions, the main purpose of Tier 1 should be to pave the way toward greater engagement in Tiers 2 and 3.

Tier 2 – Group sessions: The second tier, aimed at further raising member engagement, should begin with an invitation to every member approach-ing retirement to attend an on-site group session. Led by professionals from the plan provider, each session should focus on the main steps of defining goals; estimating income; addressing any shortfalls; and choos-ing investments.Our survey had suggested that mem-

bers are keen to learn from professionals in this kind of format, and our experience bore this out. Interest and attendance at group sessions are very high. Tier 3 – One-on-one sessions: While

group discussions are necessarily general, they do serve their primary purpose – to further increase engage-ment and promote one-on-one meet-ings with a professional.As both our survey and first-hand

experience have demonstrated, members want to talk about their specific goals and investments. One-on-one sessions are clearly the only way of doing this properly. At the same time, they maxi-mize engagement and, if we measure success by members understanding the issues and taking action, they clearly do the job.

To prepare for one-on-ones, plan pro-viders should be flexible in accommodat-ing the sponsor’s workplace needs and to the opportunity of having the member’s spouse attend. Just as important, they should offer high quality advice, sup-ported by tools for building a retirement income plan on the spot.

In our own case, the retirement centre supports group members through these one-on-one meetings. Also, we took note of what surveyed members said about their desire for a plan and developed a proprietary software tool. Using input from the group plan, the tool can gener-ate a range of payout options including the purchase of an annuity. It can also

display both gross retirement income and a very accurate net income. And, by integrating spousal assets and income, we can produce a meaningful family plan that includes tax considerations such as income splitting.

The member can act on the plan immediately, take it away to think about, or follow-up.

Two ChallengesA successful strategy to help mem-

bers plan their retirement is all about engaging, informing, and encouraging them to act. This begins with build-ing awareness through multimedia and phone platforms; driving up engage-ment through group sessions; and encouraging action through one-on-one sessions.

This approach is not without chal-lenges. We met some along the way. The first is quality of advice. We made a decision to deploy salaried retirement consultants to ensure that our mem-bers are presented with a full range of options, helping them make informed decisions about their future. For exam-ple, if a member decides to transfer his or her assets to another financial institu-tion, our consultants will help them do this efficiently.

The second challenge is program costs and whether sponsors or members are willing to shoulder them. Our own view is that both sponsors and mem-bers regard this type of program as part of their group plan and plan providers should bear all or part of the costs.

As an ever-larger proportion of Boom-ers prepare for retirement, there’s an ever-larger demand for advice. Therefore, it’s time to complement the savings mantra with a long-overdue transition and de-accumulation mantra. Granted, the latter isn’t as easy to chant. But as our experi-ence has shown, transition and de-accu-mulation definitely meet the needs of today’s Boomer generation. BPM

| DC PENSIONS |

Philippe Toupin is vice-president, group solutions, at Standard Life.


▲increased engagement

▲

Tier 3 – 1-on-1 session

Tier 2 – Group session

Tier 1 – education

Chart 1Transitional Pre-retirement Period Progession

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| VRSPs |

insurers Prepare For Mandatory PrPPs

By: Joe Hornyak

July 1, Quebec launches its man-datory version of the pooled registered pension plan (PRPP) – its voluntary registered pen-sion plan (VRSP). It could

enable 90,000 employers to help approx-imately two million employees save for their retirement through their employer, says Robert Dumas, senior vice-pres-ident of group business in Quebec for Sun Life Financial.

Unlike the federal and, so far, pro-vincial pooled registered pension plan (PRPP) proposals, Quebec has chosen to make its program mandatory. Jeff Aarssen, senior vice-president for group retirement services at Great-West Life,

to adhere to the provincial mandate pro-vided if they put in an equivalent prod-uct which, in their view, might better suit their needs,”

Little TimeSince the program launches July 1,

there is much to do, in just a little time, to be ready.

Currently, the insurance industry is working from draft regulations and the comment period doesn’t end until April 25. As well, those who will be providing and administrating these products in Quebec still need to be licensed.

The licensing process will start on April 16, says Jean-François Pelletier, regional vice-president, group retire-ment business, for Sun Life Financial, Quebec. They need to be registered and approved by the Autorité des marchés financiers and they also need approval from la Régie des rentes du Québec. However, Sue Reibel, senior vice-presi-dent, business development, group ben-efits and retirement solutions, at Manu-life Financial, believes the administra-tor and product licensing is going to be a relatively simple process. “Given that many companies have already been through the administrator licensing pro-cess for a PRPP with OSFI and are in the midst of OSFI’s product review, we are confident we will be licensed quite easily with the Quebec regula-tor.” Still, she cautions the Régie has advised potential administrators “not to presume to be approved nor start to actively market on the assumption they will be approved.”

In the meantime, they are starting to put things in place to be ready once the regulations are in place and licences granted, given the short time frame.

Reibel says their early analysis is the Quebec regulations are more pre-

scriptive than the federal regulations. They are “more specific in the types of fees that can be charged and the investment funds that are allowed as a default.”

Right now, insurers are refining their product and approach subject to the regulations,” says Dumas, and once this is done, Pelletier says there is going to be a communication program that starts “initially with the advisors and our internal people and, eventually, with the general market. If I had to stage the activities, phase one is training our people that will be directly involved with the selling of the product. There is going to be communication with the intermediary and, finally, communica-tion with the marketplace in general. That is before launching.”

‘(THE VRSP) WILL ENABLE

90,000 EMPLOYERS TO HELP

APPROxIMATELY TWO MILLION

EMPLOYEES SAVE FOR

THEIR RETIREMENT THROUgH

THEIR EMPLOYER’

ROBERT DUMASSun Life financiaL, Quebec

says the Quebec government should be applauded “because they have chosen to make it a universally offered product.” Under the proposed legislation, compa-nies with five or more full-time employ-ees will be obligated to offer a VRSP or an equivalent solution. Employers do have the option to offer a different group retirement product such as a Group RPP or RSP, he says, so “what is great about this approach is that it allows companies




well in the public space to create more appetite and more interest. How quickly people move will be a function of their belief in whether they want to be an early adopter or not.”

The selection of the administrator and the fund offering, will likely fall to the employer, says Pelletier, although some employers may give their employees a say. But, “we expect it is going to be the decision taken by the employer.”

The default fund fee is set at 1.25 bps maximum. The other investment options can be set at 1.5, says Pelletier, and they believe this is workable. “It is actually at the low end of the range we were talking about when we went to the parliamen-tary commission,” says Dumas. “We were saying that 1.5 bps would have been more comfortable, but we had other scenarios going at 1.25. It is workable.”

Limited Line-upThe government requires administra-

tors to offer a very limited fund line-up, says Reibel. Unlike the federal PRPP where the default fund can be a retire-ment date suite or a balanced fund, Quebec will only allow a retirement date suite. Five additional funds can be offered beyond the default.

Dumas suggests that because of the fee structure, “most likely we are going to be looking at life cycle funds” which are “passively managed. Again, because of inertia, we believe people will stay with the life cycle option.”

Employees can opt out, says Dumas, and “we are hoping that there will not be too many people opting out. We could see a similar experience to the 401(k) in the United States where there is a good

| VRSPs |

Aarssen says any administrator seek-ing a licence to offer these programs is currently working on designing solu-tions for the VRSP without all the final facts. However, based on the draft regu-lations, they have a VRSP website up and running to help employers. As well, they will prepare and staff up with “what we will call VRSP specialists” who will provide information and assistance to potential clients and advisors.

