We noticed last week after
the federal government's welcome announcement to commence a
consultation process on target benefit plans (TBPs) that much
of the media coverage and discussion focussed on the
Canada Pension Plan (CPP) and the fact that the federal government
appears to have rejected the option of enhancing CPP at this time.
We are writing this post to discuss why the CPP enhancement debate
is a different issue from the introduction of rules regarding
Stepping back, it is key to remember that retirement saving in
Canada is based on three main pillars: employment pension plans and
individual savings, Canada/Quebec Pension Plan and universal
government benefits that apply to seniors (OAS/GIS). The idea is
that all three pillars play a role in ensuring that Canadians have
adequate retirement savings income. The federal consultation on
TBPs relates to the employment pension plans and individual savings
pillar, not CPP/QPP. If implemented, changes to allow TBPs in the
federal sphere may assist with the employment pension plans and
individual savings pillar.
It is well known that private sector DB pension plans have been
on the decline over the past couple of decades for many reasons,
including cost uncertainty and volatility, and accounting
treatment. TBPs would provide a different design option outside the
traditional defined benefit (DB) and defined contribution (DC)
options for federally-regulated employers who wish to provide a
pension plan to their employees.
And why may TBPs help enhance private sector
pensions? Employers are concerned about several DB issues,
including cost certainty and risk sharing and have been exiting DB
plans in favour of DC or other capital accumulation plans that
really amount to savings vehicles, as opposed to pension plans.
TBPs address the DB issues, as employer costs are fixed (or are
subject to minor variation within a pre-determined range) and more
risks are borne by members than in a traditional DB plan.
TBPs, like DB plans, provide a targeted DB-type benefit on
retirement. This is attractive to employees. TBPs also provide
longevity and investment risk pooling, like DB plans. Longevity
risk pooling is a key attraction of these plans – unlike DC
plans, DB and TBP members don't have to guess how long they may
live and worry about outliving their savings. However, unlike DB
plans, benefits under a TBP may be reduced. Target benefit plans
are designed to be adaptive and flexible – responding to
economic and other changes.
The CPP debate is an issue involving a different pillar of
Canada's retirement savings system. Enhancement of CPP raises
broad public policy and economic issues which are also extremely
important, but are separate from the debate over the introduction
of private options such as TBPs. It is our view that this most
recent announcement by the federal government should be viewed as a
laudable step in facilitating alternative plan designs in the
private sector. Hopefully, if other cost certain pension designs,
such as target benefit, are available the recent trend from DB to
DC or other capital accumulation plans can be slowed or halted.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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