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News Archives - June / July 2009

Friday, July 31, 2009

Caisse Outlook ‘Stable’

Standard & Poor's has assigned a "stable outlook" to its AAA credit rating on the Caisse de dépôt et placement du Québec and its subsidiary CDP Financial Inc. The AAA long-term rating is the highest assigned by Standard & Poor's. In February, the rating agency placed the Caisse's AAA rating "with negative implications." Today it has changed its assessment from "with negative implications" to a "stable outlook." In its report, Standard & Poor's says it is impressed with the progress made to date by the Caisse to stabilize the management team and its risk management efforts. It also believes the Caisse's ability to meet its financial obligations is extremely strong.

Employers Use Cost Sharing

More U.S. employers are using cost sharing as a utilization management tool in their prescription drug programs, says a survey by Buck Consultants, an ACS company, which identified strategies employers are using to manage their prescription drug benefits and costs. ‘Prescription Drug Benefit Survey’ found 76 per cent of respondents use employee cost sharing as a utilization management tool, up substantially from 51 per cent last year. The most common target cost-sharing range is 11 per cent to 20 per cent of claim costs.
The most important clinical management steps taken to control pharmacy benefit costs include care management, disease management, and low-cost generic pricing programs offered by retail pharmacy chains.

Private Payer Challenges Examined

The challenges and opportunities for private payers and adjudicators in today's turbulent economic environment will be the focus of a session at the ‘Drug Benefit Conference.’ Linda Lin, director, clinical services and pharmacy relations, ClaimSecure Inc., will examine the strategies that will be considered in managing rising drug plan costs in 2010 and beyond. Theme of the event is ‘The Evolving Drug Benefit Landscape: 2010 and Beyond.’ It takes place September 15 in Brampton, ON. For more information, visit


Thursday, July 30, 2009

Relief Has Implications For Sponsors

Defined Benefit pension plan administrators in Ontario will need to address several issues as they decide how they will implement the temporary funding relief enacted by the Ontario government. A Watson Wyatt ‘InfoFlash Canada’ says the regulation also contained measures that are not directly related to funding relief. These include a permanent amendment to the rules regarding payment of commuted values from underfunded pension plans. The new rules effectively require administrators to monitor the approximate transfer ratio of their plans between valuation dates, and act when the ratio drops below a certain threshold. As a result, administrators need to decide what to do. Many may do nothing because there is a good reason to believe that the plan’s transfer ratio has not dropped by more than 10 per cent since the last valuation filing, or because no commuted value payments are expected in the near term. Others may ask the plan’s actuary to estimate an updated transfer ratio to determine whether it has decreased by 10 per cent since the last ratio was established. They must also decide whether to hold the payment of commuted values while the actuary estimates an updated transfer ratio (the regulation requires that the processing of such payments stop if the administrator “ought to know” that the ratio has decreased by 10 per cent) and/or stop paying out commuted values until the superintendent’s approval is obtained if the updated transfer ratio is less than 90 per cent of the previous ratio.

Increase In Costs Could Lead To Benefit Elimination

An increase in health benefits costs to U.S. employees could lead them to reduce or eliminate other voluntary benefits, says a survey from Sun Life Financial. ‘What's Driving Enrollment in Voluntary Benefits Today?’ found that up through a 35 per cent rise in health insurance costs, the majority of survey respondents (more than 80 per cent) said they would be likely to reduce spending in other areas to address the increase in health insurance expenses. Those who said they would consider canceling other benefits in response to rising health insurance costs indicated they would most likely cancel long-term care insurance, long-term disability insurance, and short-term disability insurance. Dental insurance was the least likely to be cancelled.

DB Plans Reduce Poverty

Defined Benefit pension income plays a critical role in reducing the risk of poverty and hardship among older Americans, says a new study. ‘The Pension Factor’ report – authored by Dr. Frank Porell, professor of gerontology at the McCormack Graduate School of Policy Studies at the University of Massachusetts-Boston, and Beth Almeida, executive director at the National Institute on Retirement Security – found rates of poverty among older households lacking pension income were about six times greater than those with such income. Several distinctive features of DB pensions contribute to its effect on poverty. Eligible employees are automatically included in DB plans and do not face decisions about whether to participate, how much to save, and how to invest the savings. As well, they better protect retirement wealth from pre-retirement "leakages" due to borrowing or pre-retirement withdrawals. Finally, DB pension recipients cannot outlive their retirement benefits and a spouse's access to this pension income is protected after one's own death.

Blakes Expands To Gulf

Blakes is establishing a significant presence in the Gulf Region. It has formed an exclusive association with the firm of Dr. Saud Al-Ammari in Al-Khobar, Saudi Arabia, and will be opening an office in Bahrain. Both offices will open in the fall. Leading the initiative is Dan Fournier, who is currently a senior partner in the energy and finance practices. Dr. Al-Ammari will be joining Blakes as a partner and will be the managing partner of the offices in the region.

Latimer CIO At OMERS

Michael Latimer is executive vice-president and chief investment officer at OMERS. He has held the position of president and chief executive officer of Oxford Properties, its real estate arm, since 2004. He has 30 years of corporate leadership experience with both public and private companies.

Advanced Investments Management Offered

The International Foundation of Employee Benefit Plans is offering an ‘Advanced Investments Management’ program in September. It takes place September 21 in Philadelphia, Pennsylvania. This program presents high level sessions covering advanced asset allocation, advanced bond management, equity real estate investments, alternative investments and hedge funds, and international investing. For more information, visit

Conference Takes Care Of Business

‘Taking Care of Business’ is the theme of the ‘13th Annual Health Work & Wellness Conference 2009.’ Set for September 30 to October 3 Gatineau, QC, it will feature a session on offering a tool kit for small businesses (and large businesses with regional offices in small communities) of simple, low-cost strategies that tap into the community approach to workplace health. For more information, visit


Wednesday, July 29, 2009

Cautious Optimism On DB

Despite reeling from the financial impact of the economic downturn on company pension plans and their businesses, Canadian organizations remain cautiously optimistic on the financial viability of their Defined Benefit plans, says the third CFO Research Services study conducted in conjunction with Towers Perrin. According to the survey, 71 per cent of finance executives are committed to maintaining the long-term viability of plans and 86 per cent feel confident they have adequate cash to fund their plans for the next two years. Overall, Canadian finance executives felt worse off compared to those in the U.S. and the UK, with 87 per cent believing their DB plans’ financial strength was negatively impacted by the financial downturn (compared to 67 per cent in the U.S. and 49 per cent in the UK). More than half (63 per cent) of Canadian respondents also report that their DB plan had a negative impact on their company’s financial statements (compared to 59 per cent in the U.S. and 37 per cent in the U.K.).

CHCH TV Pensions To Be Reduced

Canwest Global Communications Limited has advised CHCH TV retirees that the company will be winding up the CHCH TV pension plan effective August 31. The company has also informed the retirees that the plan has an unfunded windup deficiency, and that Canwest Global has no intention of funding the deficiency. This means that CHCH TV retirees will have their pensions reduced when the pension is wound up. The amount of the reduction is unknown because Canwest Global has yet to provide retirees with this information.

SEC Wants Short Selling Protection

The U.S. Securities and Exchange Commission has announced several actions that would protect against abusive short sales and make more short sale information available to the public. First, the commission made permanent an interim final temporary rule, Rule 204T, that seeks to reduce the potential for abusive ‘naked’ short selling in the securities market. It requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The commission is also working with several self-regulatory organizations (SRO) to make short sale volume and transaction data available through the SRO websites. Apart from these measures, the commission is continuing to actively consider proposals on a short sale price test and circuit breaker restrictions.

Reporting Tool Enhanced

Northern Trust has enhanced its Easy Event Reporting tool to provide clients with expanded options for monitoring exposure to multiple types of risk including credit, liquidity, concentration, and regulatory risk. It allows clients to trigger an inquiry for a specific business need and to efficiently receive comprehensive data and analytics to guide decisions. Available through its multi-faceted online platform, Passport, the enhanced tools integrate data mining on multiple risk exposure categories in order to answer client requests. The risk categories available in the reporting tool include monitoring market/concentration risk and credit/counterparty risk.

Summit Looks At Corporate Social Responsibility

The ‘7th Annual Summit on Corporate Social Responsibility,’ organized by Canadian Business for Social Responsibility, will take place November 5 in Toronto, ON. This year’s summit is themed ‘Transformational Corporate Social Responsibility: The Next Wave of Business Leadership, Innovation and Performance.’ It will highlight new, creative ideas to transform business and propel companies into the post-recession economy. Through a series of panel sessions (including a CEO panel), presentations, and interactive discussions, conference attendees will focus on topics including leadership, people and product innovation, and the future of government policy. For more information, visit


Tuesday, July 28, 2009

Incentives Help Wellness Programs

The use of incentives in corporate wellness programs shows that smart investments in employee health programs are yielding results, says a study by Health2 Resources. Its findings show, for example, that a confidential health history/questionnaire is an important starting point for worksite wellness and disease management. Two out of three employers offer a health risk assessment to employees and nearly three out of four of those offer incentives to take it. Incentives to take the questionnaire range up to $300 annually, with about 10 to 15 per cent exceeding $300. It also shows employers are offering cash and gift cards to spouses and family to keep them healthy. More than half of the companies surveyed offer health and wellness or disease management programs to spouses and a third extend the programs to other family members.

Funds Show Gains In Second Quarter

Three consecutive months of mostly positive returns resulted in nearly 98 per cent of the 1,038 pooled funds in the Morningstar Canada database posting gains for the second quarter. All 41 of its indices had positive returns for the quarter with 25 showing returns of more than 10 per cent over the three-month period, with eight of them gaining 20 per cent or more. The best-performing fund index was the one that tracks the Canadian Focused Small/Mid Cap Equity category, which gained 23.6 per cent. Most of that fund index's gains came in April and May, when it returned 11.1 per cent and 10.2 per cent, respectively, though it did post a modest 0.9 per cent gain in June.

Directive Threatens Managers

The Alternative Investment Management Association has warned that the European Commission’s draft directive on alternative investment fund managers would hit fund managers and investors around the world if enacted into European law. It argues that the directive creates potentially major difficulties for non-EU funds and/or non-EU managers in accessing the EU market. Marketing of funds by managers will only be allowed with a special marketing passport that the directive creates. However the directive also delays its introduction by three years and imposes significant obstacles (such as demonstrating regulatory and tax equivalence) to obtaining it.

Klein Provides Leverage Guide

Peter Klein, of Simon Fraser University, will provide a practical guide to understanding leverage and risk in alternative investments in one of the investment workshops at the ‘CPBI Ontario Regional Conference.’ This presentation will examine the sources of leverage, how leverage is used, how to measure it, how the risks should be measured, and the problems and benefits of leverage. The conference runs October 5 to 7 in Collingwood, ON. For more information, visit

Government Intervention Examined

Cynthia Steer, Rogerscasey; and Alex Jurshevski, of Recovery Partners; will discuss government intervention in credit markets at Canadian Hedge Watch's ‘8th annual World Alternative Investment Summit Canada (WAISC) 2009.’ In another session, Robert Johnston, of Eurasia Group; will look at how energy and commodities could be political drivers for the next growth cycle. It takes place September 14 to 16 in Niagara Falls, ON. For more information, visit


Monday, July 27, 2009

Pension Moratorium Approved

The federal government will allow Air Canada a 21-month moratorium to plug a hole in its pension plan. It will be allowed to waive payments to fund the $2.9 billion deficit in its pension plan until April 2011. Air Canada had a $100 million pension payment due on July 30 and another $60 million due two weeks later. It says a sharp drop in global travel and competition in Canada prompted the need for the pension moratorium to help it avert its second bankruptcy filing in six years. The company's five unions and retirees have agreed to the plan.

Hedge Fund Frauds Reported Daily

Algorithmics’ Algo FIRST database is currently registering more than one report of a new hedge fund fraud case every day. Penny Cagan, managing director and head of content group, says said it isn’t recent activity that has resulted in the large increase in recent reports of hedge fund fraud events. “On the contrary, many of these events have been ongoing for years and in some cases, decades. They are being discovered now as a result of the turmoil in the financial markets and the associated increase in redemption requests. Fraudsters cannot hide their misdeeds when investors want their money back.” The size and breadth of these fraud events illustrates the imperative necessity of undertaking proper due diligence and of framing the right questions when analyzing vehicles for investment funds, she says. Service providers to the Madoff feeder funds, such as custodians, are becoming targets of lawsuits by investors who are seeking to be made whole. This means that due diligence is equally important for not just investors, but also custodians, prime brokers, and fund administrators.

Smaller Research Providers Benefit

Last year's historic turmoil in the bulge bracket proved a boon to the franchises of many smaller equity research providers, including mid-sized broker/dealers, regional firms and sector specialists, says Greenwich Associates. The downfall of Bear Stearns and Lehman Brothers and the merger of Merrill Lynch by Bank of America created significant disruptions in the supply and quality of the research used by institutional investors in U.S. equities. At the start of 2008, bulge bracket firms captured approximately 73 per cent of the U.S. buy-side analyst research ‘vote.’ In 2009 that share fell to just 68.5 per cent. Meanwhile, the share captured by mid-sized broker/dealers, regional firms, and sector specialists jumped to approximately 29 per cent in 2009 from about 24 per cent in 2008. Absent from the list of beneficiaries of these disruptions were independent research providers. They saw their share of the buy-side analyst research vote remain flat to just slightly higher at about 2.7 per cent from 2008 to 2009.


Friday, July 24, 2009

Signals Indicate End Of Recession

A prediction that economic growth in Canada would resume in the second half of this year and pick up in 2010 signals the end of the recession. Mark Carney, governor of the Bank of Canada, sayswe now expect the Canadian economy will contract by 2.3 per cent this year and then grow by three per cent in 2010 and 3.5 per cent in 2011. Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth. However, he warned “this recovery is nascent. To sustain global growth, effective and resolute policy implementation remains critical.”

Global Economy Mending

“The global economy is on the mend. Now is the time to be opportunistic and take advantage of improving equity markets,” says Don Reed, president and chief executive officer of Franklin Templeton Investments Corp. Speaking at its annual ‘Investment Outlook and Opportunities Forum,’ he said rising commodity prices, improving global trade, low interest rates, and an unprecedented spirit of fiscal co-operation among governments around the world are all improving the health of the global economy. He also noted that “history shows us that stock markets recover before the economy by an average of six months and markets started to recover earlier this year. However, there is more work to be done – the U.S. economy, consumer spending, and the balance sheets of U.S. and European banks must improve for the recovery to gain further momentum.

Volatility 'Fact Of Life'

The Canadian equity market will remain volatile, but its long-term fundamentals are strong, says Michele Horne, president of Bissett Investment Management. She told Franklin Templeton Investments Corp.’s annual ‘Investment Outlook and Opportunities Forum’ that the market experienced one of its most significant corrections over the past 12 months. However, she noted while volatility can be unsettling for some investors, it is a “fact of life” and times of market turmoil can be a great time to invest. Investors who are waiting on the sidelines for things to settle down, are missing an opportunity, she said.

Freeze Fails To Boost Stock Price

Freezing a Defined Benefit pension plan does not lead to a boost in a company’s stock price, says a study by Watson Wyatt. Its analysis of 82 publicly-traded companies that froze or closed their pension plans between 2003 and 2007 found that there is an insignificant or negative impact on stock prices associated with the announcement of a pension freeze or close. In cases where such an announcement did have a statistically significant effect, more often than not the employer’s stock price decreased. “Freezing a plan may produce some accounting gains, but it will not provide companies with long-term cash flow relief either absolute level or volatility – for many years,” says Mark Warshawsky, director of retirement research. “Also, even if these freezes do lead to savings, there will be no immediate positive effect on firm value. It could even become diminished in the long run if employees begin to view the firm as an uncompetitive employer in light of its shrinking commitment to retirement and its transfer of risk to employees.”

Best Quarter For U.S. Plans

U.S. Institutional investment plan sponsors experienced one of their best quarters in recent years during the period ending June 30, 2009, says the Northern Trust Universe. It says plans posted a median return of 10.2 per cent for the second quarter following six straight quarters of losses. Corporate ERISA plans led the way in the second quarter, posting a median return of 12 per cent, while public funds gained 11 per cent and foundations and endowments returned 9.3 per cent at the median. The quarterly results were the second-best in the past decade for corporate plans and third-best for public funds in that period.