Two ChallengesAdvisors are an important part of

the process. However, for advisors in Quebec, there are two challenges, says Reibel. They do have a learning curve to

sell these plans. As well, Quebec has a different licensing protocol than the

rest of Canada. To sell a group retirement or a group benefit

program in Quebec, advisors need to have an additional licence.

“That is why you do not see many advi-sors selling group products in Quebec in comparison to other provinces.” How-ever, the Quebec government has recog-nized this issue. “To support the success of introducing VRSPs, Quebec is estab-lishing an exemption so that during the implementation phase, all life licensed advisors can sell these products without the group level licence,” she says.

Advisors can offer one insurer’s prod-uct exclusively or offer a selection from several. And, says Aarssen, employers will still have the option of working directly with an insurer.

The regulations they are working around surround fees, contribution rates, and the number of funds offered.

Phased InTo start, Aarssen says the VRSP will

be phased in based on company size. Employers with 20 or more employ-ees will be required to put in a VRSP or equivalent solution between July 1, 2014, and December 31, 2016. Employ-ers with 10 to 19 employees will have until December 31, 2017, and those companies with five to nine employ-ees would have to put a VRSP in place sometime after January 1, 2018. How-ever, there is nothing so stop companies with less than 20 employees from being early adopters, he says. “We suspect the government will start to promote this as

‘ADVISORS ARE AN

IMPORTANT PART OF

THE PROCESS, BUT THEY

DO HAVE A LEARNINg

CURVE TO SELL

THESE PLANS’

SUE REIBELManuLife financiaL


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| VRSPs |

As someone from Que-bec, one thing that con-cerns Mark Newton, of Newton HR Law, about the voluntary registered

savings plan (VRSP) set to come into existence July is the paternal nature of Quebec society.

The same society that has language police to ensure the use of French in the workplace will probably develop some sort of VRSP police to make sure employers do, in fact, have a plan in place. He believes it is one of the reasons the province, unlike the rest of Canada, decided to make these plans mandatory with employ-ees enrolled automatically (although they can opt out later). Eventually he suspects there will be a setup with a structure for audits and penalties for employers who do not comply with the requirements.

However, at this time, what that process will be is unknown as the legislation does not really specifi-cally talk about that, says Jeff Aars-sen, senior vice-president for group retirement services at Great-West Life. “There will be a degree of com-pliance that will take place that will make sure that employers are compli-ant,” he says. However, while they have the received draft regulations, “we are not entirely clear on what that might look like.”

Another concern is that with auto-enrollment, default investment options, and default contribution rates, employ-ers may think that these plans can be run on auto-pilot. However, he notes, the same was thought when defined contribution pension plans and group RRSPs started to proliferate in Canada. Within a short period of time, employ-ers learned they could not avoid their underlying fiduciary duties.

While the legislation says the insurer/provider is the administra-tor of the plan, they are reluctant to assume fiduciary duties, he says. Therefore, someone has to monitor the insurer. As the body selecting the

provider and the investment options, this leads back to the employer. And “as we all know, things can, and do, go wrong with pension plans with default options. Employers can never escape having the responsibility and the liability for mistakes occurring

because of not having proper moni-toring processes in place.”

If the employer has to communicate the plan, “wherever and whenever you are involved with employee communi-cation, there is the potential that things can go wrong.”

And while some of the insurer/providers plan to follow the Capital

Accumulation Plan guidelines for the administration of these plans, Newton is concerned about conflicts of interest. Since they are collecting fees for their services, someone has to watch them and review communication materials “and that is the employer. So there are still ongoing fiduciary duties that the employer has.”

However, Aarssen says the leg-islation is going to really dictate the amount of flexibility. “The VRSP will have a very restrictive plan design, so there really isn’t a lot of flexibility you can apply to it. The plan text is really going to be very rote according to the legislation.”

This means the things as a plan pro-vider that they can do to differentiate themselves will be the additional ser-vices offered – education, information, access to websites, call centres, and the investment line-up.

In turn, he believes there will a “degree of safe harbor” from the per-spective that the plan design is set.”

He won’t compare it the safe har-bour for 401(k) plans in the U.S., “but there will be more structure and limited liability compared to what you might get in a wide open DC environment.” BPM

legislation Provides Degree of ‘safe harbour’

‘…“AS WE ALL KNOW,

THINgS CAN, AND DO, gO

WRONg WITH PENSION PLANS

WITH DEFAULT OPTIONS …’

MARK NEWTONnewton HR Law



| VRSPs |

Joe Hornyak is executive editor of Benefits and Pensions Monitor.


retention result with auto-enrollment plans. We suspect inertia will work in our favour and they will not opt out.”

Two Per CentThe default contribution rate between

July 2014 to December 2017 will be a minimum of two per cent of gross sal-ary, says Aarssen. In 2018, it will be three per cent and after January 1, 2019, it will be four per cent, “so there is a degree of auto escalation which helps support meaningful contributions.” As well, employees can voluntarily contrib-ute more, up to the RRSP limits. While employers are not obligated to contrib-ute, “we hope they will,” says Pelletier. Employers should view this as part of the total reward program, he says.

As of July 1, for employers with no pension plan, Dumas says an advi-sor will likely contact them and pres-ent the products they are offering. Once

for selecting and monitoring the fund line-up, “VRSPs shift that responsibil-ity to the administrator, making it much simpler,” says Reibel. “They don’t need to spend time thinking about the fund line-up offered to their employees.”

Nor does the responsibility for edu-cating members fall to the employer. “Our view is that a VRSP falls under the CAP guidelines and under the CAP guidelines we are required to maintain ongoing member education,’ she says.

Since the fees are going to be set by the regulations, there is an element of low cost, says Aarssen. While admin-istrators will still offer services that an employer and employee require such as education and information, “the focus will move to more of a self-serve meth-odology, electronic delivery, and so on.”

The prospects for success of VRSPs look bright. Dumas says. Once they are explained, employers are “quite sup-portive” and actually think it is “a pretty good idea. However, the caveat they attach is they want to make sure it is not a burden on their administration. They

WHILE EMPLOYERS ARE

NOT OBLIgATED TO

CONTRIBUTE TO VRSPS,

‘WE HOPE THEY WILL’

fRANçOIS PELLETIERSun Life financiaL, Quebec

THE QUEBEC gOVERNMENT

SHOULD BE APPLAUDED

‘BECAUSE THEY HAVE

CHOSEN TO MAKE IT A

UNIVERSALLY OFFERED

PRODUCT’

JEff AARSSENGReat-weSt Life

are supportive, but also very mindful about how well equipped they are to take on additional tasks.” BPM

the decision is made to use a product, it is going to be a very quick operation. Employers will have 30 days to notify their employees that they are putting a plan in place. After that, the plan can be set up and employees are auto-enrolled with 60 days to opt out. After the opt-out period, contributions would be deducted.

What employers are getting, says Aars-sen, is a turnkey solution with minimal participation from the employer and advi-sor. However, under the legislation the role of the administrator then falls to the insurer providing the product. Once a plan is in place, the only cost to the employer is col-lecting and passing on contributions.

Shift ResponsibilityAnd, unlike traditional DC pension

plans where the employer is responsible

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work in Progress:

expanding The notion of workplace health and safety To include Mental health

By: Louise Bradley & Charles Bruce

Some of you may be reading this article while sit-ting down for breakfast before heading off to work. Or maybe you’ve already put in a full day and are winding down.

