In 2020, LifeLabs Inc. embarked on a year-long journey to redesign its group registered retirement savings plan and deferred profit-sharing plan to make them less cumbersome, easier to administer and to boost engagement among employees.
Under the original plans, which were in place for more than 10 years and linked to employees’ years of service, employees could contribute up to five per cent of their salary to the RRSP when they first joined the company and receive a 50 per cent employer match into the DPSP. After five years, the employer match grew to 75 per cent and then 100 per cent after 10 years.
However, employees were automatically enrolled in the plans and some were receiving a base employer contribution of one per cent without being actively engaged, says Trin Pettingill, the company’s director of total rewards, human resources operations and technology. “We also used to have a vesting period, so we would find employees would come and go and have no idea they had a plan and it would be a massive administrative effort of people leaving little bits of money behind.”
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In January 2021, a new plan design was rolled out to 4,000 eligible employees in Alberta, Saskatchewan and Ontario. It removed the tiers based on years of service, so all plan members — whether they contribute three, four or five per cent — now receive the 100 per cent employer match right away. The new plan, which includes automatic vesting, was also set up so staff have to opt in to the plan to receive the employer contribution.
“Our philosophy was that we really wanted to direct the money to people engaged in the plan, so even though there isn’t a status requirement — you don’t have to be regular full time or part time — you don’t get [the full] employer contribution unless you’re engaged in the plan,” says Pettingill.
Why a redesign?
A pension plan redesign can be prompted by many things, including compensation structure, a change in company ownership or benchmarking against the industry, says Andrew Gillies, a partner and consultant with Robertson, Eadie and Associates.
What’s a DPSP?
• A DPSP is a Canadian employer-sponsored profit-sharing plan.
• It’s often used in conjunction with other retirement plan options, such as an RRSP.
• Employees in a DPSP receive a pro-rata portion of the company’s profits, which are invested in a tax-free account.
• The employer contributions are tax deductible and the plan is registered with the Canada Revenue Agency.
• Only an employer can contribute to a DPSP, however it has no requirement to contribute to the plan in years with no profits.
In terms of the employee value proposition, pension plans should be ranked relatively highly compared to other benefits, he adds, noting most new employees will consider employer-sponsored pensions as part of the total compensation package and will want to know about the contribution requirements when considering a new job.
LifeLabs knew it had to remarket its plan to be more competitive and bring it in line with other capital accumulation plans across Canada, says Crystal Arnold, the organization’s program manager of retirement and benefits.
Read: Employer match top motivating factor in saving for retirement
Feedback from employees included that the 10-year wait for a 100 per cent employer match was too long. “Employees weren’t getting the bang for their buck,” says Pettingill. “It was also very atypical to link it to years of service to get up to that level, which we felt was the competitive level we needed to [reach].”
For employers looking to remain competitive within their industries, pension consultant Greg Hurst suggests they remember the importance of the employer contribution. He often recommends that employers with a budget for salary increases allocate a portion to the employer contribution level to make their pension plans more attractive. “To me, it’s not just a matter of being competitive, it’s a matter of designing your plan to provide an adequate retirement income.”
Gillies advises employers to review their plans every five years to ensure they remain competitive. “You’re not going to make changes frequently, so there’s really no point to continuous benchmarking, but if too much time lags in between, employers may fall behind and may not be meeting governance and fiduciary requirements in making sure the plan is up to snuff.”
Getting the word out
When it comes to communications, LifeLabs faces challenges in reaching its diverse workforce, which includes essential health-care workers, says Pettingill.
To ensure they had ample notice of the change, the company took a multi-faceted approach through several different communications channels — it leveraged its intranet, published information in its newsletter for people leaders, deployed email communications, sent physical mail to staff on leave, posted the information on bulletin boards in its locations and provided training for HR cross-functions.
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LifeLabs also ran a retirement review campaign through its record-keeper, which provided employees with several guided modules that allowed them to review their plan, adjust monthly contributions, change investments and update their designated beneficiaries.
More than half (53 per cent) of employees who participated in the review made a change, with 75 per cent of that group increasing their own contributions by at least two per cent. Among all plan members actively contributing to the RRSP, 18 per cent increased their contribution.
“We really wanted to let employees know this change was coming and help them understand the benefits of these design changes because they’re going to enable them to save faster for their retirement goals,” says Arnold.
Lauren Bailey is an associate editor at Benefits Canada.