BC: What do you mean exactly by “sustained action?”
LP: There are some plans that have solvency challenges and they are going to take five years worth of enhanced funding…to deal with. Planning for five years of significantly enhanced contributions to a pension plan, that takes a fair amount of sustained planning. A second situation is where the plan is not affordable. It takes a sustained amount of effort by a variety of parties to figure out how to restructure a plan. That doesn’t happen quickly.
BC: What can plan sponsors and members do specifically?
LP: In a defined benefit(DB)situation, if the plan isn’t affordable, it’s going to have to be restructured in some kind of way if it’s going to be kept. And that can be some kind of combination of changing the benefits, changing the contributions, changing the coverage and so on.
BC: Do the OSFI guidelines on benefit reductions send a bad message to plan sponsors?
LP: What we are encouraging people to do is face reality. And that is the most important message that we have been consistently delivering for three years or more. If you don’t face reality— and that’s not just sponsors, that’s all the parties to the plan—they have not got a significant chance of solving this in a positive way.
BC: What is the responsibility of plan members?
LP: It’s huge. They have responsibilities too. A number of these plans are negotiated. I’m not just talking about sponsors. It can be unions and retirees in some cases. In a number of cases, some boards have a majority of union members on them. Plan administrators can often be employee groups. So it’s not just an employer problem. When I talk about the parties to a plan needing to face reality, that includes employees and representatives.
BC: Do you think there is a trend of DB plans being frozen?
LP: We’ve got a trend/movement away from DB plans. But the vast majority of members and plans that OSFI regulates are still DB. We’re seeing some plans that are closed to new members or employers not setting up DB plans. So it’s happening in a variety of ways.
BC: How do you feel about a national pension regulator?
LP: There can be more harmonization without there necessarily being one regulator. Employers with multijurisdictional plans are increasingly saying that the cost of multiple regulations and the cost of compliance is part of the problem. You could have more harmonization than you have today and reduce compliance costs without going to a single regulator.
Joel Kranc is news editor of BENEFITS CANADA. Joel.kranc@bencan-cir.rogers.com.