In either case, you are one of the lucky ones. You feel well enough to work.

The reality is some people reading this are not well enough right now to put in a day of work. Every week, more than 500,000 Canadians miss work for psychiatric reasons. Mental health problems or illness prevent them from finding a job or making it into work. It limits their ability to provide for their families and feel the satisfaction their contribution brings.

Those fortunate to return to work after absence related to mental illness can face unique challenges as well. We all know someone – be it ourselves, a family member, friend, or co-worker – who has taken time off work to deal with a major physical ailment or surgery. Typically, when they return to work they find flowers, balloons or cards, and get well wishes from colleagues. On the other hand, when a person takes time off work for a mental health reason, like depression for example, they often return to awkward silence and stigma instead of compassion and understanding.

Canada SuffersAs they suffer, business in Canada suffers. The economy

suffers. Of the total economic burden caused by mental illness in

Canada, approximately $51 billion per year, a staggering $20 billion stems from these workplace-related losses.

The fact is we simply cannot afford to limit our definition of occupational health and safety to physical health only. Mental health is a crucial piece of workplace health and safety and it can no longer be ignored or overlooked.

A few years ago, the Mental Health Commission of Canada (MHCC) and a group of public and private partners set out to find a new way to promote workplace mental health and address its staggering economic impact.

Released in January 2013, the ‘National Standard for Psycho-logical Health and Safety in the Workplace’ emerged as a solution that worked effectively for small, medium, and large businesses alike no matter their geographical location. Championed by the MHCC and building on the key recommendations from Canada’s first-ever mental health strategy, the standard was developed in partnership with the CSA Group and the Bureau de Normalisa-tion du Quebec. The standard is not only a first for Canada, but also the first of its kind in the world. Other nations are watching our changing factories and offices with great interest.

Just as other health and safety standards protect an employ-ee’s physical safety, the standard does the same for mental health. It provides a framework that includes resources to help organizations across all sizes and sectors to promote mental health and prevent psychological harm.

The standard goes far beyond minimum legal requirements. It provides a framework that can help protect employers from the risk of legal liability for psychological injury.

Adopting the standard is seen as a way to influence organiza-


| MENTAL HEALTH |




tional culture in a positive way. It’s help-ing to breed a shared sense of corporate and social responsibility among employ-ers and employees.

Simply put, the standard allows an organization to take all the necessary steps to encourage a mutually respect-ful and healthy work environment, enhance productivity, and better finan-cial performance.

In the past year, more than 16,000 copies of the standard have been down-loaded by organizations in Canada and from other countries around the world. Dozens of organizations – including small, medium, and large businesses –have begun implementing the standard, impacting thousands of employees. For example, Toronto East General Hospital, Lundbeck, Bell Canada, and the Univer-sity of Waterloo are already using the standard and even more organizations are actively planning to put it in place in their workplaces. Notably, the govern-ment of Nova Scotia states in its 2013 strategic report ‘Together We Can – One Year Update’ that “it is the first province to adopt this voluntary standard for the public service.”

Track ImpactEarlier this year, more than 30 orga-

nizations were chosen to participate in a three-year MHCC research study to track the impact the standard is having on work-places and their employees. These organi-zations span different sectors, industries, sizes, and regions. This $1.4 million proj-ect supporting the uptake of the standard across Canada is being funded by the MHCC, Lundbeck, the Great-West Life Centre for Mental Health in the Work-place, and Bell Canada.

One of the key questions often asked is how does an organization get started?

The first step is to read the standard (including all of its annexes) which establishes the framework, tools, and resources that organizations can use to get started. It can be downloaded at www.csa.ca/z1003.

The standard was never designed to be prescriptive, rather, it was intended to be adaptable to each organization depend-ing on size, structure, or availability of resources. Employers are reporting that they are tailoring implementation to meet their particular requirements and needs.

Although it may appear daunting at

first, there are steps found within the standard to assist employers who are looking to get started. First, make sure that your organization is ready, at all levels, for adoption. As with all major undertakings, the support of senior lead-ership will be crucial. Identify a cham-pion for psychological health and safety (PH&S) in your workplace to passion-ately lead and inspire colleagues, engag-ing with them at all levels so that work-place mental health remains a priority.

It is important to develop and adopt a clear policy statement on PH&S and commit to the principles of the standard. The statement should then be communi-cated to all employees and reinforced by the organization’s leadership.

As this is a shared responsibility, staff participation is equally essential. This could come in the form of existing com-mittees, such as health and safety, or the establishment of new employee resource groups. We encourage organizations to consider establishing a PH&S committee.

Conducting a needs assessment is an important step in the identification of possible gaps. Most organizations already have several data sources from which to draw such as absenteeism/turn-over rates, short-term and long-term dis-ability claims, and health and safety inci-dent and near miss data, employee and family assistance program data, and ben-efit data. These can be used to assist in the collection of baseline data. Periodic employee surveys including elements of PH&S provide one example of new data that can be gathered.

Once any gaps have been identified, establishing and prioritizing clear goals and objectives will assist in address-ing identified needs and barriers. In the MHCC’s case, a wellness plan was developed to create a blueprint for action.

As the results of the assessment are communicated and action plans imple-mented, it is important to be able to deter-mine your level of success. Developing ways to establish and compare specific metrics over time, such as employee sur-veys, will also be key. The standard pro-vides an audit tool which organizations can use to assess progress.

Lastly, timely review and input from senior management regarding program success is essential. Regular reporting on program progress and next steps will

help to ensure this becomes a continu-ously improving process.

It is important to note that creating a mentally safer workplace is not a simple task. There is no overnight success.

Increase AwarenessSeveral other organizations are taking

the lead to increase awareness about the standard and are offering resources to those adopting it. For example, the Great-West Life Centre for Mental Health in the Workplace’s website, ‘Workplace Strategies for Mental Health’ (www.workplacestrategiesformentalhealth.com), has many free tools and resources that any organization can use to work toward adopting the standard. Another example is the Canadian Mental Health Association, which has partnered with the global human resource consulting firm Mercer to develop training and con-sultation services. Excellence Canada, a not-for-profit committed to advancing organizational excellence, has aligned its Mental Health at Work award with the standard.

Mental health problems and illnesses are preventing too many Canadians from going to work today and we have an opportunity to work together to change that. As employers, one way you can affect positive change is to download the standard today and support its adoption at your workplace. Leading by example, you can take the first critical step in rec-ognizing that mental health affects us all. By doing so, you will empower your employees to consider their own and each other’s mental health so that next time a friend or co-worker returns from a stress leave, they may find a sympathetic ear instead of a cold shoulder. BPM

| MENTAL HEALTH |

Charles J. Bruce (CMA, CFP, C. Dir) is the chief executive officer of the Nova Scotia Public Service Long Term Dis-ability Plan Trust Fund.

Louise Bradley is president and chief executive officer of the Mental Health Commission of Canada.


http://www.csa.ca/z1003

http://www.workplacestrategiesformentalhealth.com



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wellness keeps aging workforce young

By: Serafina Morgia

| WELLNESS |

The Canadian workforce is aging. According to Statistics Canada (2011), one in four people in the workforce will be 55 years of age or older by 2021. Further to this, Randstad’s ‘Global Work-monitor’ survey indicates that more than half of

Canadians will likely keep working beyond age 65. Consider-ing a large part of your workforce could be these very individu-als, it’s wise to start planning on keeping our aging employees healthy and productive.