Deficit Forecasts Overstated

Federal budgets will be in deficit over the next few years, but Canadians likely won't be saddled with the massive debt and interest costs that plagued the country 20 years ago, says a report from CIBC World Markets. In the report that questions recent gloomy forecasts about the size, duration, and impact of budget deficits to come in Canada, it notes that fiscal projections often understate the potential to tackle deficit challenges and that relatively small errors in estimating future growth can see medium-term deficit projections careen wildly off the mark. Another vital factor in the current deficit outlook is the temporary nature of today's high-profile stimulus efforts, including infrastructure programs with fixed termination dates.

Federal Plan Down 22.7 Per Cent

The pension plan for federal government workers lost 22.7 per cent in the latest fiscal year, says the Public Pension Investment Board. Its assets fell by $5.1 billion to $33.8 Sector billion as of March 31, 2009, down from $38.9 billion a year earlier. Its equity portfolio lost more than 30 per cent its value last year, while its real estate holdings were down almost  of 17 per cent. Bond holdings offset the losses, however, with government bonds earning a 19.4 per cent return for the year.

Poos Joins Sponsors Corporation

John Poos is executive director of the OMERS Sponsors Corporation. Most recently, he was director, global pensions at Nortel Networks Limited where he had oversight responsibilities for the design, administration, and investment strategies for more than 75 pension and ancillary benefit plans worldwide. Prior to joining Nortel, he was general manager, law and pension investments, at Stelco. He is a member of the editorial board of Benefits and Pensions Monitor. The Sponsors Corporation represents employer, employee, and retiree members of the plan and has responsibility for plan design.

Aon Makes Appointments

Aon Consulting has made a range of appointments across Canada. Edgar Aranha joins the Toronto, ON, talent practice as vice-president. Paul Birtch is vice-president wit the Toronto marketing and sales team. Irene Kohut is a senior consultant at the Ottawa, ON, human capital practice and Renate Rodgers is a senior consultant in the health and benefits practice in Ottawa. In Montreal, QC, Karine Tougas is a consultant in the employee benefits outsourcing practice and Genevieve Moreau is a senior HR business partner in the human resources practice.

Lescure Moves To Caisse

Roland Lescure is executive vice-president and chief investment officer of the Caisse de dépôt et placement du Québec. Recognized in Europe as one of the best asset managers of his generation, he will be responsible for setting its investment strategy and asset allocation for its overall portfolio. He is currently chief investment officer at Groupama Asset Management, one of the largest asset management firms in France with $125 billion in assets.


Thursday, July 23, 2009

More Firms Freeze DB Plans

The number of Fortune 1000 firms that have a frozen pension plan increased again this year as companies continue to look for ways to control their retirement benefit expenses, says an annual analysis by Watson Wyatt. It found that 190 firms on the 2009 Fortune 1000 list have a frozen DB pension plan, compared with 169 companies last year and only 45 six years ago. Overall, the rate of DB plan sponsorship in the Fortune 1000 decreased slightly to 61 per cent in 2009 from 63 per cent in 2004. The analysis also found that industries with higher DB plan sponsorship rates, such as utilities and manufacturing, are less likely to freeze a plan than those with lower sponsorship rates. However, companies in industries that have been severely affected by the economic crisis – the financial services and automobile industries in particular – are exceptions. Almost half of the DB plan sponsors in the financial services industry and one-third of the DB plan sponsors in the automobile industry have frozen plans.

Funds Benefit From Rebound

Diversified pooled fund managers posted a median return of 10.4 per cent before management fees for the second quarter of 2009, says Morneau Sobeco’s ‘Performance Universe of Pension Managers’ Pooled Funds’ report. Jean Bergeron, a principal in the asset management consulting practice, says “pension funds benefited from the stock market rebound, posting significant gains in the second quarter of the year. However, the financial situation of most pension plans remains difficult and will require additional contributions to eliminate deficits.” On average, pension fund managers added value when their performance is compared to the benchmark portfolio. In fact, the managers’ median return of 10.4 per cent was one per cent higher than the 9.4 per cent return of the benchmark portfolios used by many pension funds.

Algorithmic Trading Share Increases

A surge in algorithmic trading helped drive a significant increase in the share of U.S. equity trading volumes executed via electronic platforms last year, says the Greenwich Associates' ‘2009 U.S. Equity Investors Study.’ Overall, the proportion of U.S. equity trading volume executed electronically increased to 36 per cent in 2008/2009 from 32 per cent in 2007/2008 a shift attributable in large part to the pick-up in algorithmic trading. More than three-quarters of all U.S. institutions and 95 per cent of the largest and most active institutional traders use algorithmic trading strategies which currently account for about 18 per cent of overall U.S. equity trading volume.

Sun Expands MFS Platforms

Sun Life Financial Inc. has announced a broad expansion of its MFS Investment Management unit's global investment and distribution platforms. MFS will be adding personnel in investment management throughout its global footprint. Areas the firm is targeting include new equity research analysts stationed in key and growing emerging markets, as well as specialists in quantitative analysis and tactical asset allocation. Within distribution, MFS will be expanding in relationship management, dealer relations, and sales to support the firm's expanding efforts in global retail and institutional distribution.


Wednesday, July 22, 2009

UK Executives Less Confident

Senior finance executives at UK companies are less confident than their U.S. and Canadian counterparts about accessing cash to fund retirement commitments over the next two years, says Towers Perrin research. Its third annual CFO pension risk survey found that 61 per cent of Canadian senior finance executives are certain they have adequate access to cash to fund retirement commitments, followed by the U.S. with 47 per cent and the UK with just over a third. The survey also found that the UK was more interested in buy-out than the U.S. and Canada.

CalPERS Suffers Worst Decline

The market value of the California Public Employees' Retirement System’s assets fell 23.4 per cent for the year ended June 30, the most severe annual decline it has ever reported. As of June 30, the market value of its assets were $180.9 billion, down from $237.1 billion a year ago, but up from $160 billion in March 2009 when the market hit trough levels. Even with the decline, its long-term, 20-year investment return remained positive at 7.75 per cent. The drop in the value of its assets was mainly due to unprecedented losses in the global financial markets, the liquidity crises that followed, and the resulting global economic downturn. CalPERS administers retirement benefits for 1.6 million active and retired state, public school, and local public agency employees and their families and health benefits for 1.3 million members.

Securities Lending Grinds To Halt

Securities lending virtually ground to a halt in 2008 as a result of the deepening credit crisis and extreme market volatility that swept over the capital markets, says the ‘Callan 2009 Securities Lending Survey.’ Almost half (48 per cent) of respondent firms with securities lending programs are undergoing a controlled withdrawal to reduce the risk profile of the program and minimize current and future losses. Nearly all are utilizing their current custodian or securities lending provider for the unwind, and most believe it will take one to three years to complete. Cash collateral reinvestment losses, both realized and unrealized, were the leading concern.

Pandemic A Business Issue

The H1N1 pandemic is “a business issue for organizations – one that could adversely affect their operations and their employees,” says a report by the Conference Board of Canada. It found leading organizations are focusing on communicating their response to the pandemic effectively. A central challenge is to communicate effectively and share information with employees, customers, supply chain partners, governments, and media. By providing clear, consistent and balanced messaging, organizations can be viewed as trustworthy in the midst of a crisis. Organizations are also garnering external support by co-ordinating with supply chain partners and government bodies.

Electronic Trading Used To Lower Costs

U.S. institutions are using electronic trading platforms as a primary tool for lowering equity trading costs in a challenging market environment, says Greenwich Associates' ‘2009 U.S. Equity Investors Study.’ The average rate paid by institutions on DMA electronic trades dropped to 1.6 cents per share in 2009, from 1.7 cents in 2008 and 1.8 cents in 2007. The market's most active traders – those that generate more than $50 million in annual trading volume – are paying an average rate of 1.5 cents on DMA trades. At the opposite extreme, institutions that generate less than $5 million pay an average of two cents. Banks pay the highest average rate of 2.6 cents per share while hedge funds pay just 1.3 cents on average.

Panel Examines Pension Review Reports

‘Pension Review Reports – What does it all mean?’ will be the kick-off plenary at the 2009 ACPM National Conference. Serge Charbonneau, of Morneau Sobeco; Randy Bauslaugh, of Blake, Cassels & Graydon LLP; and Caroline Drouin, of CN, will analyze the reaction from the pension industry and comment on the expected reaction from governments to the legislative pension reviews conducted for Ontario, Alberta/BC, Nova Scotia, and the federal system. The conference takes place September 15 to 18 in Montreal, QC. For more information, visit


Tuesday, July 21, 2009

DC Systems Subject To Uncertainty

The regulation of investment choices and default options in Defined Contribution pension schemes need to be more carefully implemented, says the Organisation for Economic Co-operation and Development (OECD). Its working paper, 'Investment Regulations and DC Pension,' analyzes the impact of different quantitative approaches to regulating investment risk on the retirement income from DC schemes. It says DC pension plans are "growing in importance throughout the world," but added DC systems are subject to "a great deal of uncertainty." The ongoing financial crisis had led to pension funds in countries with mandatory DC systems experiencing losses of 20 to 25 per cent in 2008. It noted that reducing the downside risk on retirement income from DC pension plans "requires moving into relatively conservative investment policies where the share of assets allocated to bonds may be quite large,” which comes at the cost of renouncing potentially higher replacement rates that are attainable through riskier assets. It calls for regulations designed to limit some of these risks and avoid situations where older workers and retirees are exposed to major losses on their retirement income," but warns these rules need to be carefully designed.

Canadian Sentiment Unchanged

Despite the financial turmoil that rages around the globe, the sentiment of Canadian charterholders remains largely unchanged from 2008, says the CFA Institute Centre for Financial Market Integrity’s ‘2009 Financial Market Integrity Index.’ It says the relative stasis of these ratings points to an obvious ‘good news/bad news’ conclusion: Canadian respondents perceive neither much improvement nor much decline in the integrity of financial professionals or the effectiveness of market systems in Canada. This contrasts starkly with the opinions respondents offered about market participants and systems in some of the other markets surveyed. The perception respondents had in 2009 about the U.S. and U.K. markets, for instance, declined greatly from the 2008 FMI Index, signifying a loss of faith in both the individuals and the investor protections in their respective markets. As well, unlike other markets, Canadian respondents do not appear to blame Canadian professionals or market institutions for the current global financial crisis.

Canadian Pensions Ride Stock Rally

Global equity markets continued to rebound in the June quarter, lifting Canadian pension plan assets by 9.5 per cent over the period, says a survey by RBC Dexia Investor Services. "Given last year's brutal pull-back, plan sponsors are breathing a sigh of relief to be finally moving into positive territory, especially after the poor January and February start," says Don McDougall, director of advisory services. Canadian equity was the top performing asset class as the S&P TSX Composite index gained 20 per cent, its best three-month showing since 1999. Foreign stocks also rallied, driving the MSCI World Index up 16.5 per cent in local currency terms during the quarter. In domestic bonds, Canadian pensions continued to gain lost ground on the DEX Universe index as corporate spreads narrowed considerably from their peaks, earning 2.3 per cent in the quarter and 4.3 per cent year-to-date.

U.S. Funds Decline

Despite modest equity market increases, a decline in bond yields led to a decline in the ‘typical’ U.S. pension fund in June, says Towers Perrin’s ‘Pension Index.’ It shows the funded status of the typical U.S. pension plan dropped four per cent in June. The index, which reflects the asset/liability performance of a hypothetical benchmark pension plan, remains up by 1.4 per cent year-to-date, but the June reading nonetheless represents a decline of 23 per cent over the past 12 months. The benchmark investment portfolio experienced a 0.3 per cent return for June and has returned 3.9 per cent year-to-date. However, the liabilities used in measuring the index (based on projected benefit obligations) were up by 4.6 per cent in June and have now increased by 1.8 per cent year-to-date.

Wellness Focus Fixes Healthcare

A focus on wellness programs, evidence-based medicine guidelines, improving quality of care, and increasing the ability of patients to be better healthcare consumers will help fix the U.S. healthcare system, say employers. Aon Consulting’s ‘Healthcare Reform Survey’ found that 58 per cent of employers oppose a public plan option similar to Medicare to compete with employer-based plans as a way to increase the number of Americans with health insurance. However, 93 per cent of organizations said the most favourable way to increase the number of Americans with health insurance is by continuing the employer-based healthcare system with a greater focus on wellness, chronic condition management, evidence-based medicine, and other innovative approaches.


Monday, July 20, 2009

CSA Sets Out National Rules

The Canadian Securities Administrators (CSA) has unveiled a national set of rules for securities dealers and advisors. The rules, effective September 28, are intended to raise the accountability and proficiency requirements for some jobs in the investment industry. They expand the list of who needs to register with stock market authorities to include hedge fund managers. They also call for some people, such as compliance officers, to take exams to qualify for their jobs.

Air Canada Concludes Consultations

Air Canada has successfully concluded a consultation process with its retirees, managers, and administrative, technical, and support employees for pension funding arrangements that call for a moratorium on past service contributions for a 21-month period and fixed payments thereafter for the 2011-2013 period. This follows on the ratification of identical pension funding agreements by all five of Air Canada's Canadian based unions. The agreements remain subject to their adoption by the federal government of an order-in-council amending Air Canada's pension funding rules and Air Canada entering into agreements to raise a minimum of $600 million in new financing.

Employees Overestimate LTD Cost

While employees consider long-term disability a valuable employee benefit, many (40 per cent) overestimate the cost of the plan – by two to four times the actual average cost, says a CIGNA survey. Only about 10 per cent were able to identify the real cost range for LTD coverage, which is often less expensive than getting similar coverage outside the workplace.

U.S. Considers ‘Say-On-Pay’

The U.S. Treasury has delivered draft ‘say-on-pay’ legislation to Congress. It would require all publicly traded companies to give shareholders a non-binding vote on executive compensation packages. Disclosures that would be subject to ‘say-on-pay’ votes include tables summarizing salary, bonuses, stock and option awards, and total compensation for senior executive officers.

White Assistant Superintendent

Mark White is assistant superintendent, regulation sector, at OSFI. In this role, he is responsible for capital and accounting issues; actuarial policies and reviews; regulatory approvals and compliance; guidelines, regulations and interpretations; and international assistance and liaison. He joined OSFI in April 2008 as senior director, capital, accounting and research division. Previously, he was at RBC Capital Markets in several positions, including managing director and global head of the strategic transactions group.

Drug Benefit Evolution Examined

The premiere Drug Benefit Conference – ‘The Evolving Drug Benefit Landscape: 2010 and Beyond’ – takes place September 15 in Brampton, ON. The joint initiative of Equilibrium Health Consulting Inc. and Drug Benefit Consulting, it will look at technological advancements, legislative proposals, and benefit management strategies which are changing the supply and demand of healthcare in Canada. Speakers include Dennis Darby, CEO of the Ontario Pharmacists' Association, who will present the proposed legislative changes which are enhancing the scope of pharmacy practice, Linda Lin, Director, clinical services and pharmacy relations, ClaimSecure Inc., who will examine the challenges and opportunities for private payers and adjudicators in today's turbulent economic environment. For more information, visit


Friday, July 17, 2009

Perceptions Of Recession Differ

Canadian employees and employers have completely different perceptions and opinions about the effects of the current recession on their work and personal lives, says the 2009 Desjardins Financial Security ‘Health Survey.’ One key difference between the two is their opinion of the recession duration. Employees are more pessimistic, saying that the recession will last 21 months. Employers, on the other hand, are more optimistic with 53.1 per cent saying that the recession will last one year or less. When asked whether the recession has negatively affected workers' work/life balance, both groups agreed. One quarter of employees and 37 per cent of employers also agreed that the recession has negatively affected employees' physical health. When asked if the recession has had an affect on staff's mental health, 35 per cent of employees and 63 per cent of employers said yes. Employees' stress levels was found to be another factor in their declining health, as 35 per cent said they are experiencing higher stress this year compared to last.

Task Force Set To Meet

The former head of the C.D. Howe Institute will act as research director for the federal-provincial task force on pension reform. Jack Mintz is now a public policy professor at the University of Calgary and a world-renowned fiscal and tax policy specialist. The task force will hold its first meeting July 22 in Calgary, AB. Chaired by Ted Menzies, the parliamentary secretary to the federal minister of finance, it consists of officials from B.C., Alberta, Manitoba, Ontario, and Nova Scotia. It is expected to issue a report before the end of the year on whether Canada’s pension laws need an upheaval.

