McGill University wants its employees to think big picture—with their retirement savings and their total compensation.
Pension plan sponsors have been left reeling after the dive the markets took last year, and McGill University is no different. “Over 85% of our employees are in the balanced account—that account saw a loss of 15%, as of Dec. 31, [2008]. And that’s not taking into consideration January and February, which were terrible months,” says Lynne B. Gervais, associate vice-principal, HR, with McGill University.
“Last year was a disaster year. We were also affected by the ABCP [crisis].” The losses that the university’s pension plans have suffered do not help with the university’s issue of getting employees to think about the big picture when it comes to their compensation.
The Plan
McGill has a mandatory defined contribution (DC) plan in which employees contribute up to 5% of pay. Members who are younger than age 40 receive a 5% match from the university; those who are 40 to 49 get a 7.5% match. Anyone 50 and older gets a 10% match.
Plan members who started working at McGill prior to 2009 are in a hybrid plan, which is a DC plan with a defined benefit (DB) component. Upon retiring, if employees in the hybrid plan have a lower DC payout than what the DB would have been, the difference may be made up with supplemental payments. “It’s protection against the fluctuations of the DC plan,” says Gervais. Given the current economic environment, the university’s hybrid plan has surely left employees who are on the verge of retirement feeling better than most about their future financial security. .
The Challenges
As a cost-saving measure, McGill closed the DB plan to new employees last year—a move that many organizations have to make. “DB can be very costly,” Gervais admits. “We have a very generous DC plan, [so] we decided to get out of the DB plan altogether for new employees.”
In addition to a pension plan, employees receive other generous benefits. For example, employees have a health and dental plan that includes orthodontic coverage—something that many plans don’t cover. The university also still offers post-retirement benefits, another dying trend. Students with parents who work at the university receive a two-thirds deduction in tuition, and employees who want to take courses at McGill are fully reimbursed upon successful completion.
However, despite these valuable benefits, Gervais says one of the challenges the university has is conveying the value of these benefits to its employees. “Putting a dollar value on the benefits and pensions, and inserting it into the total compensation package, is our biggest challenge. There is a feeling of entitlement among employees. They don’t see it as part of the bigger picture, of what their total compensation package is. Right now, that is our biggest hurdle—to get this message out.”
Gervais says the university holds communication sessions that explain the benefits and pension plans using comparative data to show employees the real value of what they get. “We are being as transparent as possible,” she says.
McGill’s challenge is one that many organizations face. At a time when cutbacks are a means of survival, it will become even more important to get employees to think about their total compensation and not just about their paycheques.
April Scott-Clarke is assistant editor of Benefits Canada.
april.scottclarke@rci.rogers.com
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© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the May 2009 edition of BENEFITS CANADA magazine.