Why should employers be concerned about keeping their aging workforce young? An older population in the workplace can contribute greatly to an organization’s success. To start, an older population can be as young as 45. As well, their experience, maturity, and wisdom make them great teachers and mentors and indis-pensable to an effective succession strategy. While access to a pool of experienced and skilled workers is a good thing for employ-ers, ensuring they are healthy and produc-tive in the long run will require invest-ment, strategy, and planning well in advance of their retirement.

Big InfluenceEmployers can have a big influence

on their employee’s health and lifestyle choices. Establishing wellness programs that keep the aging workforce young will benefit the younger generations as well. Programs that promote a healthy lifestyle for all will spill over into the older years and become a part of an organiza-tion’s culture. It’s about changing behaviour and making health a habit. If you recall the ‘RealAge Test’ created by Dr. Mehmet Oz and Dr. Mike Roi-zen, your real age can be defined by your physi-cal health and lifestyle choices. When you commit to maintaining or achieving physical health through healthy lifestyle choices, you slow down the aging cycle.

So where do you start? Workplace wellness, or a culture of health, must start at the top of the organiza-tion with policies that are designed to change employee behaviour and facilitate health. This doesn’t mean that every CEO needs to be the company poster child of health, but they should be committed and invested in fostering a culture of health to ensure that the com-pany’s wellness program is given the resources required

to make it a success. These changes and policies don’t need to be costly to be effective. They can be as simple as providing an on-site kitchen and offering healthy food options in vending machines. Flexible work schedules can facilitate an exercise schedule and medical appointments. Promoting movement and exercise can be as easy as encouraging ‘walk and talk’ meetings when feasible or stretch breaks at scheduled times.

Chronic ConditionsMost of us know that the onset of chronic conditions

– such as high blood pressure, high cholesterol, or dia-betes – typically occur during middle age and are one of the largest contributors to lost productivity and incidental

absence at the workplace. The Public Health Agency of Canada has reported that 70 per cent of an orga-

nization’s health benefits costs come from six categories: cardiovascular, musculoskel-

etal, respiratory, digestive, cancer, and stress. The first step in getting a medical

condition under control is to treat it with medication and therapy. The next most

important step is lifestyle changes with a serious focus on health to decrease symptoms

or eliminate them altogether. Making it almost effortless to detect a

medical condition with easy access to health risk detection and health promotion can have a

positive impact on employee health. The time com-mitment required to see a doctor can be stressful in

and of itself when you are juggling a job and fam-ily responsibilities. Workplace wellness programs

that include on-site screening clinics provide conve-nient access to early detection of a potential chronic condition. Providing lifestyle coaching can help with

addressing unhealthy lifestyle practices that contribute to chronic diseases. Overall health education and promo-tion fosters a healthy work culture and helps employees gain control over their health so they can improve their overall well-being. Health risk assessments (HRAs) are key to assessing the health status of your employee

group so that they can have their own individual infor-mation and start planning on getting or maintaining their

current health status and target lifestyle changes. Aggregate HRA data and any data available through a group benefits program will provide insight and is a first step to target-ing the appropriate health interventions when designing the wellness program.





of wellness helping your workforce feel younger and healthier, and mitigating the onset of physical and mental issues that come with aging. Getting started is simple when you follow a step-by-step process:

Establish a plan Get buy in from senior management.

The greater the support a wellness program has from leadership, the more chance of success.

Internally recruit a cross-functional wellness team who have an interest in employee health from areas such as occupational health and safety, bene-fits, and human resources. Make sure different generations are represented.

Establish wellness program goals and align them with the overall company objectives.

Develop policies that support goals and provide a physical environment that supports healthy behaviours and well-being.

Prepare a work plan including budget and timelines for implementation.

Identify needs Assess your aging employees’ needs

and interests by asking what health and wellness topics are most import-ant to them

Provide access to health risk appraisals Provide biometric screening clinics Analyze data through the benefits pro-

gram such as drug data, health claims, absence rates, occupational and non-occupational disability claims, and demographic data

Develop a program Tailor the wellness program for aging

employees around their identified needs

Create relevant programs and activities Put together a timeline for activities and

events that take any shift work and flex-ible work arrangements into account

Strategize a communications and incentives plan targeted to their pre-ferred channels of communication

Partner with the right external pro-viders that can educate employees about the specific health and wellness options available to them

Program management and evaluation

Continually measure the effective-ness of each activity and allow the wellness program to continually evolve by measuring employee satis-faction and engagement

Identify components of your pro-gram that are most popular and have achieved the most success or that need improvement Workplaces that actively promote

physical and psychological health and safety have more success in recruiting and retaining talent, increased employee engagement and productivity scores, and experience more creativity from employ-ees which will ultimately achieve higher profit levels.

Young or old, the right workplace wellness program will help harness your workforce’s full potential. In the long run, the combination of addressing health risk factors, with the promotion of health and well-being, will ultimately provide a return on your investment (ROI); but, more importantly, employers need to start measuring wellness in terms of a return on value (ROV) that will no doubt come in the form of employee appreciation because they recognize the company commitment to their health and well-being. BPM

| WELLNESS |

Serafina Morgia is national practice leader, health and productivity, at Buck Consultants, A Xerox Company


Feel ProductiveAlthough the physical side of health

is a very large and important part of wellness, employers shouldn’t ignore the importance of a mentally healthy and safe work environment. The work-place can greatly influence an employ-ee’s mental well-being by giving people the opportunity to feel productive and achieve their potential.

However, it can also be a stressful environment that can contribute to men-tal health problems such as depression and anxiety. Some of the contributing factors specific to an aging workforce include supporting and caring for their children and their elderly parents. Anxi-ety can be brought on by unforeseen changes to retirement programs and insufficient savings. Age discrimination or ageism, although difficult to prove, can be a contributing factor if there is a perception that they are being passed over for promotions, career opportuni-ties, and/or training due to their age.

What programs can be put in place to address some of these issues for the aging workforce? To help ease stress, offer flexible work solutions like part-time work, a compressed work week, and telecommuting. With financial secu-rity being a concern for mature workers, consider phased in retirement options. Listen to their concerns and make sure their wealth of experience and skill set are being used effectively and that they are being recognized for it.

You can establish a workplace well-ness program that encompasses all aspects

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retiree Benefits – are Changes impossible?

By: Rachel M. Arbour

Benefit plan sponsors wanting to make changes to their retiree benefit plans for non-unionized employees and retirees have had very little in the way of guidance from Canadian courts on how or whether they can make changes, what kinds

of changes can be made, and whether any of those changes can be applied to those individuals who have already retired.

Recent decisions in Ontario and British Columbia have shed some light on this topic and, in particular, on whether changes can be applied to individuals who have already retired. In Ontario, the Superior Court held that General Motors could make changes to the benefits provided under its retiree benefits program for its retired executives, but not to the program for its retired salaried employees. General Motors has publicly stated it intends to appeal the decision. In British Columbia, the Court of Appeal held (and the Supreme Court of Canada denied leave to appeal) that Weyerhauser was not able to make changes to the way it pays premiums for the benefits provided to retirees under its retiree benefits program.

