As a result, OSFI has been working with plan sponsors to help restructure their plans and increase disclosure to members.
That means careful coordination on the part of OSFI and the sponsor. “We want to make sure that the amendment to reduce the accrued benefit is in compliance with their actual plan text,” said Karen Badgerow-Croteau, OSFI’s managing director, private pension plan division in Ottawa.
She added that OSFI requires plan sponsors to notify plan members of the process. “We ask, for example, that they hold meetings with the active members and retirees to advise them of the proposal [that is] before the Superintendent’s office,” said Badgerow-Croteau.
She says that in many cases, plan sponsors will find that reducing benefits will have a positive outcome. “It will have an effect on the plan by helping reduce costs,” she notes.
But the actuarial methods will take their toll on plan sponsors, warned Jean- Claude Primeau, manager, policy and actuarial, private pension plan division at OSFI, adding it is simply a reality that must be faced. “As soon as the method of calculating the entitlement has changed, then automatically the plan has a higher liability because of that change and method.”
Badgerow-Croteau stressed that not all is lost for pension plans in the current environment. But there is a trend towards plan sponsors seeking assistance from OSFI. “Generally speaking we’ve seen that a majority of plans are still in a good position…but we didn’t have requests for a reduction in accrued benefits. That’s something that’s certainly notable in terms of an upward trend.”
World View
THE ART OF RETIREMENT
A change in British law will allow individuals to invest in wine, art, residential property and stamp collections as a way to save for retirement. They will be allowed to invest their after-tax money into these collectables, at which point the government will return the taxes already paid.
Previously, the self-invested personal pension schemes, or SIPPs, which began in 1989, only allowed people to invest in commercial property, stocks and bonds. As for uncorking those purchased wine bottles, the new law, set to take effect in April, will not allow pensioners to do so unless they buy the wine back from the investment fund.
GOING GREEN
A study by the United Nations Environment Program(UNEP)Finance Initiative says that institutional investors should incorporate environmental, social and governance issues into their investment decision-making. The UNEP initiative focuses on the largest capital market jurisdictions including Canada, Australia, France, Germany, Italy, Spain, the U.K. and the United States.
DRUG BENEFITS WILL REMAIN
Four in five businesses that have traditionally provided prescription drug coverage for their retirees are continuing to provide that benefit, according to a survey of 300 large U.S. companies.
The survey, conducted by Menlo Park, Calif.-based Kaiser Family Foundation shows that the long-term future is less certain in terms of employer coverage. By 2010, only 50% of firms said they are likely to continue retiree drug coverage, while 22% said they likely won’t. The survey was conducted among 300 large companies with 1,000 employees or more that offer retiree health benefits.
Joel Kranc