Shareholders Focus On Dollar Value

‘Say on Pay’ is unlikely to result in the rapid reduction of executive compensation in Canada, says Ken Hugessen, of Hugessen Consulting. The June Newsletter for the Canadian Coalition for Good Governance says in a panel discussion on ‘Say on Pay’ at its annual meeting, he said he thinks that issuers want shareholders to focus on the policies behind compensation plans, but he believes it likely that shareholders will only focus on the dollar value of an executive’s compensation. Carol Hansell, of Davies Ward Phillips and Vineberg, said that increased engagement with shareholders will minimize the risk of shareholders voting ‘no,’ but boards will need to acknowledge that, sometimes, shareholders might be right. She also stressed the need to ensure that shareholder ‘approval’ does not become something that directors are allowed to shelter behind, since no matter how sophisticated the shareholder, directors will always have access to more information. Both Hugessen and Hansell stressed the need to standardize shareholder resolutions across issuers.

Plans Now Need Approval

Ontario pension plans with transfer ratios that have dropped by 10 per cent and are below 0.9, must get approval from the Superintendent before allowing terminating members to transfer their commuted value or buy an annuity, says an Eckler ‘Special Notice.’ The Financial Services Commission of Ontario (FSCO) policy applies to all Defined Benefit pension plans registered in Ontario. It says all plans must develop a process to monitor their transfer ratios. Plans that have not yet prepared an actuarial valuation reflecting the significant market losses in 2008, should take immediate steps to estimate their current transfer ratio. Plans must also take immediate steps to adopt a benefit transfer policy.

Red Flags For Ponzi Schemes

In the wake of the Bernie Madoff ponzi scheme in the U.S. and the one currently under investigation in Montreal, QC, allegedly perpetrated by Earl Jones, Advocis, The Financial Advisors Association of Canada, offers some red flags for investors and potential investors. Greg Pollock, its president and CEO, says "The first and most important warning sign is the advisor offers you some unrealistic and/or consistent returns on the investment. Such promises are fundamentally contrary to the very nature of a stock market. Stock markets go up and stock markets go down. Legitimate results vary." Other warning signs include pressure to invest beyond comfort levels and promises of exclusivity or special deals.

Global Benefits Focus Of Course

Benefit issues relating to international assignments and international pooling/offshore retirement plans will be among the general topics examined at the International Foundation of Employee Benefit Plans’ ‘Certificate in Global Benefits Management’ course. It will provide regional and country overviews on Asia Pacific, Latin America, Europe, and Canada. It takes place August 24 to 28 in Seattle, WA. For more information, visit


Thursday, July 16, 2009

Canadians Living Longer

Canadians are living longer and will collect pension benefits from the Canada Pension Plan (CPP) for a longer period of time, says a study by the Chief Actuary of Canada. ‘The CPP Mortality Study’ shows that by 2050, male beneficiaries are expected to receive their retirement benefit for an additional 3.3 years and female beneficiaries for an additional 2.3 years, compared to the same study in 2005. The increase in life expectancy is anticipated to grow to a total of four additional years for both genders by 2075. Future mortality improvements are expected to come more slowly and at older ages, as mortality rates at younger ages are already very low. Most of the increase in life expectancy at birth over the last 30 years has come from improvements in mortality at ages 65 and over. As a result, life expectancy at age 65 has increased from 14 to 18 years for males and from 18 to 21 years for females. The study says the CPP will remain viable for the next 75 years. It can be found at

Treatment Of LIFS Changes

Ontario is changing the treatment of locked-in accounts. The Financial Services Commission of Ontario says the some of the key changes will give owners of old LIFs and LRIFs a one-time opportunity from January 1, 2011, to April 30, 2012, to withdraw in cash or transfer to an RRSP or RRIF up to 50 per cent of the total market value of the assets of the fund. As well, from January 1, 2010, to December 31, 2010¸ owners of new LIFs will have a one-time opportunity to withdraw in cash or transfer to an RRSP or RRIF an additional 25 per cent of the total market value of the assets of the fund that were transferred into their new LIF account on or before December 31, 2009. After December 31, 2009, anyone who purchases a new LIF will have a one-time opportunity to withdraw in cash or transfer to an RRSP or RRIF up to 50 per cent of the total market value of the assets of the fund.

Sequel To ‘Freshfields’ Released  

The UNEP FI has launched the much-awaited sequel to its landmark 2005 ‘Freshfields Report’ which, until now, has arguably been the single most effective document for promoting the integration of environmental, social, and governance (ESG) issues into institutional investment, says Acuity Investment Management. ‘Fiduciary responsibility – Legal and practical aspects of integrating environmental, social and governance issues into institutional investment’ provides a legal roadmap for fiduciaries looking for concrete steps to operationalize their commitment to responsible investment. The report says that professional investment advisors and service provider – such as investment consultants and asset managers to institutional investors – may have a far greater legal obligation to incorporate ESG issues into their investment services or face "a very real risk that they will be sued for negligence" if they do not.   

Last Union Agrees To Pension Relief

IAMAW members have ratified tentative agreements on labour stability and pension funding relief. This successfully concludes the ratification process by all five of Air Canada's Canadian based unions. The agreements specify that there shall be no changes to pension benefit levels during the extension period. The agreements remain subject to the adoption by the federal government of an order-in-council amending Air Canada's pension funding rules and Air Canada raising a minimum of $600 million in new financing. The pension funding agreements are also subject to the support of the company's non-unionized employees and retirees. A consultation process with these groups is currently under way and is expected to be concluded by July 18, 2009. The IAMAW represents approximately 12,300 technical, maintenance, and operational support, clerical, and finance employees.

Private Equity Index Slips

The return for the State Street ‘Private Equity Index’ was -6.46 per cent for the first quarter of 2009, ending four consecutive quarters of downward trend. However, when compared to the first quarter of 2008, the index declined by 560 basis points from 0.87 per cent. Since its inception, it has declined by 124 basis points to 8.39 per cent during the quarter, dropping from 9.63 per cent reported in the last quarter of 2008.

Auto Enrollment Increasing

Auto enrollment in 401(k) plans is proving to have the biggest impact on younger and lower-compensated employees, says Fidelity Investments. Its data on auto enrolled participants in plans it administers shows that over half (52 per cent) were between the ages of 20 and 34. By comparison, only 13 per cent of participants that were auto enrolled were between the ages of 50 and 64. The majority (56 per cent) of participants that were enrolled automatically made less than $40,000 a year. Only 10 per cent had salaries of $80,000 to $150,000 a year. The number of plans offering auto enrollment increased nearly 70 per cent since the end of 2007.

U.S. Retirement Age Rising

U.S. workers who are not confident about their financial security in retirement plan to retire later than those who express confidence, says the ‘2009 Retirement Confidence Survey.’ It shows the median retirement age increased from age 59 in 1991 to age 62 in 2003. Others planning to retire later include workers not expecting benefits from a Defined Benefit pension plan (compared with those who expect these benefits), non-savers (compared with those who have saved for retirement), and workers age 35 or older (compared with younger workers). It also found that many retirees who retired early cite negative reasons for leaving the work force before they expected including health problems or disability (42 per cent) and changes at their company, such as downsizing or closure (34 per cent).

LDI Examined

Liability-driven investments will be the focus of one of the sessions at the International Foundation of Employee Benefit Plans’ ‘Canadian Investment Institute.’ Other sessions will examine reasonable investment return assumptions in a world of historically low interest rates and the outlook for corporate bonds. It takes place August 16 to 19 in Québec City, QC. For more information, visit


Wednesday, July 15, 2009

Sponsors Need To Regroup

In 2009 and beyond, both sponsors and employees will need to regroup and refocus on managing future retirement income security risks, including evaluating whether the level of risk they are bearing in their plans is worth the potential reward, says Mercer’s annual review and analysis of the retirement programs from companies in the S&P TSX Composite Index. It found the funded status of pension plans, on an accounting basis, decreased for the first time in three years, from 93 per cent at fiscal year-end 2007 to 89 per cent at fiscal year-end 2008 at the median value. This is not as low as the funded status on a solvency basis that will affect the 2009 contributions. However, the full recognition of plans’ accounting surplus or deficit on the 2008 balance sheet would have reduced the shareholder equity by one per cent at the median level. As well, the median after-tax pension accounting deficits represent about five weeks of cash flow from operations – or 1.5 per cent of market capitalization for the surveyed companies.

Growth May Return Later In 2010

Global financial services companies around the world don’t expect a return to growth until the first half of 2010 or even later, says research by Ernst & Young. Its survey finds that while a third of respondents expect some expansion this year, 34 per cent believe the return to growth to begin in the first six months of 2010, and 32 per cent expect it to be further out. More than half of the executives surveyed admitted that the downturn had impacted them more than expected. Some 72 per cent of respondents were surprised at the severity, and 70 per cent were surprised by the speed of the financial crisis. Banks were most taken by surprise, with 68 per cent saying they had been impacted more than expected, compared to 36 per cent in the insurance industry.

Pennycook Interim CEO

David B. Pennycook has been appointed interim chief executive officer at Sceptre Investment Counsel. He takes over the position formerly held by Glenn Inamoto who passed away after a sudden illness. Pennycook joined Sceptre in 1991 and most recently held the position of president and head of institutional marketing and servicing. He will continue to be responsible for the institutional marketing and servicing function, in addition to his new role.

Kennedy Joins Teachers’

Melissa Kennedy is vice-president and general counsel of the Ontario Teachers’ Pension Plan (Teachers’). Previously, she was vice-president, associate general counsel, and head of the litigation and employment law group at the Canadian Imperial Bank of Commerce. 

TMAC Goes To Niagara Falls

Dagmara Fijalkowski, vice-president and senior portfolio manager, global fixed income and currencies, RBC Asset Management; Jeremy Stretch, senior market strategist, Rabobank International; Jamie Thorsen, executive managing director, foreign exchange products and China capital markets, BMO Capital Markets; will debate the relative strengths of the Canadian dollar, U.S. dollar, Euro, yen, yuan, and pound sterling at TMAC's ‘27th Annual Conference & Trade Show.’ It takes place September 27 to 29 in Niagara Falls, ON. For more information, visit


Tuesday, July 14, 2009

Institutions Trim Trading Costs

Institutions are making a concerted effort to reduce costs and maximize the value they get from the commission dollars they do spend, says Greenwich Associates ‘U.S. Equity Investors Study.’ The primary strategy used by institutions to reduce U.S. equity trading costs is to shift trading volumes from traditional ‘high-touch’ trades facilitated by broker sales traders to relatively low-cost electronic execution. The proportion of overall U.S. institutional equity trading volume executed through high-touch trades slipped to 56 per cent in 2008/2009 from 60 per cent in 2007/2008, while the share of volume directed to electronic platforms increased to 36 per cent from 32 per cent.

HRAs Add Value

More than half (58 per cent) of respondents believe their organization would gain value from offering employees a health risk assessment (HRA), says a Pal Benefits ‘Flash Survey.’ As well, despite the fact that HRAs are conducted at work, 55 per cent of respondents would still provide employees with an HRA. The results indicate that, when implemented strategically and assuming results will be used thoughtfully, an HRA can provide valuable information to both employees and employers. When a company notices ‘red flags’ such as increases in absenteeism and disability claims, an HRA may be a company’s initial step to identifying underlying health problems, introducing a targeted wellness program, and engaging employees in their own health improvements.

Joint Identification Prompts Earlier Return To Work

When workers and supervisors jointly identify and solve return-to-work barriers, absent workers with low-back pain get back to work earlier than would otherwise be the case, says research from the Institute for Work & Health (IWH). It shows this is especially true for older workers and those who have previously been off sick. “The results suggest a lot of progress can be made helping injured workers return to their jobs with a good workplace-based intervention, especially among those workers usually considered challenging cases,” says Dr. Ivan Steenstra, the IWH associate scientist who led the study.

Sceptre CEO Passes Away

Sceptre Investment Counsel Limited’s chief executive officer, Glenn Inamoto, has passed away suddenly. His death comes 8½ months after he was appointed both CEO and CIO in late October of 2008. Previously, he was senior Canadian equity manager. He joined Sceptre as a member of the Canadian equity team in 1999. Prior to that, he was vice-president of investments at O'Donnell Investment Management Corp. and held senior investment management roles at RT Capital Management and OMERS.


Monday, July 13, 2009

Flight Attendants Approve Plan

Air Canada's flight attendants have approved a plan for a 21-month moratorium on the airline's pension obligations. The union's membership voted 63 per cent in favour of the plan. It is the third union to approve the plan. Part of the International Association of Machinists and Aerospace Workers, which represents 11,000 workers at the airline, rejected the plan earlier this month. The union has brought the plan back to the membership and a result is expected by July 14.

Commission Pool Contracts

U.S. equity brokers say the pool of equity commission dollars they earn on institutional trades of domestic equities could contract by nearly 25 per cent in 2009 – a reduction that could prove problematic for sell-side firms and institutional investors alike, says Greenwich Associates ‘U.S. Equity Investors Study.’ From 2008 to 2009, the amount of commissions paid by U.S. institutions to equity brokers on trades of domestic stocks grew 12 per cent to $13.7 billion. However, earlier this year sell-side firms projected a decline of 23 per cent in overall U.S. equity commission revenues for calendar year 2009, with an even more severe 32 per cent contraction expected in hedge fund commission payments. The end result is a possible fall in total domestic equity commissions back to 2007 levels.


Friday, July 10, 2009

Tribunal Defines ‘Employer’

The Financial Services Tribunal has released a decision that discusses, in detail, who is the employer for funding purposes under the Pension Benefits Act, says a ‘Hicks Morley FTR Now.’ The decision provides some guidance with respect to which entities are responsible for funding wind up deficits in pension plans with more than one employer. The decision is also positive for employers, as the tribunal clearly rejected an interpretation of “employer” that would make participating employers jointly and severally liable for funding deficits in respect of all plan members, regardless of who actually was the members’ employer. Therefore, it is clear that when a participating employer withdraws from a pension plan (other than a MEPP), the remaining employers are not responsible for funding any wind up deficit associated with the withdrawing employer’s employees.

Final Agreement Signed

Crédit Agricole S.A. and Société Générale have signed a final agreement to combine their asset management operations. With (euro)591 billion of assets under management, the combined entity will be ranked eighth worldwide. It aims to be a multi-expert asset manager with a high-performance investment offering adapted to the requirements of institutional clients and backed by an extensive international network. The new company has a comprehensive investment offering suitable for both retail and institutional clients and wide geographic coverage, with a presence in more than 37 countries and a position in high-growth regions, particularly Asia.

Alternative Assets Down Slightly

Alternative assets managed on behalf of pension funds by the world’s largest investment managers decreased by around one per cent to $817 billion in 2008 compared to the year before, says Watson Wyatt. An analysis of the top 100 alternatives managers shows that real estate managers dominate, accounting for around 58 per cent of assets (down from 62 per cent in 2007), followed by private equity fund of funds, fund of hedge funds, infrastructure, and commodities. As with real estate, hedge funds assets (13 per cent of assets) also diminished in 2008 with both private equity (20 per cent of assets) and infrastructure (nine per cent of assets) being the beneficiaries.

Private Equity Firms Struggle

At the halfway point of 2009, private equity firms raised just over a third of the capital they were able to attract from pension funds, university endowments, foundations, and other investors in the first half of 2008, says analysis by Dow Jones Private Equity Analyst. The first six months of 2009 saw 173 private equity funds raise $54.9 billion, 64 per cent less than the $152.7 billion raised by 261 funds during the first half of 2008 and the lowest mid-year total raised since 2005. In 2008, private equity firms raised a total of $287.5 billion, second only to the record $343.3 billion raised in 2007. Leveraged buyout and corporate finance funds continue to attract the largest proportion of capital investment. In the first six months of 2009, 73 buyouts funds raised $28.7 billion, 72 per cent less than the $102.6 billion raised by 98 similar funds during the same period last year.

Research Providers Feel Pinch

Independent research providers already suffering from a drop-off in institutional commission revenues are feeling an additional pinch from a slowdown in the distribution of institutional commissions collected through commission sharing arrangements, says Greenwich Associates’ ‘U.S. Equity Investors Study.’ The largest and most active institutional equity traders in the U.S. are looking to maximize the value they receive for their equity commission dollars by making more use of commission sharing arrangements as a means of obtaining research and advisory services from broker-dealers and independent providers. Across the entire U.S. market, the share of all institutions using CSAs was unchanged at about 48 per cent from 2008 to 2009.


Thursday, July 9, 2009

Solvency Issue For Canadian Pensions

Despite the recent market rally, Canadian Defined Benefit pension plans’ solvency positions are not much improved from the January 1, 2009 position, says an analysis by Watson Wyatt Worldwide. Asset returns have been strong in recent months, more than offsetting the negative asset returns in the first two months of 2009. However, pension liabilities increased almost as much as assets over this six-month period due to a drop in solvency discount rates. The net result is that the solvency position of the typical plan ended up slightly better on June 30 than it was at January 1, 2009. After beginning the year at 73 per cent and plunging to 61 per cent at the end of February, the solvency ratio of the typical plan rose to 75 per cent by the end of June. These low funding levels will result in onerous cash requirements for companies that offer DB plans to their employees and/or their pensioners.  Governments are providing some temporary relief by extending the timeframe over which employers must pay off deficits, but the financial burden of offering a DB plan is causing concern for many companies. 