Fact SpecificThese cases are very clear in one respect – each situation is

very fact specific. This means that every plan sponsor’s strategy and outcome will depend on the specific language in the com-munications about the nature of the benefit program including any language in those communications where the plan sponsor has reserved the right to make changes to the benefit program. The question raised by these recent cases, which largely held that the plan sponsors in question could not make the changes they wanted to make to their retiree benefits programs, is whether they signal a shift in the approach towards retiree benefit entitlement that should make plan sponsors wary of making any changes.

The GM DecisionThe General Motors decision is on a motion for a partial

summary judgment in a class action that challenged changes General Motors made in 2007 to its retiree benefits for retired salaried employees and retired executives.

That the decision is on a motion for partial summary judg-ment, the fact that the company agreed to the certification of the class action, and that the motion proceeded on an agreed set of documents – as well as some of the comments made by the judge in the decision itself regarding what the parties put forward as their arguments – illustrates the numerous strate-gic decisions made by plan sponsors in a litigation context and highlights the importance of these strategic decisions in the fact-specific circumstances of each case. But, for plan sponsors

considering changes to their benefit plans, the court offered some helpful commentary, particularly since it held that in the circumstances, the plan sponsor did have the right to make the changes applicable to one of the affected employee groups.

The court held that based on the evidence, the retiree benefits were a form of deferred compensation and that in the circum-stances, the salaried retirees had a reasonable expectation that they would have these benefits for life once they had retired.

To support its ability to make changes to the retiree ben-efits program for its retired salaried employees, the plan spon-sor relied on the paragraph of its communications in which it sought to reserve the right to make changes to the program. This language said that the plan sponsor “reserves the right to amend, modify, suspend, or terminate any of its programs (including benefits) and policies by action of its Board of Direc-tors or other committee expressly authorized by the Board to take such action. The Programs, benefits, and policies to which a salaried employee is entitled are determined solely by the pro-visions of the applicable program, benefits, or policy.”

The court reviewed this language, along with other docu-ments put forward by the parties. It applied a contractual inter-pretation to the language and ultimately found that the reser-vation of rights language itself did not clearly and unequivo-cally apply to individuals once they had retired. The court also applied what it called “a lens of good faith” to the plan spon-sor’s intent in drafting the clause.

| BENEFITS |





| BENEFITS |

One unique (and troubling) aspect of the decision was that the court consid-ered the reservation of rights language that the plan sponsor put into place after it made the changes that gave rise to this litigation and it relied on that language as an example to show that the plan spon-sor could draft a clear and unambiguous reservation of rights clause.

The court decision does not set out the reservation of rights language relied on by the plan sponsor to illustrate it had reserved the right to make changes to the retired executive group. However, based on the evidence before it, the court found that the retired executive employees had more information available to them about the fact that their benefits could be reduced.

This information included communi-cations that their program was unfunded and paid out of current earnings and that at the point of retirement, the executives were asked to sign a form that stated the benefits paid under the program could be reduced or eliminated. The court found that the executives knew they would be asked to sign such a document when they retired. And, as a result, the court held that the plan sponsor was able to make the changes that it made to the level of benefits provided to its retired executives.

The Weyerhauser DecisionThis second recent development is a

decision on the appeal of a class action retiree benefits case from British Colum-bia. Unlike the General Motors decision, the plan sponsor did not want to change the level of the benefits it provided to its retir-ees, but instead wanted to freeze its costs at current levels by advising retirees that it would continue to pay the current con-tributions towards the retiree benefits plan, but that the retirees would be responsible for any future premium increases. At trial, the court held that that the plan sponsor had not reserved the right to change the way it

funded the program in this way. The Brit-ish Columbia Court of Appeal upheld this decision and the Supreme Court of Canada denied leave to appeal.

For plan sponsors considering changes to their retiree benefits programs, there were two particularly interesting aspects to the court’s review of the language relied on by the plan sponsor in this case. The first is that the court focused on the over-all tone of the language of the employee communications and highlighted that those communications included language promising that “the company will pay.”

Second, while the plan sponsor’s reservation of rights clause did not spe-cifically refer to retirees, the plan spon-sor argued that the words “from time to time” in its clause permitted it to make changes once an individual was retired. Based on the facts before it, the court rejected this argument, finding instead that once an individual had retired, the retiree had met the requirements of the employer’s unilateral contract to receive the benefit and the plan sponsor’s reser-vation of rights language was not suffi-cient in the circumstances to allow the plan sponsor to make the change appli-cable to its retirees.

Small ListThe General Motors and Weyer-

hauser cases add to our relatively small list of court decisions that guide plan sponsors making changes to their retiree benefits plan. Neither case provides a comprehensive guide for plan sponsors on what steps are required in order to make changes to a retiree benefits pro-gram. And, while both cases found that certain changes could not be made by the plan sponsors in question, they also both illustrate circumstances under which changes could be made to retiree ben-efits, both during and after the end of the employment relationship. The General Motors decision does this most clearly in the court’s acceptance of the plan spon-sor’s ability to make the changes appli-cable to the retired executive group.

It will be interesting to see how other

cases add to this landscape. In early 2014, the Supreme Court of Canada released a decision on the procedural aspects of certification of a retiree benefits class proceeding in Quebec in Dell’Aniello versus Vivendi Canada Inc. This class proceeding stems from changes made to the Vivendi retiree benefits program in 2009 and a decision on whether Vivendi was legally permitted to make those changes will be of great interest to plan sponsors considering changes to their own programs.

While we wait for more guidance from the courts, what should a plan sponsor do? Do these recent decisions signal that plan sponsors should cease making changes? Is it now impossible to make changes applicable to non-union-ized retirees?

Language CrucialSimply put, I don’t think so. The

recent cases add to earlier retiree ben-efits decisions. The cases confirm that changes to future retiree benefits can be made during an individual’s active employment. And, when those changes are going to be applied to current retir-ees, the cases continue to demonstrate that the language of retiree benefits com-munications remain crucial. The courts continue to review the nature of the com-munications made about the retiree ben-efits program. Plan sponsors continue to be able to rely on clear and unequivocal language in those communications that permit them to make changes to their retiree benefits programs.

The recent cases illustrate some inter-esting questions about how to approach changes to retiree benefits programs. Any plan sponsor considering changes to its retiree benefits programs, and par-ticularly where those changes are going to be applied to individuals who have already retired, will have to develop its own strategy based on its own individual facts and circumstances. BPM

Rachel M. Arbour is with Hicks Morley Hamilton Stewart Storie LLP.


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spousal Pension Benefits – vestiges of a Bygone era

By: Marilyn Lurz

Why do pension plans offer spousal post-retirement benefits? Well, they are required to by law. So when was that law passed? In Ontario, and some other jurisdictions, it happened in and around 1987.

However, why do these laws exist in the first place? Here’s what I believe.

Following the Second World War, the men who had been in service came home looking for jobs. In some cases, they took over jobs that had been filled by women in their absence. The ‘model’ of the day was a patriarchal society where the male was the breadwinner and the woman worked in the home with the kids underfoot. Some women did work, but it was often in low-paying jobs and also often part-time work.

Case In Point My parents were a case in point. A family with three chil-

dren, my father went to work every day and my mother did lots of volunteering – at the school and at church. At Christmas, she spent four weeks at the post office in downtown Toronto,

ON, sorting Christmas cards and letters to Santa. This was her annual paycheque for many years. She worked for nine years at Canada Life before having children, but, effectively, said good-bye to the workforce after that.

