2013 CPBI Atlantic Conference
Communication Critical When Changing Plans
Employers making changes to their benefit programs need to develop a strategic plan for communicating with employees, said Randy Bauslaugh, of McCarthy Tetrault in the session ‘Taming Frankenstein: Legal Panel On Pension And Benefit Plan Changes And Conversions,’ at the 2013 CPBI Atlantic Conference in St. John’s, NL. He said this needs to be a priority even to the point of hiring professional public relations professionals to help sensitize plan members to the changes. Once announced, he said FAQs and town hall meetings are good methods to communicate the changes. However, he cautioned that town hall meetings, while good from a human resources perspective, can be legally dangerous as “people say things.”
V. Randell Earle, of O’Dea Earle, however, cautioned about hiring PR people. He said they have a propensity to want to simplify things and some things are not simple. A sponsor could end up in court defending a PR agency document. You need people to communicate, he said, but you also need to “make sure they know what to communicate.”
The U.S. is not seeing labour growth, but it is seeing productivity improve through the use of technology which is eliminating jobs, said Lloyd Atkinson, a prominent Canadian economist. In the session ‘Pension Crisis: A Crisis In Thinking Or Reality,’ he said anyone who visits, for example, an auto manufacturing facility sees most of assembling of autos being done by robots with only a handful of workers on the factory floor. This move to technology is putting more focus of the skills gap at a time when governments – facing high healthcare costs, unfunded pension liabilities, and high debt – are squeezing education. Unfortunately, he is not optimistic over how governments are going to deal with these as they tend to want to put off any decisions they need to make. “Politicians never see the writing on the wall until their backs are to it,” he said.
Brad Rowe, of Eckler Ltd., said while turning to alternatives to get equity like returns with bond like volatility may be misleading, they do offer the possibility to increase returns for defined contribution pension plan members. In the session ‘Alternative Investments for Capital Accumulation Plans (CAP): What Plan Sponsors Should Know,’ session, he said instead they should realistically look at alternatives to enhance returns or diversify risk. While the main roadblock to DC plans to use alternatives is liquidity, they can gain access by investing in public companies involved in private equity deals or infrastructure. They can also invest in real estate trusts or use mutual funds with hedge like strategies. DC plans need to find some way to add alternatives as defined benefit plans outperform DC and he believes it is because of alternatives. In 2000, the average DB plan had 94 per cent of its assets in traditional investments. Today, 28 per cent of their assets are allocated to alternatives. Other possibilities to give DC plan members access to alternatives are to design default funds which members choose as their retirement savings vehicles and by using one-fund DC plans.
Having a program in place to develop a psychologically safe workforce is not enough, said Rebecca Smith, of Medavie Blue Cross. In the ‘Employers A Time for Action Psychological Health and Safety in the Workplace’ session, she said employers need to continually identify new hazards and evaluate the status of old ones. It is not just a one-year program and “you are done,” she said. Keeping workers psychologically safe in the workplace is a continuous program. However, uncertainty over how to assemble a team to go and look for psychological hazards may be holding some employers back, she said. These hazards are not tangible and differ from employer to employer. And while the new standards are currently voluntary, she warned at some point they could be made mandatory as employers have to take responsibility for things in their control.
While shared risk pension plans are currently specific to New Brunswick, there are lessons to be learned from the experience there, said, Paul T. Lai Fatt, a principal at Morneau Shepell. Speaking on ‘Shared Risk Plans – A Case Study,’ he said in putting these plans in place sponsors need to understand the problems they are trying to solve and then focus on long-term sustainable solutions. They need to address the problems of today while designing a solution that hopefully avoids a repeat of those problems in the future. So finding ways to reduce contributions through, for example, solvency funding extensions for an unchanged benefit problem doesn’t make sense. They need to consider all the interests of plan members, actives, and retirees to develop funding policy and flexible benefit design that allows plans to adapt to future events without having to go back to the drawing board each time events change.
Plan sponsors with no generic substitution policies may want to consider introducing the use of these in their drug plans, Natalie Borden, manager, drug utilization review, pharmaceutical services, at the Nova Scotia department of health, told the ‘Challenges Facing Atlantic Drug Plans & Solutions That Should Be Considered’ session. She said that the loss of patent protection has resulted in a number of drugs now being available as generics. For those plans with mandatory generic substitution in place, there is a cost saving as most provinces have limits on the price of generics and this cost of generics has been reduced from 70 per cent of the brand price to as low as 25 per cent in some provinces. She also dispelled the myth put forward that generics are not as effective as brand name drugs. The myth says they are 20 per cent less effective when, in fact, the 20 per cent applies to the absorption rate in the body and this rate is accepted by Health Canada.