Canadian Lawyer InHouse

april 2014 20 INHOUSE "Having a pension to be able to give to employees is a very good attraction and re- tention tool," she says. "On the other side of the coin, it has to be affordable — there has to be some cost certainty or affordability from the plan sponsor's point of view." Steele recently drafted key pension docu- ments based on the new shared-risk pension model adopted in New Brunswick. "There's an inclination to kick the can down the road with things like pensions because politically they're a bit of a hot potato," says Steele. "It's great to see New Brunswick tackle this issue and try to do something innovative on the pension front." The province has taken a shared-risk approach — its own variation of a target benefit plan — so there's a narrow range in which contributions can go up or down. Essentially, it's like a lever. "A shared-risk model is designed to adapt to changing eco- nomic circumstances," says Steele. In good years, when the plan is perform- ing well, the extra funds can be used for con- tribution decreases or enhancing employee benefits. During a bad year, maybe you don't pay cost of living adjustments; those become conditional in a shared-risk plan. "What we did is looked all over the world to see who had the best pension plans in Commonwealth countries," says Susan Rowland, a member of the Task Force on Protecting Pensions in New Brunswick. Rowland, a graduate of Osgoode Hall Law School, has focused her career on pension and benefits law, specializing in the restruc- turing and funding of pension plans. "We knew about the Dutch (shared risk) model and how well it had performed," she says. "We decided to Canadianize it and build on the principles established under the Dutch." And the secret sauce, she said, is risk management. "You want the focus to be forward in terms of the management of the plan — not retrospective," says Rowland. "Right now pension plans in Canada have a retrospec- tive look on which to base their goals for go- ing forward. We have to plan for the future and manage for the future." Target benefit plans deal with problems if you get into a deficit, but don't provide benefit security, says Rowland. What makes N.B.'s shared-risk model different from a target benefit plan is it provides that benefit security, she added. "What you want is ben- efit security on one side and deficit manage- ment on the other." The management of the assets in the plan has to meet a test of 97.5 per cent security on a go-forward basis, says Rowland, which provides a high level of benefit security. When you have a bull market, you may not have the returns you'd expect if you were '' in-house counsel shouldn't shy away from this. They have a lot of value they can add to the management of the pension plan. randy bauslauGh, mccarthy Tétrault llp ''

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