Too Little, Too Late

“The changes with regard to the 10-year amortization are a bit of a red herring due to the consent clause,” says Paul Forestell, principal and retirement unit head with Mercer in Toronto. He feels the requirement that no more than one-third of the aggregate of all active, deferred and retired plan members can indicate (before the start of payments) that they object to a 10-year solvency amortization schedule is unrealistic. “It’s holding something out in front of the plans that they probably won’t be able to get.”

A better solution, explains Forestell, would have been 10-year amortization legislation without conditions, as was proposed by the Alberta/British Columbia Joint Expert Panel on Pension Standards in November 2008.

“Overall, the budget is good for plan sponsors, but not as good as it could have been,” he adds.

John Cannell, treasurer of the Toronto Transit Commission Pension Fund Society, is less circumspect in his assessment.

“It’s too little, too late,” he says. “Despite these changes, in the current markets, any pension plan with solvency problems is in trouble and faces very difficult times ahead.”

He echoes Forestell’s thoughts on solvency relief, explaining that he doesn’t see how it will provide any concrete solutions to plans that are in trouble. “It doesn’t go far enough, and it’s not particularly helpful.”

Solvency funding aside, the proposed legislation allowing the Ontario Teachers’ Pension Plan (Teachers’) to provide pension administration and investment services to other public-sector pension plans and institutional investors is a hit with consultants, pension funds and plan sponsors alike.

The decision is sure to give smaller plans more choice and value when looking for a fund manager, says Martin Biefer, director of communications with the Hospitals of Ontario Pension Plan.

“We understand that the government is trying to make the pension system work more effectively here in Ontario,” he adds. “This change could really help smaller plans through economies of scale and expertise of plans like Teachers’.”

“It’s certainly an interesting concept,” says Forestell. “I’m sure some plans will be intrigued, but I think that there are some practical aspects to the idea that may be difficult to iron out.” He explains that the asset mix favoured by Teachers’ may not be appropriate for some smaller plans.

For the TTC’s John Cannell, the section referring to Teachers’ is the one bright spot in an otherwise disappointing budget.

“They run a good shop,” he says. “They may have something to offer.”

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