Canadian pension plan sponsors are caught in a balancing act in which they must manage regulation compliance while also mitigating costs and offering a positive member experience, according to a report by Towers Watson. Pension costs and economic volatility have increased, while pension regulations have become more complex—and plan sponsors are left trying to manage it all, says the report.
The 2011/2012 Tower Watson Pension Administration Survey asked 164 Canadian employers about their pension administration efforts and found that the bulk of plan sponsors are looking at administration primarily through a risk management lens. Data accuracy (26%), cost management (24%) and plan compliance (19%) are key employer concerns at the moment, and they are expected to remain top priority for the next two years.
Given the complexities that come with plan administration and good governance requirements, it’s little surprise that the majority (78%) of survey respondents said they outsource at least one pension administration service. The most commonly outsourced services include administration systems (67%), year-end processes (62%) and transactions such as retirements and terminations (57%).
Yet, despite this use of third-party administrators, pension plan sponsors are spending more, not less, time on plan administration. Of those surveyed, 62% said they have increased the amount of time they spend on pension administration over the past two years, and 44% said they expect to increase that time even further.
While plan administration is sent externally, the one thing that employers don’t want to outsource is member communication. Of those surveyed, 71% said they prefer to keep communication efforts in-house. But despite this—or perhaps because of it—it appears that member communication is either neglected or ineffective. Only 15% of respondents said their employees understand their pension benefit.
The good news, however, is that despite resource challenges, 79% of respondents said they have a goal of improving their communication efforts, and 60% of those with closed or frozen DB plans plan to be proactive in providing information to their members about retirement.