The Canadian Source Of Employee Pension Fund Investment And Benefits Plan Management

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Benefits and Pensions Monitor April 2007

Annual Report & Directory: Group Benefits And Retirement Recent Industry Trends And Their Impact On Plan Sponsors

By: Jan Grude

The end of mandatory retirement, accounting for pensions and post-retirement benefits, and drug costs are just some of the issues that plan sponsors in Canada face these days. And, they are turning to their group benefits providers in their search for answers and solutions.

Benefits and RetirementTo assist sponsors in their search, Benefits and Pensions Monitor presents its 2007 Annual Report & Directory: Group Benefits and Group Retirement. It begins with Jan Grude, of Buck Consultants, an ACS company, looking at these and other key issues and trends facing the industry this year.

Then, on Page 23, readers can find the Directory of Group Benefits and Group Retirement. Again, this year, weʼve divided the directory in two with a section for those who provide healthcare and other non-pension benefits and a second section for those who offer Group Retirement services. As well, we expanded the parameters this year inviting providers of all-inclusive Capital Accumulation Plan services to list in the directory along with the major insurers who provide these services.

Many emerging trends in the pensions and benefits industry are having a profound impact on plan sponsors today. Some of these trends are caused by legislative changes, others by changing demographics, and some are being driven by economic conditions.

For example, plan sponsors are coping with the increasing costs of pension plans and group benefit programs by moving from DB to DC plans or considering flexible benefit plan options. And the shift in demographics and the aging workforce, coupled with an end to mandatory retirement, means that plan sponsors need to examine the short and longterm effects of these changes on their plans, and how best to address them.

What are the most pressing issues facing plan sponsors today and what are they doing to meet these challenges? Read on, as we explore some recent trends in the pension and benefits arena and their impact on plan sponsors and their group benefits providers, both now and in the future.

Quebec Bill 30

The intent of Bill 30, which became law in December 2006, is to revise funding requirements, introduce new responsibilities for the pension committee, and better define the responsibilities of those involved in the administration of pension plans.

Bill 30 enshrines in legislation what has previously been found in documents such as the CAPSA Pension Plan Governance Guidelines. It will be interesting to see if other provinces follow suit. CAPSA guidelines represent ʻbest practiceʼ standards, and conscientious administrators will follow them – even if theyʼre not legally required to do so. By making them law, Quebec is moving governance to a whole new level.

Accounting For Pensions And Postretirement Benefits

Accounting changes in the U.S. will affect companies that must report pension and/or post-retirement benefit expense using the standards of the U.S. Financial Accounting Standards Board (FASB). Starting with fiscal years ending on or after December 15, 2006, companies will need to move results up into the corporate financial statement, rather than containing that information in footnotes. This change is expected to bring greater attention from investors as it will be easier to spot year-over-year changes and volatility. In addition, for fiscal years ending on or after December 15, 2008, the new standards will require plan assets and obligations to be measured as of the financial statement date, rather than up to three months earlier as is currently permitted.

These balance sheet changes cover Phase 1 of the changes to the U.S. accounting standards for post-retirement benefits. Phase 2 will involve a review of how pension plans are to be reported in the companyʼs income statement, and significant changes are expected as a result of this review.

Changes are also occurring in Canada and on the international front. The Canadian accounting standards board recently announced changes similar to FASBʼs Phase 1 changes. The International Accounting Standards Board is contemplating how it will proceed to bring its standards in line with those of FASB, and expects to release a discussion paper in 2007.

This activity makes a lot of sense if it means that companies will be able to readily compare notes globally, knowing that they are using the same basis for comparison. However, it may come with a ʻprice-tagʼ of increased volatility in results, due to a likely trend by the standards boards to move to the use of market-based asset values.

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