It is against this backdrop that governments decided it was necessary to mandate spousal post-retirement pension benefits in registered pension plans. Provincial governments watched many widows in the ’50s and ’60s left with next to nothing after their husbands died and looked for ways to lessen the burden of those widows on the welfare state/taxation base.

Good plan, right? If society had remained as it was when my parents were in their child-raising years, then I’d say yes. But times have changed – in big ways – and I believe mandatory spousal post-retirement benefits have long since become outmoded.

I provide pension and financial/retirement planning educa-tion for all sorts of people and I tell them constantly that things need to change to meet peoples’ evolving needs. For example, a pension plan designed half a century ago may no longer suit the needs of much of the company’s population and, therefore, should at least be tweaked to match the new realities.


| BENEFITS |



So doesn’t legislation also need to move with the times? This issue of spou-sal benefits is only one example. I could get into the fact that some of the pension rules in the Income Tax Act need to be looked at again since they were designed in an era of high interest rates. I’m sure there are many other items that need to be looked at, but let’s get back to the issue of spousal benefits.

Big Changes The first big change impacting the

need for spousal benefits is the fact that many more women are now in the work-force. A ‘Women’s Equality Report’ pub-lished by the Canadian Labour Congress says “the dual earner family is now very much the Canadian norm” and “three in four (73 per cent) of Canadian two-par-ent families with children are now two-earner families.”

I’ll use myself and husband Peter as the example here. We’re both on our second marriage. Peter has three chil-dren and I have two. All the kids are more or less grown up and indepen-dent. Throughout the time that my kids were small, I worked (albeit part-time for a few years when they were young). Let’s assume that, when we retire in a few years, we’ll both have incomes of around $50,000 and, for the sake of my argument, let’s assume this income is coming exclusively from our registered pension plans.

Legislation mandates that our regis-tered pension plan has to provide a 60 per cent post-retirement spousal benefit. In some cases, this means a reduction in pension to ‘pay’ for the spousal benefit. Where did this 60 per cent come from? The theory says that one can live cheaper than two. The idea of the 60 per cent was that after losing her husband, a widow would do quite nicely on a lifetime con-tinuance of 60 per cent of the pension being received while both spouses were alive. In fact, this level of income was expected to permit the widow to enjoy the same standard of living, more or less. (Many expenses go down including clothing, food, travel, etc.)

So that means I can basically main-tain my same standard of living if, after Peter dies, I start receiving 60 per cent of the income we were receiving when he was alive. But, look what happens. My independent income is $50,000 and 60

per cent of Peter’s pension is $30,000 for a total of $80,000 or 80 per cent of our joint income when he was alive.

Wow, how great is this? My standard of living is going to improve after he’s gone. Maybe if we’re not getting along that well, he’ll need to “watch his backside…”

My point here is I really don’t need to receive 60 per cent of Peter’s pen-sion, given that I have independent sources of income from a lifetime of being in the workforce. So why is this mandated by the government? Are Peter and I the exception to the rule, or has the single-income family become the exception now?

Of course, we can remove the sur-vivor benefit by signing a waiver form, but, if we do sign a waiver form, the resulting options may not be particularly advantageous – more on this later.

The Marriage Breakdown Dilemma

The next major impactful change is the rate of marriage breakdown in Can-ada. According to ‘Fascinating Fami-lies,’ a Vanier Institute of the Family report issued in 2011, about 40.7 per cent of marriages end before the 30th year of marriage and this grows to 43.1 per cent of couples who can expect their marriage to end before their 50th anniversary.

So Peter and I are not exactly a rare statistic – two people on their second marriage with a passel of kids from prior marriages. We agreed many years ago that it’s fair if we maintain our finances separately based on the simple idea that his kids should get his money and my kids should get mine.

Enter the complication of the manda-tory spousal benefit.

If Peter receives a spousal benefit from any of my pension plans, this is money he has to turn over to my children in order for us to maintain the concept of ‘his kids get his money; mine get mine.’ I trust him to do this, but I find it unfor-tunate that we have to set up an outside contract to ensure this happens in order for my children to benefit from my pen-sion plans after my death.

Survivor BenefitsOne of my pension plans provides

a ‘free’ 662⁄3 per cent survivor benefit. Peter’s pension plan has a ‘free’ 60 per cent survivor benefit. In both cases, if we

waive our right to the survivor benefit, there is almost no post-retirement death benefit payable. In my case, there’s a promise to pay back at least member con-tributions with interest. In Peter’s plan, nothing is payable if one does not have a spouse at pension commencement.

So there is absolutely no incentive in either of these plans to waive our rights to the survivor pension. It, therefore, makes no sense for us to do that. We lose money by doing so. This means we have no choice, but to agree to pay any of these benefits to our deceased spouse’s children.

My question here is every pension plan has a limited budget and must decide how best to spend the plan’s assets and future contributions on ben-efits. At one time, it was clearly viewed as a good thing to spend pension dollars on free spousal benefits. But does this still make sense? What about the chil-dren of divorced parents who remarry? What about the children of divorced parents who don’t remarry? What about single people who have no intention of marrying and/or acquire a common-law spouse? Is there not a better way to spend those pension dollars than on spousal benefits that are often not needed and/or get turned over to the other per-son’s kids?

Needed At All?I’m not saying that a survivor benefit

is not appropriate, or needed, in some cases. I simply believe that the circum-stances under which mandatory spousal benefits were created no longer exist. Is it too much to ask for governments to review their legislative requirements at least once a decade to respond to major societal changes?

There is no question that pension legislation is complex and difficult to understand let alone change. But is that a good excuse for keeping antiquated rules in place? Let’s ‘let bygones be bygones’ and find ways to kindle the fires needed to cause meaningful legislative change and more frequent reviews. BPM

| BENEFITS |

Marilyn Lurz is a pension consultant with Lynmar & Associates.


Consider this for a mo-ment: what is the most expensive disease in your benefits program? Men-tal health? High choles-

terol? Arthritis? Probably, it is none of these chronic

diseases. Most likely, it is dental decay. Many Canadian plan sponsors spend more on fixing decayed teeth than on any other medical problem.

So, other than letting the employee pay more and more for this disease, what can be done to convert the group dental plan into a plan for healthy outcomes?

To begin improving the group dental plan, let’s recognize some simple truths about dental decay: Dental decay is a chronic disease

caused by a bacterial infection on the tooth. To manage this disease afford-ably and scientifically, this infection needs to be managed.

Dental decay in your plan mem-bership affects a small minority a lot of the time. It’s like any other chronic disease – few are sick, but those who are, spend most of the money.

Restoring cavities and crowns (two items which account for up to 40 per cent of your spending in your group plan) commonly do not reduce the bacterial infections causing these problems. In fact, restorations create more cracks and crevices where bac-teria can grow.

We know who is likely to get dental decay. There are a handful of well-known risk factors which the plan member can use to quickly diagnose their own risks of more decay. This is the basis for your plan members to become ‘smart shoppers’ of dental services.So managing the infections on the

teeth becomes an important consider-ation in managing dental benefit costs. One solution is preventive antibacterial tooth coatings such as Prevora (DIN 02046245). For 15 years, controlled

studies of this medication show in the most challenged patients (those with three or more cavities at the start of the study), it reduced cavities by 70 per cent versus a placebo. And in patients without saliva (because they were tak-ing six or more prescription drugs daily), the most difficult cavities at the gum line were reduced by 41 per cent over one year. Follow up studies show that the protection lasts for years for most patients.