Trust Covers Dental

Canadian Auto Workers officials are working out details to establish a healthcare trust in 2010 that would cover 50,000 retired and active auto workers. The trust would cover dental, vision, and long-term care benefits not covered under public healthcare in Canada. The establishment of the trust was negotiated under collective bargaining earlier this year when the companies began their restructurings. The new labour agreements remain in effect through September 2012. The trust is similar to the voluntary employee beneficiary association established by the United Auto Workers in the United States. 

Share Of Commissions Drops

The share of institutional equity brokerage commissions captured by independent third-party research providers declined significantly during the months of tumultuous trading in U.S. equities in 2008/2009, says Greenwich Associates’ ‘U.S. Equity Investors Study.’ Independent third-party research providers saw their share of the institutional research pie drop to 11 per cent of overall equity research commission payments in 2009 from 18 per cent in 2008. That 2009 proportion represents $845 million out of almost $7.7 billion paid by institutions to compensate brokers for research in 2009 and $13.7 billion in institutional equity brokerage commission fees overall.

College Offers Graduate Certificate

Centennial College in Toronto, ON, has launched a graduate certificate called ‘Total Benefits Management.’ This certificate incorporates courses from the CEBS (Certified Employee Benefit Specialist) designation, which is co-sponsored by Dalhousie University and the International Foundation of Employee Benefit Plans. The curriculum covers Defined Contribution and Defined Benefit retirement plans as well as group life and health benefits in a total compensation context. The certificate uses the CEBS curriculum and supplements it with graduate level instruction in core business skills such as project management, accounting, and total benefits client interface training.

Investors Demand Information

Institutional investors and investment managers are demanding information and analytics to support risk management, says a Northern Trust survey. It also found they feel they need to improve their organizations’ ability to successfully implement risk models in the investment process. The survey also highlights the changing sources of portfolio risk. While market volatility remains the greatest source of risk, liquidity risk emerged as a leading concern following last year’s credit market crisis. It found 17 per cent of respondents felt liquidity was the greatest source of risk for investment programs in 2009, compared to just two per cent who thought that was the case in early 2008. Nearly 45 per cent of the participants said valuation and risk models could have performed better in predicting the impact of liquidity risk over the last 12 months.

Lump-sum Distribution Studied

Some 16.2 million U.S. workers had taken a lump-sum distribution from an employment-based retirement plan as of 2006 and the average amount of these distributions was $32,219, says a study by the Employee Benefit Research Institute. It found what individuals chose to do with a lump-sum distribution can have a significant impact on how much (if any) assets they have at retirement. Through 2006, almost half (47.3 per cent) of those taking a lump-sum distribution used at least some portion of the money for tax-qualified savings, while 16.9 per cent used at least some portion of it for consumption. The other most prevalent uses were buying a home, paying off debt, or starting a business. The research shows that at least some portion of a lump-sum distribution is more likely to go for tax-qualified savings if the distribution is larger or if the recipient is older, male, or white.


Wednesday, July 8, 2009

Gaps Must Be Closed

Canada needs to close the gap in pension coverage and the private sector has the tools to do it, says Dean Connor, president of Sun Life Financial Canada. Speaking at a meeting at the Vancouver Board of Trade, he said three to five million Canadians, which is about one-in-five workers, are not in a pension plan or are not saving enough on their own. He believes that Canada needs to simplify regulation which will ultimately reduce the cost of operating pension plans and free up more money for pensions. He suggests that multi-employer plans, auto-enrolment, and introduction of a high annual contribution limit will help bridge the gap in pension coverage.

Policies Needed On Substance Abuse

Key policies and agreements can help managers, supervisors, and human resource professionals cope with the growing challenge of substance abuse in the workplace, says a Cowan ‘Employee Benefits Bulletin.’ It says a substance abuse policy should state its purpose and objectives, as well as the scope, the roles and responsibilities of both the employer and employee, the consequences of a violation, and the available resources for managers and employees. A fitness-to-work checklist is a tool that can help determine whether an employee is impaired due to substance abuse or a health-related issue. Last-chance agreements are drafted on a case-by-case basis between the employer and employee. They should reflect the circumstances of a particular situation with regard to what is expected of an employee and the consequences should they fail to follow the prescribed action. The substance abuse agreement assures employees that their medical and case information will not be shared with their employer.

Canadian Equities Shift Toward Growth

Russell Investments has added 43 Canadian companies to its ‘Global Index.’ It now comprises 407 stocks that represent more than US$ 1.2 trillion in market capitalization. Though this figure has declined from US$ 1.9 trillion at this time last year, Canada still ranks as the seventh largest market in terms of relative weight in the index. As a result of the recently completed annual index reconstitution process, Canada saw a significant shift in terms of style designation from value to growth that is consistent with the general movement to a more growth-dominated global index. Currently the Canadian equity market appears as 73 per cent growth and 27 per cent value, while at this point last year it was 59 per cent growth and 41 per cent value.

Paton Heads Edge

Neil Paton is president and chief executive officer of The Edge Benefits Inc. Most recently, he vice-president of distribution within the insurance division of a large Canadian financial institution. He will be responsible for leading the company through expanded distribution, product development in the simplified solution marketplace, and further leveraging the process and service delivery. 

Aurion Shuffles Fixed Income Team

Christine Horoyski, senior vice-president and portfolio manager, fixed income, will now have overall responsibility for all fixed income portfolios at Aurion Capital. Derek Johnson is director, fixed income. Previously, he worked on the bond desk for a major Canadian bank and for an investment management firm, where he was responsible for credit and equity analysis. Nicole White is director and portfolio manager. She has been with the firm for 13 years and most recently was a portfolio manager with responsibility for its money market and currency portfolios. The changes to the fixed income team we prompted by the retirement of Paul Fahey, a founding partner of the firm.


Tuesday, July 7, 2009

Plans Rebound From Lows

Canadian pension plans benefited from impressive asset returns in the second quarter as equities continued the rebound from their lows of early March, says the Mercer ‘Pension Health Index.’ It shows the solvency of funds increased nine per cent to 71 per cent. The drop in federal bond prices during the quarter also helped reduce the solvency liabilities of pension plans. This accounted for about three per cent of the improvement.

Decision Alleviates Some Concerns

The decision of the Financial Services Tribunal (FST) in the Montreal Trust surplus distribution dispute has alleviated much, although not all, of the ‘you can't get there from here’ concern that had been raised by reason of the superintendent's initial position in that matter, say Priscilla H. Healy and John R. Varley, of Fogler, Rubinoff LLP. In the ‘Exclusive Online’ article ‘Surplus Distribution Dispute Decision Alleviates Some Concerns,’ they say they sincerely hope that the superintendent will let the issue rest there and not raise the same issue on future surplus applications. To read the article, visit

Paper Looks At Private Equity

State Street Corporation has released a paper on private equity as part of its Vision series of thought-leadership reports. ‘Private Equity at the Cross Roads’ notes that although the industry is currently under pressure from the financial crisis and recession, “many believe that private equity is about to enter a new phase of more sustainable growth. Over the long-term, investors and governments will look to private equity for its significant capital resources, management expertise, and high risk tolerance to help restore economic strength as impaired assets are wound down and fresh investments are required for new and expanding businesses.”

Levert Leads Sales Effort

Francoys Levert is managing director, sales and relationship management, MFC Global Investment Management. He will lead sales and relationship management efforts in Quebec and in Eastern Canada. Previously, he was a managing director with State Street Global Markets, responsible for institutional foreign exchange sales activities in Canada.

Newman Moves To Teachers’

Jennifer Newman is vice-president, investment finance operations, at the Ontario Teachers’ Pension Plan (Teachers’). She joins the fund from the Canadian Imperial Bank of Commerce, where she was vice-president, process reengineering and special projects.


Monday, July 6, 2009

Members Face Benefit Cuts

Members of the Canadian Commercial Workers Industry Pension Plan have been notified that they could face benefit cuts as a result of the worldwide financial crisis. The multi-employer pension plan says it suffered heavy losses in 2008 and this year and unless it has an infusion of significant new capital, benefits restructuring may be required. The plan provides pension benefits to some 290,000 current and former members of the United Food and Commercial Workers union at 328 employers primarily in the grocery store sector.

State Street Looks At Hedge Funds

State Street Corporation has released a paper on hedge funds as part of its Vision series of thought-leadership reports. ‘New Views of the Hedge Fund Industry’ cites two major trends affecting the industry: a migration to third-party administration and custody services and increased regulatory oversight. While hedge fund redemptions are expected to continue through 2009, the report says “anecdotal evidence suggests that investors are starting to regain confidence. The hedge fund industry will emerge from the financial crisis – smaller, in terms of the number of funds, but eventually larger in terms of assets under management.”

August Interest Rate Assumptions Update

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including August 2009 are now available at An Excel spreadsheet on the website contains seven worksheets:

  • Commuted Values – 2009 Basis
  • Commuted Values – 2005 Basis
  • Commuted Values – 1993 Basis
  • Marital Breakdown – CSOP 4300 (March 2003)
  • Marital Breakdown – CSOP 4300 (March 2003 ALTERNATE)
  • Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
  • Minimum Interest on Employee Required Contributions (including the 12 month average rates)


Friday, July 3, 2009

ACPM Honours Volunteer

The Association of Canadian Pension Management will honour one of its volunteers each year for their outstanding contribution in helping the organization reach its goals. The ‘ACPM Award for Exceptional Volunteerism’ will be presented annually at the gala dinner held at the ACPM National Conference each September. This year, the national conference is set for September 15 to 18 in Montreal, QC.

Arrow Hedge Using RBC Dexia

RBC Dexia Investor Services has been selected by Arrow Hedge Partners Inc. to provide shareholder services for a portfolio of funds in Canada. Arrow Hedge Partners is a Canadian-based investment management company that provides its clients with access to funds of hedge funds and single manager hedge funds.

Benefits Average Declines

The average total of benefits as a percentage of payroll declined for the third straight year, says the Human Resources Association of the National Capital Area's ‘2009 Washington DC Area Benefits Survey.’ The average benefit rate for respondents in the DC-Baltimore, MD, area was 30.9 per cent. For 2009, it dipped to 28.8 per cent. A number of employers changed their healthcare plans by reducing benefits to eliminate an increase in their actual costs. To control costs, employers also shared rate increases with employees.


Thursday, July 2, 2009

Union Rejects Pension Freeze

Air Canada's largest union has rejected a labour deal that freezes pensions and wages for the next 21 months. The International Association of Machinists and Aerospace Workers – representing about 10,000 workers including mechanics, baggage and cargo handlers, aircraft cleaners, and electricians – voted 50.8 per cent against the deal. The union had been advising its members to accept the plan and hopes to work out a compromise with its members. Unions representing customer service agents and dispatchers had previously agreed to the pact.

Preferential Tax Treatment Not Being Considered

The preferential tax treatment granted in the U.S. for Health Care Trusts (HCT) is not being considered in Canada, says Eckler ‘GroupNews.’ At present, it appears that the HCT may be based on the health and welfare trust structure, modified slightly to accommodate the CAW agreements. Health and welfare trusts are arrangements created via administrative practice and interpretation of the Income Tax Act. They are not specifically defined in the ITA and their current provisions do not allow any pre-funding of benefits (retiree or otherwise). The current health and welfare trust rules allow employers to contribute to the trust (and get a tax deduction for the contribution). Permitted benefits paid to beneficiaries are not taxed to the recipient, except for employer-paid disability benefits.

Benefits Valued More Than Cash

Employees value their total benefits offering more than cash, says a study by the employee benefits group of Sun Life Financial. Of the supplemental benefits evaluated, employees ranked their dental insurance, 401(k)/retirement plans, vision insurance, and group life insurance as most valuable. When employees were asked to assume they had all the medical insurance their family needed and to distribute 100 points across other benefits based on how much they would value them, only 33 per cent of respondents assigned a value greater than zero to cash and only five per cent of the total assigned a value greater than 30 to cash. Cash was the least utilized category.

CAP Administration On Agenda

CAP administration and design and pension plan administration pitfalls will be among the pension workshops at the ‘CPBI Ontario Regional Conference.’ It will also feature workshops on benefits and institutional investments as well as a stream designed for small businesses. It takes place October 5 to 7 in Collingwood, ON. For more information, visit


Tuesday, June 30, 2009

Further Upside Potential For Canadian Equities

A majority of investment managers see further upside potential for Canadian equities, despite a rally that has seen double-digit gains in the S&P/TSX Composite Index so far this year, says the ‘Russell Investment Manager Outlook.’ A solid 45 per cent consider Canadian equities to be undervalued and only one-in-five think the market has become overvalued. Only eight per cent of managers say they are still bullish towards cash, and fully 61 per cent are bearish, indicating that stocks and bonds are once again seen as offering rewards commensurate with their higher risk profile.

Taxable Benefits Policies Changing

The federal government is changing employee taxable benefits policies in an effort to reduce the administrative burden for employers and ensure more fairness in tax administration. One change clarifies the rules under the Canada Revenue Agency’s gift and award policy which allows employers to give employees non-cash gifts and awards up to $500 per year, tax-free. The new rules state that employees are also eligible to receive a separate non-cash long service or anniversary award of up to $500 tax-free, under certain circumstances. Items of immaterial or nominal value – such as coffee, T-shirts, mugs, or plaques – will not be considered a taxable benefit to employees. The government also changed its policies with respect to loyalty programs. The rules previously required employees to calculate and include in their income the fair market value of any reward points accumulated by charging employer-reimbursed expenses to personal credit cards. Under the change, the CRA will no longer require these employment benefits to be included in an employee’s income.

Impact Of RAMQ Needs Review

RAMQ’s modification of the financial parameters for drug insurance could translate into an average reduction of approximately two per cent in drug costs for Quebec private plans mirroring its coverage, says a Mercer ‘Client Alert.’ It says this reduction would occur with a reduction in coinsurance from 69 per cent to 68 per cent, combined with an increase in maximum contribution from $927 to $954. However, if the drug coverage applicable to a plan’s employees who have not attained age 65 is more generous, there will be no financial impact to the plan. And if a plan reimburses the RAMQ copayments paid by employees who are aged 65 or over and are covered by RAMQ, an increase in drug costs of approximately three per cent on average could result. Mercer recommends that sponsors review their plans to assess the impact of the changes.

CIBC Mellon Gets ‘A’ Rating

Moody's Investors Service has assigned a long-term deposit rating of Aa2 and a short-term deposit rating of P-1 to the CIBC Mellon Trust Company (CIBC Mellon). Moody's also affirmed CIBC Mellon's bank financial strength rating (BFSR) of B-, its long-term issuer rating of Aa2, and its stable rating outlook. Thomas C. MacMillan, president and chief executive officer of CIBC Mellon, says "the ratings recognize our strong relationship with our parents, and our ability to offer world class solutions to the Canadian market."

Measurisk Passes Milestone

Measurisk, LLC, an affiliate of J.P. Morgan Worldwide Securities Services (WSS), has crossed an important industry milestone in modeling the full positions of more than 1,000 hedge funds – making it the largest position-based hedge fund analytical platform in the industry. Measurisk acts as an independent intermediary facilitating the flow of risk information between hedge funds and investors.


Monday, June 29, 2009

Consulting Giants Merge

Consulting firms Towers Perrin Forster & Crosby and Watson Wyatt Worldwide plan to merge in a bid to cut costs amid an economic slump that has caused clients to curb discretionary spending. The combined company will be named Towers Watson & Co. It says it will take three years to achieve savings of $80 million through job cuts and the streamlining of overlapping operations. A large chunk of the synergies would come from North America, which accounts for 65 per cent of the revenue at Towers Perrin and 45 per cent at Watson Wyatt.

Ford Changes Auto Securitization

Ford Credit Canada is closing the first public auto securitization completed in Canada since the end of 2007. It is also the first public auto loan monthly pass-through amortizing securitization in Canada. In the past, securitizations were structured like a regular bond where investors received semi-annual interest payments and a bullet payment of principal at maturity. In this deal, investors will receive a mix of interest and principal on a monthly basis. HSBC and Scotia Capital are joint structurers, leads, and bookrunners.

