BPM October 2010.indd - Benefits and Pensions Monitor

Governing Capital Accumulation Plans In 2010 3
you put yourself in the members’ shoes, it can be overwhelming,
or, they may think they are rich with a seemingly large balance of,
say, $100,000.
SINNAEVE: Yes, funding adequacy and understanding what
adequacy means are important, however, I think this all leads back
to a key point that Deborah raised when she spoke to defi ning
the purpose of the plan. Is it to provide a signifi cant contribution
towards retirement savings or to promise a fully funded retirement
benefi t? Plan sponsors are making a signifi cant contribution and
certainly wish to provide the information and tools to assist plan
members but does their promise extend to assuring adequacy for
lifestyle needs whether in a DB or DC plan?
MODERATOR: Are providers switching the focus
from providing education to members, to helping
sponsors engage their members to use these tools?
JOHANNSON: Engagement is part of the challenge Marc mentioned.
For example, if you have an employee base with a lot of
20-somethings, it’s going to be hard to engage them in retirement
savings discussions. It just isn’t relevant in terms of what they’re
thinking today.
To me, we have to fi nd realistic ways to engage employees early
in life when compounded savings can deliver such a tremendous
benefi t. We need to speak to what interests them now and leverage
that into trying to save for the future.
How can you engage that younger employee? To me, it’s a matter
of speaking to both sides of the balance sheet. Younger people
are trying to fi nance today’s needs, let alone fi nance their future
in retirement. They need to look at how to manage their money
to accomplish both. Engaging them with how to meet their needs
of today more effi ciently can help them free up contributions to
achieve an employer match and save meaningfully for the future.
But to get there, you have to speak to their current needs, not just
those when they are in retirement. This can be part of member communications,
seminars, and tools to better engage the younger employee.
MODERATOR: Where do the CAP guidelines fi t in
today?
NEWTON: In my view, the guidelines are totally inadequate
®
when you compare the level of regulation and guidelines that we
have here versus the U.S., totally inadequate. They don’t capture a
wide range of issues around fi duciary obligations and other obligations
that employers have. They really don’t cover off the leading
edge of what a CAP plan could and should provide.
Numerous times during the discussions developing these guidelines,
the CAP committee chair expressed the view that they were
intended more for the mom and pop shop with a dozen employees
as it is assumed that the expertise is already out there for the bigger
employers like Hudson’s Bay.
I disagree. The guidelines should be here to present a model that
employers try to reach. These are really minimum practice guidelines
and that’s not where we want to be in the Canadian marketplace.
BEESLEY: As a small sponsor, we have less than 150 members
and just trying to administer a plan keeps me running. We have to
rely heavily on our service providers.
Maybe if there was a balance between governance and some of
the safe harbours that the U.S. has, that would be better.
When you are presented with a certain amount of risk, you have
to mitigate it somehow. For us, it is necessary to look for ways to
outsource or otherwise fi nd a balance between member needs and
the needs of the employer or sponsor.
We fi nd it really diffi cult.
LODER: It’s a really big struggle for plan fi duciaries these days
to govern programs appropriately or to even think about what is
appropriate because the guidelines, in some aspects, are very much
open to interpretation as to what adequate compliance means.
However, governance budgets for DC plan sponsors are diminishing,
especially if committee members have multiple roles within
an organization. You’re basically balancing two things. You’re balancing
risk management, which often becomes the primary focus,
with the often competing objective of maximizing the outcome for
the employee.
MODERATOR: How about from a provider perspective?
Do you feel that the CAP guidelines are
adequate? Would you be amenable to tightening
them up?
SINNAEVE: Objectively, there’s certainly a fundamental need
for recognizing what the goal of the program is and actually putting
it in the full context.
There are many variables and it’s very much a continuum. And
that means different things for different people in their own situations
in their lives.
What we need overall are appropriate standards, not necessarily
just for the CAP guidelines, but in terms of the fundamental access
that individuals have to all sources of potential retirement income
across all aspects of the Canadian retirement system. As this can
evolve over the timeline of an individual’s working life – or the life
of a DC plan – we have to be more dynamic and open-minded in
our thinking.
From the plan member’s perspective, they are the centre of the
universe and they really have to have a sense of awareness of all
aspects of the retirement system available to them – the government
programs, plan contributions and its variables, and their own
savings capacity. If, as a plan sponsor or an industry service provider,
we’re working towards helping people understand what they
need to do in terms of overall planning, that’s a starting point.
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