These developments have created a ‘new dental patient’ – one who is more frugal, more exposed to dental decay, and more discriminating in the value of dental care. And as a consequence, many dental waiting rooms have emptied. In response, dentists have begun to meet the preferences of their adult patients. They are forming a new national net-work called Partners in Prevention (www.partnersinprevention.ca). As the brand suggests, it is all about the new dental patient.

Surveys show that today the primary reason why adults purchase den-tal services is to

protect their overall health. (And wise they are, for dental decay is now considered a major risk fac-tor for coronary heart disease.)

In response, organizations like the Partners are offering new ser-vices such as shared diagnosis and preventive coatings which address the anxiety about pain, about overall health, and about affordability over the long term.

One of the most common questions asked of benefit consultants is ‘what is

new in dental?’ Well, there is lots actu-ally. Dental teams can now treat the cause of dental decay painlessly and affordably and have formed a network to reach out to their communities about more preventive care when it is needed.

Dentistry is no longer boring, unre-lentlessly expensive, and full of anxi-ety. Rather, it now pursues the objec-tives of healthcare reform – healthier patient outcomes. BPM

improving The Group Dental PlanBy: Ross Perry

| BENEFITS |

Ross Perry is president of CHX Technologies.

www.partnersinprevention.ca �

How do these new preventive dental coatings work? In the case of Prevora, it releases a strong antiseptic which elimi-nates much of the bacteria immediately and then inhibits any re-emergence for several weeks.

However, the new challenge to shift-ing from treatment to prevention is getting buy-in from dentists. For years, dental practices have pursued a production model of fixing decayed teeth in those patients with dental insurance. But starting with the Great Recession, this model of dental care has come under siege. ‘Free’ dentistry has declined, the population has grown older, and the Internet and social media have created an informed shopper of dental services.


http://www.partnersinprevention.ca

http://www.partnersinprevention.ca


The CFA Society Toronto’s ‘2014 Annual Pension Conference’ will examine ‘What’s next for Pension Plans? ‘Right-risking’ in Today’s Eco-nomic Environment.’ Sessions will include an economic outlook for equi-ties and bonds and the increase of real assets and their effectiveness to diver-sify traditional allocations. It takes place April 24 in Toronto, ON. For information, visit www.cfatoronto.ca

Derek Dobson, chief executive officer and plan manager at the CAAT Pen-sion Plan; Bruce R. Kennedy, executive director at the BC Teachers’ Pension Plan; and Ron Mock, president and chief executive officer of the Ontario Teach-ers’ Pension Plan; will be among the fea-tured speakers at the Conference Board of Canada’s ‘Pension Summit 2014: Time for Action.’ Sessions will examine how organizations nationwide are try-ing to deal with pension fund shortfalls today. It takes place April 28 in Toronto, ON. For information, visit www.confer-enceboard.ca

fraud. Other sessions will look at the global pension crisis, what to do about interest rates, and understanding and applying the health ‘reformation.’ It takes place May 26 to 28 in Boston, MA. For information, visit www.cpbi-icra.ca

The International Foundation of Employee Benefit Plans’ ‘Canadian Public Sector Pensions and Benefits Conference’ offers an opportunity to learn firsthand from industry experts who will address the latest issues fac-ing public sector plans today. The program focuses on a wide range of issues including plan design, cost-containment, and communication strategies. It takes place May 27 and 28 in Ottawa, ON. For information, visit www.ifebp.org BPM

The 2014 ‘Canadian Responsible Investment Conference’ will be held May 26 to 28 in Toronto, ON. Del-egates – including financial institu-tions – will have an opportunity to network with leaders in responsible investing, to hear from leading ESG specialists and thought leaders, and to learn about the latest issues, trends, and developments in the field. For information, visit www.socialinvest-ment.ca

Harry Markopolos, the Bernie Madoff whistleblower and author of ‘No One Would Listen,’ will be a keynote speaker at ‘CPBI Forum 2014.’ He will present not only an insider account of his actions in bringing the fraud to light, but offer a vivid examination of the U.S. financial system, including how to fix the system to guard against

| CONFERENCES |


For complete event information, visitwww.bpmmagazine.com/benefits_events.php �

http://www.cfatoronto.ca

http://www.conferenceboard.ca

http://www.conferenceboard.ca



http://www.ifebp.org

http://www.socialinvestment.ca

http://www.socialinvestment.ca


http://www.bpmmagazine.com/benefits_events.php






CorrectionsIn the February issue of Benefits

and Pensions Monitor, the Simulated ‘Low Volatility Canadian Equities Ver-sus S&P/TSX Composite Index’ chart in the TD Asset Management article ‘Low volatility strategies: New and improved?’ was incorrect. The correct chart can be found at http://www.bpm-magazine.com/02_archives/2014/02_Feb/Digital_Issue_BPMFeb14.pdf#page=29&view=Fit&pagemode=bookmarks&scrollbar=0.

Benefits and Pensions Monitor apolo-gizes for any inconvenience this may have caused.

uuuu

In the February issue of Benefits and Pensions Monitor, the contact in the Directory of Fixed Income Man-agers at BNP Paribas Investment Part-ners Canada, Ltd. was shown as Rob-ert Mann, senior sales and client rela-tionship manager. In fact, the correct contact is James Johnston, head of

not available for the Directory of Fixed Income Managers:

STANTON ASSET MANAGE-MENT Rocio Gueto, Vice-president, Business Development, 1010 Sher-brooke W., Montreal, QC H3A 2R7 PH: 514-849-2007 Fax: 514-849-0067 eMail: [email protected] Web-site: www.stantonasset.com Man-ager style: Credit, Senior Loans, Relative Value-driven Approach Pro-fessional Staff: 5 Established: 2004 Minimum Investment - Pooled: $1M Minimum Investment - Separate: $20M; $50M for a Senior Loan Mandate Ser-vices and Assets Available: High Yield, Corporate, Senior Loans Total Fixed Income Assets Managed: $491.8M Canadian Clients: 1 BPM

North American Sales; 200 Park Ave., New York, NY 10166 PH: 212-681-3032 eMail: [email protected] Web: www.bnpparibas-ip.com

uuuu

In the February issue of Benefits and Pensions Monitor, the most current sta-tistics were not used in the ‘Catch The Wave: Canadian De-risking’ article on page 35.

The article cited equity returns on the S&P/TSX composite and the S&P500 at record highs at the end of September. This should have been December. As well, the Mercer Pension Health Index was at 106 per cent at December 31, as opposed to 98 per cent at the end of Sep-tember.

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In the February issue of Benefits and Pensions Monitor, the listing for Stanton Asset Management was

| CORRECTIONS |

For complete event information, visit

www.bpmmagazine.com/benefits_events.php

�


http://www.bpmmagazine.com/02_archives/2014/02_Feb/Digital_Issue_BPMFeb14.pdf#page=29&view=Fit&pagemode=bookmarks&scrollbar=0





mailto:rgueto%40stantonasset.com?subject=Re%3A%20A%20Benefits%20And%20Pensions%20Monitor%20April%202014%20digital%20issue%20response%20

http://www.stantonasset.com

mailto:james.johnston%40bnpparibas.com?subject=Re%3A%20A%20Benefits%20And%20Pensions%20Monitor%20April%202014%20digital%20issue%20response%20

mailto:james.johnston%40bnpparibas.com?subject=Re%3A%20A%20Benefits%20And%20Pensions%20Monitor%20April%202014%20digital%20issue%20response%20

http://www.bnpparibas-ip.com

http://www.bnpparibas-ip.com


http://www.conferenceboard.ca/conf


http://www.conferenceboard.ca/conf


Pension Plans Best Solution For Income

AdequacyRe: Is Income Adequacy The Real

Issue? editorial in February issueI read with interest your February

editorial and find I must express my dis-agreement with the two changes to the two federal government seniors entitle-ment programs put forth by the School of Public Policy.