Institutions Committed To Foreign Allocations

Canadian institutions appear committed to another portfolio strategy that characterized their portfolios in the years before the start of the crisis, the increase in allocations to non-Canadian assets since the elimination of the Foreign Property Rule in 2005. Greenwich Associates’ ‘Canadian Equity Investors Study’ says more than 70 per cent of participating institutions have left allocations to international equities unchanged from 2008-2009 with only about 15 per cent each saying they made moderate increases or decreases. Almost 45 per cent of institutions say they left allocations to domestic equities unchanged over the past 12 months, with 30 per cent making moderate increases and an equal share making moderate reductions.

Enterprise Of Future Examined

‘The Enterprise of the Future’ will be one of the sessions at theNQI Performance Excellence Summit.’ A panel including Mitch Joel, president, of Twist Image; Rod Phillips, president and chief executive officer of Shepell·fgi; and Kevin M. Warren, president and chief executive officer of Xerox Canada; will discuss what the organization/enterprise of the future will look like and new best practices. Theme of the event is ‘New World. New Economy. New Future. Now What?’ It takes place October 22 in Toronto, ON. For more information, visit


Friday, June 26, 2009

Canadians Conservative Towards Alternatives

Canadian institutions have taken a more conservative approach than U.S. funds when it comes to investing in alternative asset classes and Greenwich Associates’ ‘Canadian Equity Investors Study’ reveals that some Canadian institutions are looking to scale back their exposures to some alternatives even further. Almost 30 per cent of participating Canadian institutions say they have already reduced their allocations to hedge funds, including almost 15 per cent saying they have scaled back these allocations "significantly." None of the institutions increased allocations to either hedge funds or private equity and 14 per cent made moderate cuts to their private equity allocations.

Caisse Rating Confirmed

DBRS has confirmed its ratings on the Caisse de dépôt et placement du Québec and CDP Financial Inc. It notes that the Caisse’s total portfolio recorded a return of negative 25 per cent in 2008 and missed its benchmark by a substantial 658 basis points, erasing nearly 2½ years of returns, and taking the 10-year average return down to 3.6 per cent. Nevertheless, the trends on the ratings remain stable in spite of the erosion in the Caisse’s net asset base, which was primarily driven by the sharp downturn in global equity markets.

Stable Value Funds Need Review

In today’s unpredictable market environment, even the ‘safest’ investments such as stable value funds carry considerable risks that plan sponsors and participants alike might not be aware of, says Watson Wyatt. Stable value funds invest in fixed income securities that are protected up to the amount of their book value by ‘wrap contracts’ issued by insurance companies and banks. This protection is partly the reason stable value funds have long been considered among the most secure investments participants can make in their 401(k) accounts. However, the recent market turmoil has affected both the underlying investments as well as their guarantees. It says major areas of concern – the loss of book value of investments due to credit rating deterioration in the wrap issuer structure and wrap issuers exiting contracts – could drive the fund’s crediting rate rapidly lower. It suggests that plan sponsors review their existing stable value investments and wrap contracts to ensure they are prepared if the market suddenly changes again.

Solvency Relief Requires Communications

With the enactment of the solvency funding relief regulations in Ontario and at the Federal level, plan sponsors and administrators must now start the process of selecting the appropriate options for their situation, says a Hicks Morley ‘FTR Now.’ Where this will require the consent of members, former members and unions, communications will be very important. In particular, both solvency relief programs require plan sponsors to engage their collective bargaining agents as trade unions are empowered to object on behalf of their members.

Managers Turn To Outsourcing

Many asset managers have found that third-party service providers create operational and technical efficiencies with end-to-end solutions for all steps in the investment cycle, says State Street Corporation’s ‘Outsourcing Investment Operations: Managing Expense and Supporting Strategic Growth’ report. From the first major deals a decade ago, the report describes the steady growth of investment operations outsourcing due to the expansion of financial markets, increasingly complex alternative assets, and rising merger activity.  Global market dislocation in the past year has intensified cost control pressures, while adding another reason to outsource – increased compliance risk.


Thursday, June 25, 2009

Large Fixed Income Allocations Maintained

In the years leading up to the global financial crisis, Canadian institutions maintained relatively large allocations to fixed income in comparison to institutions in the United States, says Greenwich Associates’ ‘Canadian Equity Investors Study.’ That choice served Canadian institutions well in 2007 and 2008, and the results of the survey indicate that institutions are maintaining the approach in 2009. Approximately 15 per cent of Canadian institutions have left their fixed income allocations entirely unchanged from 2008 to 2009, while almost 45 per cent have made moderate increases and an equal proportion made moderate decreases. No Canadian respondents made ‘significant’ additions or cuts to their fixed income allocations over that period.

Ontario Solvency Relief Measures In Place

Ontario pension plan administrators with valuation reports to file in the near future will want to review the relief options available to them as soon as possible and determine the appropriate course of action, says a Watson Wyatt special memo. Those sponsors who wish to take advantage of the measure which extends the amortization period for the new solvency deficiency by up to five more years – provided that no more than one-third of eligible members and former members object – should carefully consider the consent requirements and ongoing disclosure requirements of electing that option. Should that option be pursued and consent sought, the right message to members will be critical to avoid objections. Ontario’s solvency relief measures for Defined Benefit plans give sponsors two other options. They can defer, for up to 12 months, the commencement of the amortization payments to liquidate any new going concern unfunded liability and/or new solvency deficiency. Or, they can consolidate previously established solvency deficiencies. The measures also include restrictions on contribution holidays for 2010 to 2012.

Employers Slow To Recognize ‘Retirement Challenge’

The desire to delay retirement does not compel employers to encourage saving for retirement by their employees, says research by the Center for Retirement Research. The research found"the presence of a significant retirement challenge” where there is either a large number of unprepared employees or a large number of employ­ees wanting to stay on the job well past the traditional retirement age. However, it suggests employers have been slow to recognize the personnel management implications of the shift away from traditional pension programs and their interest in retirement-related initiatives is still driven by their value in attracting and retaining employees. However, the research found the employer's expected rate of employment growth and the size of the employer have a statisti­cally significant positive effect on the encouragement of retirement saving.

Templeton Forum Set For July 23

Franklin Templeton Investments' '2009 Investment Outlook and Opportunities Forum' will take place July 23 in Toronto, ON. Its investment experts – including Don Reed, president and CEO of Franklin Templeton Investments Corp.; Garey Aitken, lead manager of the Bissett Canadian Equity Fund; Lisa Myers, lead manager of the Templeton Growth Fund, Ltd.; will provide insight into how to seize the opportunities around the world during this market cycle. For more information, visit


Wednesday, June 24, 2009

Employers Take Prudent Measures

Canadian employers are proactively and prudently taking measures to contain costs and manage risk while trying to minimize the impact on employees, says Mercer’s ‘Leading Through Unprecedented Times’ survey. Canadian employers were prepared for the worst in the fall of 2008; waiting to see if deep staffing, benefits, and compensation cuts would be necessary to deal with the failing economy. However, very few employers (less than five per cent) took or planned drastic measures such as eliminating group benefits to control health and benefit costs. This compares to 14 per cent of employers who said they were likely to do so in November. When it comes to health benefits, 60 per cent of Canadian employers said they have, or plan to implement, a wellness program this year. When it comes to retirement plans, 60 per cent of Canadian employers with Defined Benefit pension plans have taken, or are very likely to take, actions to mitigate risk in 2009. More than three-quarters (78 per cent) of Canadian employers indicated that their employees are significantly or moderately concerned about the impact of economic turmoil on their retirement plan investments. Accordingly, 61 per cent of Canadian employers with Defined Contribution pension plans have taken actions, or are very likely to take actions in 2009, to ensure that members of the plans better understand their investment choices, options, and long-term savings objectives.

Shift Away from Electronic Trading

During the volatile months of 2008-2009, Canadian institutions shifted trading volumes from electronic platforms back to high-touch trades, says Greenwich Associates’ ‘Canadian Equity Investors Study.’ Approximately 20 per cent of Canadian equity trading volume was executed via electronic systems in 2007-2008 and 69 per cent was done through high-touch trades. In 2008-2009 electronic trading dropped to 17 per cent while high touch trading grew to 74 per cent. One reason for the shift back to high touch execution was the breakdown in many algorithmic trading strategies during the crisis. However, with volatility falling back to historic norms and many algorithms being updated to incorporate new data patterns, Canadian institutions seem poised to make a more aggressive move into electronic trading. Institutions expect to be executing 22 per cent of their total Canadian equity trading volume via electronic systems by 2012, at which point they expect to have reduced high-touch execution to less than 60 per cent of their trading business.

NHL Shortchanged Widows

The National Hockey League has underfunded its players’ pension plans and shortchanged widows, says an Ontario Superior Court judge. The NHL Players' Association alleged that errors in the calculation of pensions for players who died before 1986 meant their surviving spouses received as little as 10 per cent of the funds entitled to them. The decision means the league may have to make retroactive payments to the widows and put as much as $30 million into the pension fund. The NHL can seek to appeal the decision.  

Vijh Now Vice-president

Raj Vijh is vice-president, investment finance, in the treasury, risk, operations, and technology group at the CPP Investment Board. He will lead the team responsible for investment operations as well as the valuation and reporting of the investment portfolio. He has more than 15 years of experience in the investment management industry. Previously, he was managing director of Russell Investments’ Americas private client services business operations and administration group.  

IFEBP Planning Trustee Courses

The International Foundation of Employee Benefit Plans is offering several educational programs in Canada in July and August 2009. ‘Foundations for Trustees 1’ takes place July 20 and 21 in Winnipeg, MB. This program is designed to inform trustees of their responsibilities and provide a strong foundation on essential issues including trustee responsibility and benefit plan administration. The ‘Advanced Trustee Management Standards’ program offers education in areas such as compliance, governance, and funding and plan design. ATMS Part IV, ATMS Part III Pensions, and ATMS Part II Pensions take place August 14 and 15 in Quebec City, QC. The ‘Canadian Investment Institute’ presents investment and legislative issues confronting Canadian pension and health and welfare funds. The ‘Canadian Public Sector Pensions and Benefits Conference’ is for public sector trustees, administrators, and professional advisors looking for a solid grounding in the special challenges facing the public sector in Canada. Both take place August 16 and 19 in Quebec City, QC. The ‘Certificate in Global Benefits Management’ provides a foundation in international benefits and an enhanced understanding of the differences in benefit packages offered around the world. It takes place August 24 to 28 in Seattle, WA. For more information, visit


Tuesday, June 23, 2009

Commission Rates Decline

Commission rates paid by Canadian institutions to brokers on trades of domestic equities declined sharply from 2008 to 2009, says Greenwich Associates’ ‘Canadian Equity Investors Study.’ The "all-in" blended commission rate paid by institutions on trades of Canadian equities fell to an average 2.7 cents per share in 2009 from 3.4 cents in 2008 as average rates declined on both "high touch" trades facilitated by broker sales traders and electronic execution. The average rate on high-touch trades dropped to 3.7 cents per share in 2009 from 3.9 cents in 2008, while the average rate on self-directed electronic trades fell to 1.4 cents per share from 1.9 cents.

Manitoba Seeks Comments

Manitoba is seeking input on proposed amendments to its pension benefits regulation. Significant changes include clarifying administrator responsibilities, providing for the rights and obligations of pension committees and their members, and expanding the disclosure requirements for plan members and other beneficiaries. The proposed changes have been organized into 11 separate parts which are available at Comments on the proposed regulation changes must be submitted by August 15.

Employers Reinstate Matches

Almost half (48 per cent) of U.S. employers who reduced their employer 401(k)/403(b) matches plan to reinstate them within the next 12 months, says a survey by Watson Wyatt. However, not all the changes made during the economic crisis will be rolled back. Nearly half (46 per cent) do not plan to reverse the increases in the percentage that employees now pay for healthcare premiums. “While more employers now feel the worst of the current downturn may be behind them, most are not expecting to go back to ‘business as usual’,” says Laura Sejen, global director of strategic rewards consulting. “The challenge for companies will be to determine which cost-cutting changes can be reversed and which will become ingrained into the permanent business environment.”

Minority Want Details On Fees

Only 31 per cent of U.S. workers prefer a highly detailed account of fees and expenses, says the ‘10th Annual Transamerica Retirement Survey.’ It found more than half prefer some form of summary information while 14 per cent have no preference. Thirty-two per cent of workers prefer the information to be somewhat summarized with a breakdown of fees for services and investments, while 22 per cent prefer a high level summary with a total, all-inclusive cost. Three-quarters would prefer to receive information through an electronic format such as electronic quarterly account statements or through their plan provider's Website.

Fixed Income Drives Performance

Securities industry performance in the first quarter was driven by fixed income trading, says a report from the Investment Industry Association of Canada (IIAC). Both areas posted more than 40 per cent increases in revenues from the previous quarter. Fixed income trading desks experienced exceptional results in during the quarter, setting a new record high with $556 million earned in the period, up 44 per cent from the fourth quarter of 2008 and more than double the level witnessed a year ago. While equity trading only contributed $96 million to total industry revenue during the quarter, it still represented an 88 per cent and 71 per cent increase quarter-over-quarter and year-over-year respectively and achieved its highest level in nearly two years.

Stefanelli Moves To Janus

Jason Stefanelli is vice-president and institutional sales director with Janus Capital Group Institutional. He will be responsible for marketing Janus, Perkins, and INTECH-managed strategies to the institutional market in Canada. He previously served as vice-president with Wellington Management Company, LLP, responsible for business development and consultant relationship efforts in Canada.

Bell Manulife’s CFO

Michael W. Bell is senior executive vice-president and CFO of Manulife Financial. For the past six years, he has served as executive vice-president and CFO at CIGNA Corp. where he was responsible for all global financial operations including finance, accounting, treasury, tax, investor relations, and capital planning.

Freyne Interim CFO

Colm Freyne is interim chief financial officer for Sun Life Financial Inc., effective July 1, 2009. He replaces Rick McKenney, who will be taking up an executive position with a U.S. financial services company. Freyne is currently its senior vice-president and controller. 

Securities Law Examined

Osgoode Professional Development’s ‘Canadian Securities Law and Practice’ course offers a comprehensive, practical understanding of current Canadian securities law and practice. It will cover areas such as principal elements of securities regulation and an overview of securities litigation and enforcement. Course leaders are Jeffrey M. Singer, of Stikeman Elliott LLP, and Heather Zordel, of Cassels Brock & Blackwell LLP. It takes place September 30 and October 7, 14, and 21 in Toronto, ON. For more information, visit


Monday, June 22, 2009

National Plan Could Soon Be Reality

A national supplemental pension plan could be a reality in the next two to three years, says Iris Evans, Alberta’s finance minister. The Alberta and British Columbia governments are calling for creation of a pension plan for residents in the two provinces who currently have no pension coverage. However, Evans says it would be ideal to establish such a system at a national level as opposed to provincially. With more provincial finance ministers on board with the idea, she is “reasonably confident” that a national plan could soon become a reality. The finance ministers are to meet in July to present a framework to Ted Menzies, parliamentary secretary to the Minister of Finance, who recently led national consultations on federal pension plan legislation.

Target Date Funds Need Benchmarks

The time is right for fund managers to take a closer look at the risks inherent in Target Date funds and communicate these risks to plan sponsors, says Watson Wyatt. One way to do this is to adopt benchmarking policies that more closely reflect the long-term goal of saving for retirement that the funds are trying to achieve. Its analysis of 72 Target Date funds shows great variation in stock allocations from fund to fund. Shorter-horizon funds contained a range of 32 to 80 per cent in equities, while longer-horizon funds contained a slightly higher range of 51 per cent to 95 per cent in equities.

Essential Pension Course Returns

Osgoode Professional Development’s ‘5th Annual Essential Course in Pensions’ will examine issues such as managing the transition from Defined Benefit to Defined Contribution plans. It will also offer post-conference workshops on mastering multi-jurisdictional and cross-border pension issues and labour, employment, and
human rights issues in pensions. It takes place October 27 to 28 in Toronto, ON. For more information, visit


Friday, June 19, 2009

Labour Rejects ABC Plan

A proposal for a government-sponsored supplemental pension plan being floated by the Alberta and B.C. governments may actually make a bad situation worse, say labour leaders from western Canada. While they agree pension reform is needed, they charge that the ABC Plan is a meager supplemental program that employers can simply opt out of and which shifts all the risks onto the shoulders of individual Canadians. An actuarial analysis of the plan prepared for the Alberta Federation of Labour shows that – even when added to existing benefits provided by CPP and OAS – the proposed ABC plan would generate as little as 14 per cent of pre-retirement income for individuals enrolled in the plan. The federation says this is far short of the recommended threshold of 70 per cent. The ABC plan also gets low marks because it allows employers to opt out and it wouldn't require all employers to match contributions made by individual employees.

