Issue link: https://digital.canadianlawyermag.com/i/226536
made to defined-benefit plans to make them more affordable for employers, but they have to be part of collective bargaining. Some companies have switched to the more predictable defined-contribution plans, which specify how much the employer contributes but doesn't guarantee a set amount at the end of the day. Instead, monthly pension cheques are determined by the amount contributed and how the invested money performed over the years, putting more of the responsibility on the employee. The trend that sees employers looking to de-risk volatile defined-benefit pension obligations is a global one, says Ian McSweeney, pensions and employee benefits lawyer with Osler Hoskin & Harcourt LLP. "There has been a real sea change" during the past five to 10 years "around the cost of defined-benefit plans, the sustainability and affordability of the plan," he says. The fact people are living longer and further drawing on pension plans is an additional challenge as are volatile markets in which pension plan money is invested. McSweeney says there has always been an ebb and flow, that's the nature of pension plans, and that's why we look at them from a long-term perspective. But there's been a trough in that ebb and flow, particularly since the 2008 market meltdown, making it more difficult for employers to weather that storm. "Some employers have not been able to withstand it and have gone under," he says. "In many cases the pension benefits became a huge part of the company's budget cap. This volatility has really brought pension plans to the forefront." At the same time, there's a desire to get that huge group of people working for private companies without a private pension plan involved in nest-egg building outside of RRSPs and what the government offers. Many smaller companies that have trouble retaining employees because they offer no plans are also keen to get involved in something they can afford. That ball has already started rolling in Canada. A shared-risk model was instituted in Holland and adopted by New Brunswick in 2010. It involves a different governance structure with baselevel benefits and some pre-determined steps established to follow if funding targets aren't met. "The shared-risk plan is meant to try to accommodate the risk volatility of definedbenefit plans," says McSweeney. The Canadian Federation of Independent Business, which represents small- and medium-sized employers, is interested in the federal initiative in Pooled Registered Pension Plans, which requires the provinces to adopt their own legislation. In a 2011 survey, 78 per cent of federation members indicated they offered nothing to their employees. "We're trying to encourage more coverage," says Plamen Petkov, the federation's vice president for Ontario. "Ideally you should have more participation." In Ontario, legislation was introduced through a private member's bill earlier this year. The hope is to fill that gap so the large group of people who have no private pension plan at all will at least have something when it comes time to retire. 17