While I do see some merit in increas-ing the GIS, I am adamantly opposed to any changes to this program unless it is accompanied by the requirement of an annual net worth statement from the applicant. Many current GIS recipients have sizeable net worth.

Some examples could be: They own a personal residence in

West Vancouver, BC, debt-free worth $1 million.

They own four quarters of farmland 10 miles outside of Calgary, AB, worth $3 million.

They still have the title on the manu-facturing facility of the business they used to own in London, ON, worth $1.5 million and are leasing it to their children for $1 a year.Implementation of that test along with

a graduated clawback of the GIS reach-ing zero when the net worth exceeds $250,000 would be a reasonable thing to do and would remove thousands from the program thus freeing-up funds to go to increasing the benefit for those truly in need.

Secondly, leaving the CPP survivor benefit at the same level as the income prior to the death of the partner is illogi-

‘world’ price of generics made in low cost countries. Domestic manufacturers must, and are expected to, maintain a very high production and plant health and safety pro-file in order to do business in this country. Frequent inspections by the FDA and the Health Protection Branch ensure plants are operating in a First World manner to ensure the safety of Canadians.

Since the drive to lower costs began in Canada, numerous companies from India have entered the Canadian market.

Although countries are entitled to set their own standards with regards to domestic consumption, those standards must also be adjusted to meet those of their export destinations. With the FDA blitzing Indian plants and finding numer-ous violations, one wonders what pro-tocol Canadian inspectors utilize when assessing these same plants. Regulatory oversight of foreign plants requires con-siderable funds and one questions the amount of consideration given this when the provinces are demanding access to lower priced generics. The two, price and safety, march in lock-step and cannot be segregated. Canadian health consumers should be aware there is very significant risk of outright fakes entering the market-place, placing their health in danger.

Is a massive scandal of unsatisfac-tory health outcomes or even deaths in the future of Canadian health consum-ers? Only time will tell, but it appears the odds are against us as we drive to the lowest common denominator – cost. One can only hope someone is watching the shop as well as the till.

Gordon Stueck (BSP)Stueck PharmacyLeader, SK

cal. The needs of the single recipient would clearly be less than the combined need when the partner was alive.

Such a rule change would in the long run reduce the benefit for couples as there will always be a limited pool of funds from which to draw upon so expanding the single benefit means rela-tive reductions in the couple benefit.

The truth is there are better, more flexible and far less costly, less abused, options. Defined contribution plans and PRPPs can more efficiently fill the short-comings you note than the changes rec-ommended.

Gord TulkPresident, Slate Insurance Inc.Red Deer, AB

Overseas Generics Come With Risks

Re: Counterfeit Generic Drugs and Federal Oversight of Foreign Manu-facturers

Several recent news articles about foreign, generic medication manufac-turers relay problems on the safety of pharmaceuticals manufactured in India. With the recent push to lower generic prices in Canada, I believe the problems identified are germane to the health and safety of Canadians.

The recent efforts on the part of provin-cial drug formularies and pan-Canadian provincial alliances to lower generic drug costs have forced Canadian manufactur-ers to bargain from a position of weakness. The importation of generics from out-of-country, primarily India, have forced Canadian manufacturers to lower prices in pan-Canadian negotiations to match the

| LETTERS |


http://www.cadth.ca/generics

http://www.cadth.ca/generics


| THE BACK PAGE |


Jim Helik is a contributing author to the ‘Managing High Net Worth’ course and the ‘Commodities As Investments’ course published by CSI Global Education. He is also one of the first holders in Canada of the Human Resource Management Pro-fessional designation from the Society for Human Resource Management.


By: Jim Helik

In general, surveys of employees of companies with no or little help, showed a low level of confidence in their knowl-edge of retirement programs and a strong interest in acquiring more information.

Older workers had a strong desire for their employers to offer a retire-ment planning program (where none was previously offered).

Even these limited programs showed increases in financial lit-eracy, were rated highly by employ-ees, and resulted in some employees changing their behaviour.

Greatest GainsLearning occurred for all employee

groups. However, the greatest gains were achieved through comprehen-sive programs by those employees with relatively low pre-seminar lev-els of financial literacy and for those

groups who are arguably more at risk, such as those employees with less education, lower earnings, and women.

This research shows that employee financial education isn’t easy and may not be as broadly-based as we might like, but is achievable. BPM

There is now a growing body of literature that shows how difficult it is to teach people all they will need to know to

look after their investment assets and integrate this knowledge with their overall financial goals (see the column in April 2013, ‘Is Our Plan Members Learning?’). However, while there seems to be a failure to teach broad-based and widely appli-cable financial literacy, in some very focused cases, employees have been able to learn and apply some new knowledge about their retirement.

Two QuestionsThis information comes from the

FINRA Investor Education Founda-tion. It’s data predominantly cov-ered large employers who offered comprehensive retirement planning pro-grams and had defined benefit plans. The fundamental study questions are: Are programs of any type offered by

an employer increasing financial lit-eracy?

If financial literacy increases, does this affect employee behaviour?Key highlights show there was a

low level of financial literacy among employees generally. This assessment came from surveys that tested, by almost any measure, the most basic retirement planning issues including when social security benefits could be claimed and at what age could employees retire, eligi-bility for Medicare, and basic questions about cost of living increases.

Most employees considered a com-prehensive retirement planning program as an important employee benefit. And participants rated the comprehensive programs very highly. Testing performed one year after the seminar shows that much of the participants’ increase in

financial literacy was retained.Using their new, though basic, knowl-

edge, many workers reported that they were changing their retirement plans. This included changes in the age they

planned to retire, whether or not they planned to work after retirement, and (for those with DC plans) their plans for the money received from their pension plan.

Individual CounsellingWhile the emphasis of the studies

was on employers offering comprehen-sive programs, there were also studies of many of the companies that did not offer a comprehensive planning program. One employer offered individual counseling with its human resources department with online access to the plan provider. Another contracted with an outside insurance company to offer 1½-hour seminars for employees nearing retire-ment. The general process was that employees nearing retirement were indi-vidually invited to participate in what-ever program was offered. Many lim-ited participation by employees to once every five years or so. Other employers offered no specific seminars or informa-tion at all.

Teaching retirement Planning To our employees

mailto:jhelik%40powershift.ca?subject=Re%3A%20A%20Benefits%20And%20Pensions%20Monitor%20April%202014%20digital%20issue%20response%20


It’s not about seeing the obvious. It’s about having the vision to see beyond. To see both the obstacles and the opportunities. To recognize the risks and the rewards. As Canada’s leading independent actuarial consulting firm, Eckler has been helping clients manage uncertainty for more than 85 years through the delivery of informed and unbiased advice. It’s all about innovation and creativity – and the discipline to get the numbers to reveal the bigger picture.

When you have mastered numbers you no longer read them. You read meanings.

Visit eckler.ca/vision – we’ll help you hear what the numbers are really saying.


http://www.eckler.ca/vision

http://eckler.ca/vision


http://www.troweprice.com/global

http://www.troweprice.com/global

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