Full Recovery Slow To Come

The worst of the economic and financial turmoil has passed, but a full recovery will be slow to come, says a Desjardins Group economic forecast. Its economists expect economic recovery in both Canada and the U.S. to be a gradual process. They predict that Canada’s real GDP will fall 2.6 per cent in 2009 and then climb 1.7 per cent in 2010, while American GDP will drop three per cent this year, followed by growth of 1.4 per cent in 2010. The global financial system faces an especially slow recovery since the balance sheets of financial institutions are still contaminated by toxic assets and losses on loans are mounting. However, a recovery of the American economy will lead the rest of the world out of recession. “It is at the heart of the world’s commercial and financial trade and it will take more than one recession to change this fact. It is, therefore, unlikely that the planet’s economy will emerge from a recession separate from the United States, especially as commercial trade between nations has exploded in the last few decades,” says the forecast.

Workers Delaying Retirement

A significant number of older U.S. workers are planning to delay their retirement as a result of large losses to their retirement funds, says a survey by Watson Wyatt. It found that a third (34 per cent) of all workers have increased their planned retirement age in the last 12 months. These changes are more pronounced for older workers. Forty-four per cent of those aged 50 and over plan to delay their retirement, compared with only 25 per cent of those under 40. Although the average planned retirement age for all employees is 65 years old, half (50 per cent) of those aged 50 or more plan to retire at age 66 or later. Three-quarters (76 per cent) of older workers (aged 50 to 64) cited the decline in the value of their 401(k) accounts as the most important reason why they are planning to postpone their retirement, followed by the high cost of healthcare (63 per cent) and higher prices for basic necessities (62 per cent).

Better Information Needed On Target Date Funds

There needs to be better information about Target Date funds and their usage in the 401(k) market, says Mark Wayne, representing the National Association of Independent Retirement Plan Advisors. He told officials at the U.S. Department of Labor and the Securities and Exchange Commission that “Plan sponsors and participants need a clear understanding of the different asset allocation strategies employed by different Target Date funds in their plans.” The association strongly agrees with the theory behind offering these funds as 401(k) plan investments. For many participants, they are effective mechanisms to ensure participants have an appropriate investment selection and their investment portfolios are rebalanced on an ongoing basis. However, Wayne, president of Freedom One Investment Advisers, said the current disclosure requirements under securities law are inadequate, do not meet a ‘truth-in-labeling’ approach, and produce confusion among plan sponsors and participants about the true meaning of “target date.” 

MacKay Shields Acquires Mariner

New York Life Investment’s wholly-owned subsidiary, MacKay Shields will acquire the assets of Mariner Municipal Managers, a municipal bond firm. Mariner Municipal’s six-member investment team will become a new unit of MacKay Shields and the transaction will see the transfer of Mariner Municipal’s $377 million in assets to MacKay Shields. MacKay Shields has more than $33 billion in assets under managements and clients that include pension funds in the U.S. and overseas.


Thursday, June 18, 2009

Institutions Consider Manager Changes

A record number of financial institutions including pension funds will replace their asset managers in the third and fourth quarters of 2009, says Mellon Transition Management, the transition management specialist for BNY Mellon Asset Management. This prediction is based on the more than 40 per cent increase in the number of pre-trade inquiries during the first five months of 2009 and the substantial jump in executed transitions in the second quarter of 2009 versus the 2009 first quarter. Pretrade inquiries have proven to be a good predictor of transition activity, often leading actual transition activity by several months. Pre-trade inquiries are done by institutions to gauge the costs and risks of switching managers.

Executives Seeing Recovery

The economic downturn is not as bad as some would think says a study of more than 200 senior financial executives by Canadian Financial Executives Research Foundation (CFERF), the research institute of FEI Canada. The study reveals that a majority of companies will see revenue either grow or remain unchanged for 2009. The results show companies across Canada have intensified their focus on cash management, with 75 per cent of respondents indicating that they are more focused on cash management issues now than they were at the same time last year. While study respondents reported an overall positive outlook for an expedient economic recovery, not all industries expect to fare evenly. Still manufacturing companies, arguably the hardest hit in the past several months, were the most optimistic for recovery in 2010.  It also found that freezing executive compensation and deferment of capital investments emerged as the key cost management techniques expected to prevail in the coming year.

CFIB Extends Agreement

Sun Life Financial has extended its agreement with the Canadian Federation of Independent Business (CFIB) to offer group insurance coverage to its members nationally. The plan will be available exclusively to all CFIB members regardless of size. Sun Life Financial first announced the agreement in November when the plan was offered to CFIB members in Atlantic Canada.

Aurion In Infrastructure Venture

Infrastructure Management Group, Inc. (IMG) and Aurion Infrastructure Inc. (AII), a subsidiary of Aurion Capital Management Inc. (Aurion), have formed IMG Aurion Infrastructure LLC (IMG Aurion) a strategic venture that will provide investment advisory services to institutional investors in connection with investments in mid-market infrastructure across North America. The venture will combine the industry expertise and infrastructure market presence of IMG and AII with Aurion’s pension fund and portfolio management capabilities to provide institutional investors with investment products within the infrastructure asset class including commingled funds, separate account mandates, and co-investment opportunities.

Committee Okays DC Bills

Defined Contribution pension plan-related bills aimed at enhancing fee disclosure requirements and barring plans from offering participants investment advice that might be subject to conflicts of interest have been approved by a U.S. House subcommittee. The fee disclosure measure retains a controversial provision that effectively requires DC plans to include at least one index fund as an investment option. The investment advice legislation was revised to make clear its provisions wouldn't pre-empt existing advice arrangements.

Opportunity Exists For Philanthropy Growth

With the billion of dollars soon to be inherited by boomers, the greatest opportunity exists for the growth of philanthropy, says Brad Offman, vice-president, strategic philanthropy, at Mackenzie Investments. The conference chair for Mindpath’s ‘Growing Your Financial Advisory Practice Through Philanthropy’ conference also said advisors will play a key role in this process. For example, in most provinces, a $100,000 charitable gift can reduce a tax bill by about $45,000. This will provide an individual investor with greater tax referral opportunities than an RRSP contribution of the same amount, he said. The conference was designed for senior philanthropy consultants, advisors, and managers of planned giving.

CPBI Ontario Ushers In New Era

Michael Worb, chair of the Canadian Pension and Benefits Institute Ontario, wants to usher in a new era for the Ontario chapter of this organization. “The Ontario chapter has always been committed to continuous education within our industry, but we’re looking to inject a new level of excitement and interest into our plan sponsor audience.” In particular, it wants to help the plan sponsor members realize how critical it is to stay on top of industry trends and dialogue so they can make the best, most informed decisions regarding their benefits and retirement programs. To achieve this, it plans to offer strategic programs focused on plan sponsor educational needs in the areas of pension, benefits, and investment.

Communicating Plan Information Challenging

The challenge of communicating information about the pension plan was among the top five most important issues cited by employers in Buck’s last survey of Canadian pension plans. The annual pension statement is often the only time employees are reminded of what they’re building for retirement. These statements too often have all the interest, appeal, and clarity of an insurance contract and, as a result, the usefulness of the statement as a retirement planning tool is lost to members, as is the chance to help build employee understanding and engagement. It should provide a few common sense features such as an at-a-glance summary of how much the member has contributed, what the normal retirement date is, and an estimate of the annual pension earned so far, without paragraph after paragraph of hedging and qualifying language.

Blunt Chair Of HRPA

Antoinette Blunt is board chair for the Human Resources Professionals Association. She is president of Ironside Consulting Services Inc., an HR consultancy in Sault Ste. Marie, ON, specializing in the provision of human resources, labour relations, and management services for employers in Northern Ontario.


Wednesday, June 17, 2009

U.S. Funded Status Improves

In May, overall U.S. pension plan funded status improved for the third straight month, says Watson Wyatt’s ‘Investment Brief.’ Asset performance continued to rise, while interest rates on swaps increased by 40 basis points, consequently reducing liabilities for the second consecutive month. Together, these two events helped strengthen the funded status of pension plans from a market/implementation perspective.

CPPIB Raises Bid

The Canada Pension Plan Investment Board (CPPIB) is raising its bid for Macquarie Communications Infrastructure Group, a communications network company with operations in Australia and the United Kingdom. It has added another 50 Canadian cents to the $2.50 it offered initially for each Macquarie share. It says uncertainty has started to subside in capital markets, and that it was the right time to raise its offer.

Minority Of Sponsors Have Clear Chain

A 2009 retirement plan survey conducted by tax and audit firm Grant Thornton found that less than a third of plan sponsors reported a “clear chain of authority for their plan’s governance committee,” says a Buck ‘Outlook.’ This is a drop from last year’s 41 per cent. Other indications of a falling off in applying best practices to plan governance are that only 58 per cent of plan sponsors maintain minutes of meetings, down from 79 per cent last year; 27 per cent use an independent party to analyze plan fees, down from 45 per cent last year; and 65 per cent do not require plan management to periodically sign conflict-of-interest statements. Plan sponsors are responsible, through their governance structure, for ensuring proper administration, management, and investment review of their plans and there may be costly legal implications for insufficient governance processes.

Ontario Allows TFSA Beneficiary Designation

Ontario residents can now designate beneficiaries for their Tax-Free Savings accounts. This will allow a TFSA owner’s funds to flow more directly to their heirs at the time of death. Similar legislation has been passed by British Columbia, Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, P.E.I., Northwest Territories, and the Yukon Territory since the launch of the TFSA at the beginning of 2009. Beneficiaries will receive funds outside of a will in the same way that they currently receive proceeds of registered retirement savings plans. This makes it easier to transfer the assets in the account upon death and eliminates probate fees.

Change Management Needs Planning

Change management needs to be planned to get everyone onside, says Tina Hamilton, a people resource specialist. Speaking at the 13th Annual Blevins Insurance Group Client/Carrier Appreciation Day, she said the global economic crisis has had a serious impact on the workplace. For example, one in five Canadian workers fears they will lose their job and the fact many companies are doing more with less has increased stress and anxiety levels in the workplace. To deal with the financial situation, companies are turning to change management and must deal with the issue of helping people through the change. She said to do so effectively, the company must introduce the change and explain why it is necessary. Employee concerns must be addressed and, while explaining what will change is necessary, what will not change should be emphasized.

Sienna Takes New Role

Lee Sienna is vice-president, long-term equities, at the Ontario Teachers’ Pension Plan. He joined Teachers’ Private Capital in 2002 and has led several direct private equity investments for the fund.


Tuesday, June 16, 2009

Positive Indicators Emerging

Following a first quarter dominated by negative economic news, positive indicators are beginning to emerge from the gloom, says a report by RBC Economics. It predicts that while Canada's economy experienced its largest one quarter contraction since 1991, this likely will prove to be the worst quarterly showing in this recession. Leading indicators suggest that the worst has also passed for the global recession, with recent data pointing to a recovery later this year. In the U.S., some encouraging signs are beginning to appear. Buoyed by low interest rates, an easing in credit conditions, and the government's fiscal stimulus package, the U.S. housing market is showing some stability and consumer confidence is rising, pointing to the possibility of a moderate turnaround for the American economy by the second half of 2009.

Pharmaceutical Cost Trend Reverses

Costs for pharmaceuticals in 2009 have increased by 15.19 per cent, dramatically reversing a four-year downward trend in prescription drug prices, says Buck Consultants’ ‘2009 Canadian Health Care Trend Survey.’ “Medications for the treatment of cancer, depression, rheumatoid arthritis, and cardiovascular conditions in an aging workforce are the main contributing factors to this upswing,” says Michele Bossi, health and productivity consulting practice leader. The overall healthcare trend (including prescription drugs, medical plans, hospital coverage, and dental care) continues to increase at just under 15 per cent, up from 13.76 per cent in 2008. The cost increase for medical plans (excluding prescription drugs) has climbed to 14.14 per cent for 2009 from 13.09 per cent in 2008. Many employers, having already implemented plan design changes to curb cost trends, are beginning to shift to a proactive approach to healthcare cost containment such as wellness programs.

Air Canada Gets Pension Moratorium

Air Canada has reached tentative agreements on a 21-month pension funding moratorium with the Air Canada Pilots Association (ACPA) representing approximately 3,200 pilots and with CUPE representing approximately 6,700 flight attendants. The airline has now concluded tentative agreements on a pension funding moratorium with its entire unionized workforce in Canada. The pension agreements call for a moratorium on past service contributions for a 21-month period and fixed payments of $150 million, $175 million, and $225 million in 2011, 2012, and 2013 respectively. Current service payments will continue to be made in the normal course and there will be no change to the Defined Benefit plans nor a reduction in benefits. In addition, the agreements call for 15 per cent equity ownership of the company to be issued to a trust for the benefit of unionized employees with proceeds of sale to be contributed to the pension plan deficit. "In view of the fact that the payments required to fund the pension solvency deficit are not sustainable under the current rules, the tentative agreements reached on pensions provide a reasonable solution to maintaining our employees' pension plans and benefits,” says Calin Rovinescu, president and chief executive officer of Air Canada.

Sun Life Returns To UK

Sun Life Financial Inc. is buying UK insurer Lincoln National Corp. The two have similar businesses in the UK and the acquisition will increase Sun Life's UK assets under management by almost 60 per cent to $19 billion, while doubling the number of policies it has to 1.1-million. It will acquire Lincoln National's life insurance, pensions, and annuities. Sun Life has been in the UK more than a century, but stopped selling new products early in the decade after suffering losses in its annuities business. The deal is still subject to approval from regulators and is expected to close in the third quarter. 

Manager Turnover Looming

Manager turnover could reach historic highs over the course of the next 12 months if U.S. institutions follow through on their plans for managing hiring and firing, says a Greenwich Associates’ ‘Market Pulse’ survey. At the very least, it says managers can expect tough new demands for increased transparency and disclosure. U.S. institutions used the first half of 2009 to take a close look at their investment policies, asset allocations, and investment managers to determine what went wrong last year, to pinpoint the policies, investments, and managers that performed as expected through the market crisis and to identify those that fell short. The conclusions that institutions draw from these reviews will have a profound impact not just on the U.S. investment management industry, but also on the world's financial markets. The survey also found that corporate plan sponsors, stung last year by dramatic reductions in portfolio asset values, are moving to reduce the volatility of pension fund investment performance by increasing allocations to fixed income, even as they shut Defined Benefit plans to new employees and reduced matching contributions to Defined Contribution plans.

Employment Flexibility Remarkable

The flexibility of Canadian employers and employees during this economic downturn has been remarkable, says Christopher Andree, of Gowling Lafleur Henderson LLP. Speaking at the International Foundation of Employee Benefits Plans’ ‘Concepts and Practices of Canadian Benefits for Canadian and U.S. Corporations,’ he said early in the downtown employers were able to use it to remove employees from their workplaces who did not want to be there. However, they then recognized that they would need a team in place when things turned and took steps to keep their teams together. Unionized employees have also been willing to accept changes in their jobs such as reduced work weeks which could, in better times, have been cause for constructive dismissal.

Bauslaugh Heads IPEBLA Committee

Randy Bauslaugh, of Blake, Cassels & Graydon, LLP, is chair of International Pension and Employee Benefits Lawyers Association's governing body, the steering committee, for the 2009-2011 period. Mitch Fraser, of Torys LLP, was also appointed to the committee. Bauslaugh and Fraser were appointed during the IPEBLA’s biennial conference in Athens, Greece. The recipient of the 2009 Libby Slater Award for outstanding achievement in pensions law in the period 2007 to 2009 was Deborah McPhailof the Financial Services Commission of Ontario. She was honoured for her critical involvement in almost every significant pensions case in Canada over the past 15 years. Recipients of the 2009 Tony Thurnham Award are Caroline Helbronner and Jessica Bullock, of Blake’s for their article ‘Plan Sponsors and Service Providers – Allocating Risks and Responsibilities’ in the November 2008 issue of ‘International Pension Lawyer.’ IPEBLA is a Dutch non-profit organization which brings together lawyers and other legal professionals throughout the world with a practical interest in the legal aspects of pension schemes and other employee benefit arrangements. Bauslaugh is a member of the editorial advisory board for Benefits and Pensions Monitor. For more information, visit


Monday, June 15, 2009

DB Plans Back Match Suspension

Many workers at U.S. companies which have suspended their 401(k) match are still covered by a traditional Defined Benefit pension plan, says a report from the Employee Benefit Research Institute (EBRI). Of 251 401(k) plan sponsors that have suspended matching contributions for their approximately 4.4 million workers, those employing 50 per cent of the workers also maintained an open DB plan. An additional 16 per cent of workers were with employers funding a frozen DB plan and eight per cent were with an employer that had both an open and a frozen DB plan that carried funding obligations.

