How Foresters Financial redesigned its pension, benefits plans to provide employees with more flexibility

Big changes

Foresters’ review, which started three years ago, included the organization’s benefits plan and two pension plans — a defined benefit plan that was closed to new entrants in August 2013 and a defined contribution pension that was introduced for everyone hired since September 2013.

Read: Pension plan sponsor appetite strong for new innovative design options

“As we progressed in our review to modernize our pension and benefits offering, we looked at a variety of different options and decided to freeze the DB pension plan to future service accruals and earnings levels at the end of 2021,” says Adams.

“From a business perspective, this was done to give us more flexibility in managing our capital, manage our pension liability and ensure a sustainable cost base for our total rewards programs. From a talent perspective, we wanted to have a unified total rewards offering for all employees that’s modern, competitive and valued in today’s talent market.”

The review demonstrated that the market had moved, he says, both in how much employers were contributing to workplace savings plans and in the types of vehicles they were offering. “Our research showed employees want flexibility, simplicity and access to financial advice to make better decisions to suit their needs, so we made the decision to invest in and modernize our DC plan so that it would be relevant — and valued — for the next 10-plus years.”

Looking for flexibility, Foresters expanded the options of where employees can allocate their retirement and benefits dollars. On the retirement side, it added a group registered retirement savings plan and a group tax-free savings account and increased its employer match within its savings plans. All members must contribute three per cent of pensionable earnings with a 100 per cent company match. Employees can then contribute up to an additional four per cent, which is also fully matched.

Read: Shifting demographics key catalyst to changing pension plan design

Zaheed Jiwani, a principal and head of DC at Eckler Ltd., says he’s seeing more plan sponsors offer different types of savings vehicles, but he warns of the more transitory nature of group RRSPs and TFSAs. “[Plan sponsors] have to balance that flexibility with the goal and the purpose of their plan. Flexibility could also offset retirement adequacy, so having sufficient contributions going in, but if they’re going into vehicles where the assets are less sticky or members have greater access to it can actually lead to the opposite results of what you’re going for.”

At Foresters, the minimum employee and all employer contributions go toward the DC plan, while any additional employee contributions can be allocated to the DC plan, the RRSP, the TFSA or any combination of the three plans.

“This is to recognize that everyone has different needs — saving for retirement, saving for a house down-payment, saving for a vacation or renovation — and we want to provide our employees with flexibility to better support their financial well-being,” says Adams.

On the benefits side, the organization separated its health and dental benefits so employees can choose the coverage level that suits their individual needs; introduced a wellness account, which can be used for a range of things, such as daycare and elder-care expenses, fitness and recreation expenses, tax preparation, education expenses and counselling services; allowed for the wellness account funds to be directed to the health-care spending account; and introduced the ability to allocate benefits flex credits to multiple places, including the HCSA, wellness account and the retirement plans.

Read: More employers offering innovative health-care spending accounts: report

“This is particularly helpful when an employee can coordinate benefits with their spouse in order to maximize the unused flex credits,” says Adams. “And we’ve already seen employees use this flexibility to contribute more money to the retirement and savings plan.”

The what, why and how

With such significant changes, Foresters kept its communications and change management top of mind when it kicked off the redesign project.

“People naturally view any change as a negative, even when it’s a positive one,” says Adams. “So we wanted to be able to help employees understand the what, why and how — what was changing, why it was changing and how it impacts them.”

Indeed, when a plan sponsor is closing a DB plan, communications will definitely be a challenge, says Jiwani, noting flexibility is a great way to position the conversation. He suggests employers shift from just talking about the DC plan to the overall benefits programs.

“I think that’s the best way to position it — to talk about things holistically from a retirement, medical benefit and also savings perspective. It’s that overall financial, mental and physical health and grouping all of those together — that’s how you should approach it and it’s more holistic.”

Read: 2020 CAP Suppliers Report: Stretching into the financial wellness space

For Foresters’ communications strategy, it took a multi-channel approach by using different mediums to connect with employees. This included emails, videos, a dedicated site on its intranet, webinars, town hall meetings and its weekly newsletter. It also hosted one on ones for all employees to talk to a member of the total rewards team and ask any relevant questions.

“This was a big change, so we also planned out our messaging to provide employees with just-in-time information and were always transparent on what’s next. That way, they knew what they had to think about for the next decision they needed to make.”

Jennifer Paterson is the editor of Benefits Canada.