Employers Turn To Social Media

Reduced communication budgets and resources are prompting employers to use social media to keep their workforce engaged, says a survey by the International Association of Business Communicators (IABC) Research Foundation. Its ‘Employee Engagement Survey’ found almost four-fifths of respondents report that they use social media frequently to engage employees and foster productivity. Company blogs are the most popular social media tool currently in use (47 per cent), with discussion boards ranking the highest for future planned use (33 per cent). Currently few use social networking sites such as Twitter, Yammer, and Facebook, but organizations are planning to use those tools even more in the future.

UK Firms Raise Life Estimates

The average UK company has raised its estimates of how long pension scheme members will live after they have retired by 3½ yesrs since 2004, says a survey by KPMG. Its ‘2009 Pensions Accounting Survey’ also found that UK companies are reserving an extra £40 billion to pension liabilities because of uncertainty in financial markets. The study found that in 2008, the percentage of employers basing their longevity assumption on an actuarial table whose data were compiled in 1992 fell sharply to 59 per cent of those surveyed, from 91 per cent of companies in 2007. That 1992 table has been found to underestimate life expectancy by a significant margin and is no longer used by the insurance industry as the basis for setting reserves. 

Bergeron Replacing Masson

Claude Bergeron is executive vice-president, legal affairs, and secretariat at the Caisse de dépôt et placement du Québec. He joined the Caisse in 1988 and is replacing Suzanne Masson, executive vice-president, corporate affairs, and secretary, who is retiring. Véronique Mercier is vice-president, communications. She was office manager and press secretary to Quebec's finance minister and press secretary to the premier of New Brunswick.  

Seminar Looks At Green Funds

Green and ethical funds will be the focus of a seminar June 23 in Toronto, ON. ‘The Eco Bottom Line: Making Money & Saving Money’ will feature Hadley Archer, World Wildlife Fund director of business engagement, who will talk about environmental leadership and its link to attracting new business. As well, Elizabeth McGeveran, senior vice-president – governance and sustainable investment at F&C Asset Management PLC will explain how investors can support companies contributing to sustainable development and avoid those harming society, without compromising on performance. For more information, visit


Friday, June 12, 2009

U.S. Promises ‘Say On Pay’ Legislation

The U.S. Treasury Department is promising legislation to require ‘say on pay’ provisions at public companies and regulatory oversight of compensation committee independence. The department will support efforts in Congress to pass ‘say on pay’ legislation, giving the U.S. Securities and Exchange Commission the authority to require companies to give shareholders a non-binding vote on executive compensation packages. It will also propose legislation giving the SEC the power to ensure that compensation committees are more independent. For example, they would be given the responsibility and the resources to hire their own independent compensation consultants and outside counsel. These measures would help meet the principles the department believes should be followed to better align pay with performance. These include a belief that compensation plans should properly measure and reward performance and compensation should be structured to account for the time horizon of risk.

OMERS Can Offer Third-party Services

OMERS has been granted expanded powers by the Ontario government to provide third-party investment and pension administration services. The amendment to the Ontario Municipal Employees Retirement System Act, 2006, was part of the Ontario government's 2009 budget Bill 162, which received Royal Assent June 5. The changes allow OMERS to establish authorized subsidiaries to provide investment management and pension administration services to smaller pension plans, governments, certain educational institutions, and non-profit organizations.

BMO Buys Integra GRS

Bank of Montreal is purchasing the recordkeeping business of Integra GRS from Integra Capital Management Corporation. The GRS business provides recordkeeping and administrative services for capital accumulation plans. “This acquisition is an extension of our existing wealth management offering,” says Ed Legzdins, senior vice-president, retail investments, private client group; and managing director, international, BMO Capital Markets. “Complementing Integra’s full selection of funds with BMO’s retail investment products gives us the opportunity to develop a group retirement services platform and offer a suite of products through the institutional pension market.” Joan Johannson, president and managing director of Integra GRS, says, “Our management team and employees are very excited about joining one of Canada's premier financial services companies. We look forward to expanding our services for our clients and their plan members who will be reassured to know that it is business as usual with the same team in place, dedicated to service excellence.”

BlackRock Acquiring Barclays

Barclays will sell its global investors’ money management arm to BlackRock. The $13.2 billion purchase makes this the largest deal ever for a dedicated money management firm and makes BlackRock – with more than $2.7 trillion in assets under management – the world’s biggest money manager. Barclays will retain a 19.9 per cent stake in the new firm, which would be called BlackRock Global Investors. One issue to be resolved is its iShares exchange traded funds business. This was sold to CVC Capital Partners in April, but the deal included a 45-day period during which Barclays could entertain competing bids. CVC now has five business days to match BlackRock's offer for all of BGI, not just the iShares business.  

Saskatchewan Offers Funding Relief

Unlike other jurisdictions that have required that member consent be obtained as a precondition to the funding relief, Saskatchewan’s funding relief proposal for sponsors of registered pension plans is less arduous as plan sponsors have the ability to unilaterally elect funding relief, says a Mercer ‘Communiqué.’ Under the funding relief proposal, Defined Benefit plan sponsors can elect a three-year moratorium from funding a new solvency deficiency revealed in a valuation prepared between December 31, 2008, and January 1, 2011. This election can only be made once. At the end of the solvency moratorium period, any solvency deficiencies existing at that time must be funded over no more than five years. During the moratorium period, there is no requirement to make special payments towards a newly established solvency deficiency, subject to conditions such as only allowing benefit improvements where those improvements are established by a collective bargaining agreement.

Market Value Of Funds Dips

The market value of retirement savings held in employer-sponsored pension funds declined by $58.1 billion to $810.9 billion  during the fourth quarter of 2008, says Statistics Canada. The 6.7 per cent decline was attributable mainly to a fall in the market value of stocks and equity funds. The drop followed a decrease of $82.7 billion in the third quarter, which was the largest quarterly decline in a decade. Expenditures of $49.3 billion exceeded revenues of $21.6 billion in the fourth quarter for a negative cash flow of $27.7 billion. This was the third time in 2008 that pension funds experienced a negative cash flow.

Beettam Heads CLHIA

Ronald Beettam, president and CEO of Equitable Life of Canada, has been elected chairman of the Canadian Life and Health Insurance Association Inc. (CLHIA). He previously served on the board for two years and as chair of the standing committee on standards and marketplace relations. Joining him on the board are Alain Néemeh, president and CEO, RGA Life Reinsurance Company of Canada; Yvon Charest, president and CEO, Industrial Alliance Insurance and Financial Services Inc.; Mary Forrest, head of North America (Life), Munich Reinsurance Company; Mario Georgiev, president of Optimum Reassurance Inc.; Donald Guloien, president and CEO of Manulife Financial; Pierre-Yves Julien, president and CEO, Medavie Blue Cross; D. Allen Loney, president and CEO, the Great-West Life Assurance Company/London Life Insurance Company/The Canada Life Assurance Company; Peter McCarthy, president and CEO, BMO Life Assurance Company; George Mohacsi, president and CEO, Foresters; Mary Nemeth, vice-president and chief operating officer, The Wawanesa Life Insurance Company; and Don Stewart, CEO, Sun Life Financial Inc.

Pepin Speaks At CPBI Atlantic

‘The Challenging New World Of Investment’ will be one of the topics covered at the 2009 Atlantic Regional CPBI Conference. Serge Pepin, of BMO Investments Inc., will attempt to navigate through today’s much more complex investment landscape of wealth erosion, economic malaise, and corporate failures. Theme of the conference is ‘Hard Times Creative Measures.’ It takes place September 16 to 18 in St Andrews, NB. For more information, visit


Thursday, June 11, 2009

Equities Expected To Perform Best

Equities are expected to perform best in the short and intermediate term, says Morningstar's institutional investment manager survey. While fixed income shared second spot with commodities over a one-year horizon, respondents had stronger convictions about the prospects of a commodities revival over a three- to five-year horizon. Expectations for real estate over the next year continue to be bearish with managers generally favouring cash over it.

‘Perfect Storm’ Threatens Retirement Plans

A 'Perfect Storm' of demographic, individual, and financial elements is poised to derail people's retirement plans unless they prepare properly now, says a survey from HSBC Insurance. Its fifth annual 'Future of Retirement study' shows people's short-term survival strategies in the midst of the recession are creating a serious long-term pensions 'downturn deficit' and there is a continuing lack of pensions planning, even though people are aware that they are likely to live longer. This is being exacerbated by poor levels of financial understanding, education, and access to advice. As well, people are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement The consequence of these combined factors is that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning.

Regulation Protects Depositors

The point of regulation is to protect depositors, not market participants, says Dale Harrison, vice-president, portfolio manager (Canadian equity – financials), at Phillips, Hager & North Investment Management Ltd. Speaking at the Morningstar annual investment conference, he said when people buy financial instruments, it is up to them to do the research or hire someone to do so. It is not up to the regulators to review new products that are being created.

Return To Mindset Needed

Mutual funds need to return to the mindset on which the industry was founded, says Don Phillips, managing director of Morningstar. Speaking at its annual investment conference, he said in recent years fund companies have seen themselves as one of many financial services entities selling to investors. However, they need to view themselves as being on the investor's side, helping them to navigate the world of financial services. If they fail to do this and the investor loses, he said, then everyone loses.

Not The Time To Cut-back

This is not the time to cut-back, says Rob Kelland, director, wealth management, at Kelland Wealth Management Group. He told the Morningstar annual investment conference that now is the time to invest in your business. The current investment climate is a once-in-a-lifetime environment. However, he said this extremely challenging investment environment has created key opportunities, especially from a client service perspective.


Wednesday, June 10, 2009

Court Rejects Chrysler Appeal

The U.S. Supreme Court has rejected an appeal by two Indiana pension funds to block Chrysler's sale to Fiat. The funds contended the sale unlawfully rewarded unsecured creditors – such as the union – ahead of secured debtholders like themselves. The pension plans attempted to use Fiat’s June 15 deadline by trying to persuade the justices that there was no reason to rush to meet that deadline. However, Chrysler, Fiat, and the Obama administration warned that t Chrysler was losing $100 million every day its plants remain closed and that the deal would automatically terminate in less than a week, with no guarantee that a new agreement would be reached. The Indiana funds hold less than one per cent of Chrysler's secured debt.

Hedge Fund Survival Debated

“Hedge funds are not dead and will survive … but many things need to change,” says Toreigh Stuart, of Man Investments Canada. Stuart defended his position at AIMA Canada’s annual parliamentary debate which explored whether the investment strategy could survive. As long as investors continue to seek more choices than traditional funds can offer, and continue to want to manage short-term risk, hedge funds will never die Stuart said. On the opposing end, Tom Bradley, of Steadyhand Investment Funds, said the hedge fund model is dying, as it is too benchmark oriented, cannot provide the proper transparency to clients, and will soon succumb to regulations and a shrinking of the industry. Stuart acknowledged that the industry is continually evolving and that, in time, weaker hedge fund managers “will be weeded out” while stronger ones will carry on and prosper.

Next Generation Turning Away From Internet

The current generation may be the one which invented, used, and abused the Internet, says Dr. Nick Bontis, director of the Institute for Intellectual Capital Research. Speaking at the LOMA/LIMRA Annual Conference, he said, however, the next generation is already turning away from the Internet and using different social communication tools. Part of the reason for its demise may the volume of eMail most business people already get. eMail traffic is growing increasingly burdensome with the average financial professional getting more than 80 eMails a day right now, almost double the number received in 2006. Of this, only about 10 per cent of the messages actually drive shareholder value with the rest things like copied messages and spam. He also warned that another shift is coming, away from the use of English to other languages on the Web. Right now about 75 per cent of all Web content is in English. Over the next few years, that will drop to about 25 per cent as more content shows up in languages such as Mandarin Chinese and Arabic. This means that individuals using the web for searches may only be scratching the surface of the information available.

Exchange Offers New Forms Of Insurance Pooling

The creation of a health insurance exchange that would offer new forms of insurance pooling, combined with an individual mandate and guaranteed issue, would restructure the U.S. health insurance market and has major implications for the existing employment-based benefits system that provides the majority of Americans with health coverage, says a study by the Employee Benefit Research Institute (EBRI). The question of a health insurance connector/exchange and the various interdependent policy components has been central to the national health reform debate since the state of Massachusetts adopted that approach. The report is neutral on whether an exchange should or should not be formed, but instead lays out the various interdependent policy components that are essential for the success of such a program. It discusses issues that must be addressed when designing an exchange in order to reform the health insurance market and also examines state efforts at health reform that use an exchange.

More Consolidation Possible

The consolidation in the life insurance industry which saw 66 per cent of the firms vanish over the last 20 years is happening in other sectors as well, says Paul Grimes. And he warned the consolidation may not be over given the current financial crisis. However, he told delegates at the LOMA/LIMRA Annual Conference this is not necessarily a bad thing for companies which are focussed on what they are doing. In fact, one of the opportunities coming in the financial sector is the growing need for financial advisors. With Defined Benefit plans disappearing, those workers with Defined Contribution plans are going to be looking for experts to help them manage their saving for retirement.

Bradie To Succeed Garner

Steve Bradie will assume the post of CEO at Green Shield Canada when J. David Garner retires. Bradie is currently executive vice-president and chief operating officer. He joined the company in 1987, gaining experience in finance, human resources, and claims administration.  He assumed the position of vice-president, claims and administration, in 1996 and was appointed executive vice-president and chief operating officer in 2004. The process of transition will begin immediately and will determine the exact timetable and strategy for the handover.

Hockin Speaking At Alternatives Conference

As the largest Canadian conference serving the alternative investment sector, delegates to the 2009 World Alternative Investment Summit Canada will hear renowned national and international speakers addressing key industry issues. Speakers will include Tom Hockin, Expert Panel on Securities Regulation; Chris Addy, Castle Hall Alternatives; and Natalie Dempster, World Gold Council. It takes place September 14 to 16 in Niagara Falls, ON. For more information, visit

Future Of Credit Rating Agencies Examined

‘The Future of Credit Rating Agencies: Regulation and Accountability’ will be the focus of a Rotman School of Management Capital Markets Institute session. Professor Stephane Rousseau will present his latest research paper on credit rating agencies. This presentation will be followed by an expert panel that includes Dr. Marlene Puffer, Ted Price, Sean Rogister, and Professor Alan White who will react to Rousseau’s paper as well as provide their own unique perspectives. It takes place June 25 in Toronto, ON. For more information, visit


Tuesday, June 9, 2009

Air Canada Gets Pension Agreement

Air Canada and three of its unions – the CAW, IAMAW, and CALDA – have reached a tentative agreement on its pension plans which will see a moratorium on past service contributions for 21 months and fixed payments thereafter for 2011 through 2013. It also leaves the Defined Benefit pension plan intact with benefits protected and no other concessions made. CALDA represents 70 flight dispatchers, the CAW represents 4,500 customer service agents, and the IAMAW represents 12,300 technical, maintenance and operational support workers. Included in the portion on pensions is an agreement with Pionairs, the group representing more than 15,000 retired Air Canada workers.

RPP Membership Increases

Membership in registered pension plans (RPPs) in Canada at the start of 2008 was up 2.4 per cent over the number in plans at the beginning of 2007, says Statistics Canada. RPPs, has 5.9 million member, an increase of more than 140,000 from the previous year. The number of RPPs reached 19,185, an increase of 590. Increases in the number of plans in recent years have come mainly from plans with fewer than 10 members. These small plans accounted for more than one-half of all RPPs, but less than one per cent of total membership. The 28 plans with 30,000 members or more accounted for about 47 per cent of all membership. Public sector plans added 96,500 members in 2007, accounting for nearly 70 per cent of the total increase. Defined Benefit pension plans remained the predominant type, accounting for 4.5 million members or nearly 77 per cent of total membership. However, defined contribution plans reached 935,000 members in 2007, accounting for close to 16 per cent of the total.

Workers Can Rely On 401(k) Plans

Members of 401(k) plans can do fine financially relying just on their workplace plan, says a study for the Pension Research Council at The Wharton School at the University of Pennsylvania. ‘Can 401(k) Plans Provide Adequate Retirement Resources?’ concludes that "moderate 401(k) contribution rates can lead to adequate income replacement rates in retirement for many workers; that adequate asset accumulation can be achieved using only a 401(k) plan; and that these results do not rely on earning an investment premium on risky assets." As well, because Social Security provides the bulk of most individual's retirement income and represents a floor beneath which retirement income cannot fall, the risk as a percentage of total retirement assets is not as large as would be suggested by examining the 401(k) plan distributions separately.

Teachers’ Sues Over Breach Of Duty

The Ontario Teachers' Pension Plan is suing Chesapeake Energy, accusing the chief executive and directors of breaching their fiduciary duties to shareholders "by approving excessive expenses." Teachers’ also plans to withhold votes for ‘conflicted’ directors at the natural gas producer’s annual general shareholders meeting. Teachers’ will also vote in favour of shareholder proposals calling for de-classification of the board of directors and majority voting for directors.

Average Contribution Exceeds Minimum

The average contribution to UK Defined Contribution schemes comfortably exceeds the minimum proposed for personal accounts due in 2012, says Capita Hartshead's 16th annual pensions administration survey. However, it says bigger contributions are needed. Its survey found employees are now paying an average four per cent of earnings into DC schemes, which is then topped up by an average seven per cent contribution from their employer. The firm warned that at this level of contribution, DC schemes which were not supplemented by other savings were likely to deliver only modest pensions for many members, particularly for individuals with shorter savings histories.

Rio Tinto Using State Street

State Street Corporation has been appointed by Rio Tinto, an international mining group, to provide investment services for $8 billion in assets. State Street will provide it with custody, fund accounting, securities lending, and investment analytics services for its Canadian, U.S., and UK pension schemes. The services will be provided from State Street’s operations in London and Montreal.


Monday, June 8, 2009

Funds Want Chrysler Sale Delayed

Two Indiana pension funds want the sale of Chrysler LLC to a group led by Italian carmaker Fiat SpA delayed while they challenge the deal. In a filing with the U.S. Supreme Court, they argue the sale unlawfully rewards unsecured creditors – such as the union – ahead of secured lenders and that Chrysler is pursuing an illegal reorganization plan through a ‘sham sale.’ A ruling could set a precedent for the case of General Motors Corp, which is using a similar sale strategy. A New York appeals court has approved the sale, but stayed the closing to give the Indiana State Police Pension Fund and the Indiana Teacher's Retirement Fund, as well as the state's Major Moves Construction Fund, time to block the sale while they appeal.

OSFI Gives Guidance To Plans

Pension plans registered under the Pension Benefits Standards Act, 1985 (PBSA) can continue to fund using the normal funding rules or take advantage of funding relief options if the Solvency Funding Relief Regulations, 2009, come into force, says the Office of the Superintendent of Financial Institutions (OSFI). “Plan sponsors may be waiting for the final version of the funding relief regulations before deciding on funding relief. However, many federally regulated pension plans are required to file an actuarial report for the plan-year ending December 31, 2008, and, unless otherwise directed by the Superintendent, this report is due by June 30, 2009,” says a letter from the Superintendent. For actuarial reports filed for a plan year-end dates between November 1, 2008, and October 31, 2009, the Superintendent says the filing deadline is the later of August 14, 2009, or six months after the plan year-end date.

Equities Good News For Funds

U.S. Capital market results were generally favorable in May, extending the recovery that started almost three months earlier, says Towers Perrin's ‘Capital Market Update.’ It says the month’s good news was driven by equity results. However, the positive impact was blunted by a decline in long corporate yields which pushed up liability values. The bottom line indicated a slight 0.5 percentage point increase in its benchmark plan’s funded ratio. Even with the increases, May’s 69.7 per cent funded level represents a 22 percentage point decline over the past 12 months.

PIMCO Launches Website

PIMCO has launched a Canadian version of its website. It offers detailed information about the company as well as information about its investment strategies and the broad fixed income market. It also offers access to current and archived publications such as Bill Gross' ‘Investment Outlook,’ research pieces, and interviews with its investment professionals. The Canadian site can be seen at

ACPM Looks At ‘Changing Currents’

The ‘Changing Currents’ of the retirement income world is the theme of the Association of Canadian Pension Management’s 2009 national conference. Set for September 15 to 18 in Montreal, QC, it will address pension, investment, economic, and governance issues through the framework of ‘changing currents.’ Plenary sessions will look at the ‘Pension Review Reports – What does it all mean?’, Governance Committee Behaviour in Turbulent Times, Investment ‘Seenarios’ or ‘Scarnarios,’ and ‘The Pension Plans of the Future: Looking Back – Moving Forward.’ For more information, visit


Friday, June 5, 2009

Workplace Can’t Handle Return To Work

Far too many supervisors and managers in the Canadian workplaces are not equipped to deal with employee health, productivity, absenteeism, disability, and employees returning to work after an absence, says a Shepell-fgi survey. ‘The Missing Link: The Supervisor's Role in Employee Health Management’ concludes that supervisors do not receive data on real-time employee absence and organizations do not have structured processes in place that supervisors can consistently use to address intermittent problems with employee absence or significant changes in employee productivity or behaviour. Organizations need to establish preventative measures to include proactive promotion of EAP-based employee needs, both at the broader organizational level and at the workgroup level, and establish regular and formal manager/supervisor training to identify and respond to declining productivity and changes in employee behaviour.

Air Canada Mediator Appointed

The federal government has appointed a mediator in the pension talks between Air Canada and its unions. James Farley, a former Ontario Superior Court Justice, has been asked to mediate between Air Canada, its unions, and its retiree associations in devising a sustainable path for the airline company's pension plan. Its pension solvency deficit reached $2.9 billion last year and the airline says a moratorium on its pension funding is critical to the airline avoiding a second bankruptcy filing in six years.

Moving Out Of Drug Silo

Assisting plan sponsors in managing their limited financial resources in the drug plan area is critical, but there is a great deal more that can be done with a plan’s drug claim experience. Michael P. Sullivan, president of Cubic Health, told a Connex Health ‘Benefits Breakfast Club’ session that there is an opportunity to move away from the drug silo to other areas which are complementary. These include integrating disability, absence, and drug claims data to better manage benefit lines. He said plan sponsors should also evaluate population health, financially model the impact of alternate plan designs, and model future costs, including post-retirement liability assessments, using more than “just a number picked from the heavens.”

Healthcare Coverage To Rise

Costs for the most popular types of healthcare coverage in the U.S. are projected to increase at double-digit rates through the remainder of 2009 and into 2010, says a Buck Consultants, an ACS company, survey. Its ‘20th National Health Care Trend Survey’ shows costs for the most popular plans will increase by more than 10 per cent, although they are slightly lower than the 11.1 per cent projected increase in the 19th survey. Health insurers reported an average prescription drug trend of 10.8 per cent, down 0.6 per cent from the 11.4 per cent reported in the prior survey. This is three percentage points higher than the 7.8 per cent reported by pharmacy benefit managers.

BMO ETFs Start Trading

BMO Exchange Traded Funds have started trading making BMO Financial Group the only major Canadian financial group to offer a family of ETFs. The funds include a Canadian government bond index and a U.S. equity index. ETFs are similar to index mutual funds, except they are listed and traded on a stock exchange like regular stocks. Each fund consists of a basket of stocks that tracks the performance of a specific market index, such as the Dow Jones Industrial Average.

Courville Heads MFC

Jean-Francois (J-F) Courville is chief executive officer at MFC GlobalInvestment Management. Previously, he was president and chief operating officer. He joined the company in 2007 from State Street Canada where he had served as president and CEO since 2005.


Thursday, June 4, 2009

Bumpy Journey To New Normal Ahead

The world of mean-reversion has come to an end with major forces shaping a bumpy journey to a new normal, says Ed Devlin, executive vice-president, head of Canadian portfolio management at PIMCO. Speaking at its ‘Do You Have a 2007 Approach For A 2009 Market?’ Perspectives session, he said credit markets present attractive opportunities, but seniority in the capital structure makes the most sense in today’s environment. However, sector choices matter. Some investment grade sectors are attractive, but many are likely to suffer downgrades and may even default. As a result, dedicated or tactical exposure to investment grade credit will be based on investors’ needs. Another option is high quality investment grade credit which may serve as an attractive return engine while dampening the volatility associated with equities.

Rule Simplifies Retirement Planning

It’s not a question of how much income replacement is needed, it’s how much you’ll need to collect from investments, benefits, and pensions per year in retirement, says Russell Investments Canada. Its ‘Retirement Rule of $20’ simplifies retirement planning by breaking it down. It says for every $1 of annual income you expect to need over your retirement, you will need $20 saved at the day of your retirement (with inflation indexing). The rule is based on current data regarding average life expectancies and the long-term rate of return from a balanced retirement portfolio consisting of 35 per cent equities and 65 per cent bonds.

CLHIA Sets Healthcare Policy

The Canadian Life and Health Insurance Association (CLHIA) has set out a number of recommendations for achieving a renewed and sustainable public healthcare system. The ‘CLHIA Report on Health Care Policy: Towards a sustainable, accessible, quality public health care system’ says its recommendations would increase the efficiency and cost effectiveness of Canada’s public healthcare system and improve overall care for Canadians. It includes governments taking an approach focused on the individual receiving care, investing more in wellness and disease prevention, and assisting Canadians in managing their needs for continuing care. It also recommends that no Canadian should take on undue financial hardship as a result of prescription drug costs.

Nortel Reduces Transfer Ratio

Nortel Networks has been given approval by the Ontario Superior Court of Justice to reduce the transfer ratio for its Canadian Defined Benefit plan from 85 per cent to 69 per cent. The court has also ruled that employees who have already transferred out of the system can still receive the higher rate, while subsequent commutes will only receive 69 per cent of the value of their pensions. After the initial transfer, the remaining 31 per cent balance must be paid by the pension plan over a five-year period – as required by legislation – dependent on the results of the current restructuring process. The court’s decision will only affect members of the Canadian plan who have chosen to transfer the commuted value of their pension entitlements to another retirement savings vehicle.

Impact Of Buy-side Grows

As institutions shift trading volumes to electronic platforms and internalize trading functions once provided by their broker-dealers, the performance of buy-side trading desks is having a growing impact on investment returns, says a Greenwich Associates survey. In an effort to improve that performance, institutions are adopting Transaction Cost Analysis (TCA) as a core part of their equity investment and trading operations. However, even as more institutions integrate these performance measurement tools into their investment processes, questions about TCA's limitations persist and many traders remain ambivalent about its ultimate impact. Traders are not enthusiastic about TCA's ability to add value to the process of allocating trading business to broker dealers, and only a relatively modest proportion thinks TCA can have a strong impact on investment returns.

Older Workers Grow Less Confident

Older workers are much less confident about their retirement security than they were two years ago, says a Watson Wyatt survey. The number of workers aged 50 to 64 who are very confident about having enough resources to live comfortably five years into retirement dropped to 44 per cent from 63 per cent in 2007. The numbers for affording a comfortable lifestyle 15 years into retirement are even bleaker. Only 18 per cent think they have sufficient resources to be comfortable for this long, compared with 34 per cent who felt that way in 2007. However, the survey found that workers with Defined Benefit plans are much more confident in their retirement prospects than those who participate only in a Defined Contribution plan.

RI Champions Emerging

A group of responsible investment (RI) champions is clearly starting to emerge among UK corporate pension funds, says the UK Sustainable Investment and Finance body (UKSIF). Its ‘2009 Responsible Business: Sustainable Pension’ report says there was "clear and exciting evidence" that pension fund investors are promoting RI and that trustee leadership is driving this change. It suggested trustees, supported by increasingly well-informed investment consultants, are demonstrating how best practice in RI can be achieved in practical and affordable ways.

CIBC Mellon Releases CSR Review

CIBC Mellon has released its inaugural corporate social responsibility (CSR) review. ‘Taking care’ provides details of the company's progress on its CSR commitments made to date and its objectives for 2009. The review addresses a wide range of topics in five key areas – compliance and ethics, clients and products, employees, community, and environmental sustainability. It also features the company's CSR and environmental sustainability statements and commitments, along with key performance indicators for 2009. To see the review, visit

Session Looks At Healthcare Fraud

The existence of healthcare fraud and abuse is an unfortunate reality. Since it is important for all stakeholders to acknowledge this risk and understand their role in managing the impact, the Toronto Area Chapter – ISCEBS has invited Jeff Alcock, manager of investigation services for Manulife Financial group benefits and past chair of the Canadian Health Care Anti-Fraud Association, to  discuss the importance of engaging all stakeholders, with particular focus on the role of the plan member in mitigating the risk and impact to group benefit plans. ‘Health Care Fraud and Abuse’ takes place June 16 in Toronto, ON. For more information, visit

Conference Examines Philanthropy

The ‘2nd Annual Doing Well by Doing Good Conference ~ Growing Your Financial Advisory Practice Through Philanthropy’ will take place June 17 in Mississauga, ON. A one-day educational conference for senior financial advisors and charitable organizations, it will look at tools, products, and strategies for giving and philanthropy. For more information, visit


Wednesday, June 3, 2009

CPPIB Asked To Review Pay

All government-owned companies, including the Canada Pension Plan Investment Board, have been asked to review compensation practices, says Finance Minister Jim Flaherty. He said last April leaders of the Group of Twenty countries agreed with principles on executive compensation set out by the Financial Stability Forum. He has asked all government-owned companies to confirm that they are in compliance with the principles. The principles attempt to end a culture among financial institutions that promotes too much risk-taking. It is calling for bonuses in a mixture of cash and shares, and tying compensation to long-term profitability rather than short-term revenue.

Ottawa Modernizing CPP

Ottawa has proposed several changes to the Canada Pension Plan to modernize and improve the financial sustainability of the plan. The changes would “modestly” expand pension coverage and provide greater flexibility for older workers to combine pension and work income. To improve the plan’s flexibility, the Work Cessation Test, which requires individuals who apply to take their CPP benefit early to either stop work or reduce their earnings, would be removed. By removing the test, individuals could take their benefit as early as age 60 without any work interruption or reduction in earnings. Another change to improve flexibility would increase the general low earnings drop-out from its current level of 15 per cent to 16 per cent in 2012 and to 17 per cent in 2014. This ensures that average earnings are not affected by a certain number of years of unusually low earnings that occur during periods of unemployment, full-time post secondary attendance, or for other reasons. Individuals would be able to exclude up to eight years of low earnings, up from the current limit of seven years.

Financial Industry Must Speak Up

People are mad about financial markets and are complaining to politicians and regulators, says Tom Caldwell, CEO of Caldwell Financial Ltd. Speaking at the ‘2009 FPL Canadian Electronic Trading Conference,’ he said both politicians and regulators like to look like they are doing something and that means more regulation, which will add cost to the investment industry. As a result, he urges everyone in the industry to get involved and let the regulators know if they have ways to make things simpler. Too often, regulation is developed in response to situations, not to anticipate problem. This makes existing regulations more complicated. Caldwell said the industry must speak up against this.

Optimism Boosts Markets

Optimism that the worst of the economic recession is over helped boost market performance in May as equities rallied strongly for a third consecutive month, says Morningstar Research Inc.’s preliminary performance report. While there were relatively small losses for four of its 24 fund indices that track equity funds, the top indices registered double-digit gains. By far, the top performer was the precious metals equity fund index which advanced 23 per cent in the month, largely thanks to a strong rally in gold. Gold prices rose by 10 per cent for the month, bringing the spot price up to US$975 – a level last seen in late February. The worst performance, a decline of 3.3 per cent, came from U.S. small/mid cap equity.

Short-selling Ban ‘Absolute’ Mistake

The short-selling ban in Canada during the financial meltdown last year showed what an “absolute” mistake it was, says Doug Clark, managing director, quantitative execution services at BMO. Speaking at the ‘2009 FPL Canadian Electronic Trading Conference,’ he said the ban in Canada was unique because it was only on financial services companies cross-linked to the U.S. For those companies not linked, short-selling was allowed to continue. However, for those under the ban, spreads widened and liquidity dried up which had a negative effect on investors, He warned that we are about to see the same thing happen again as they are talking about another short-selling ban in the U.S. and Canada is sure to follow.

Regulation A Disability For Financial Services

Securities regulation in Canada should be principle-based and focused on outcomes, says Tom Hockin, chair of the expert panel on securities regulation. He told the ‘2009 FPL Canadian Electronic Trading Conference’ that the fragmented system of securities regulation in Canada is a disability for the financial services sector as it means there is no single body to deal with systemic risk. For example, Canada survived the ABCP crisis, but barely because of this. Reduction of systemic risk, he said, should be one of the guiding principles. This would allow regulation to respond quickly to market events which might cause systemic risk in Canada.

OMERS Acquires Nordco

OMERS Private Equity is acquiring Nordco Inc. from private equity firm The Riverside Co. Nordco is a provider of rail infrastructure services and operates manufacturing facilities in Oak Creek and Oshawa, ON. Riverside bought Nordco in 2003 in a management-backed buyout.

Think Tank Discusses European Practices Report

Evolving a unified regulatory approach to create a level playing field among investment products and re-invigorating the relationship with the investor by encouraging better information flows throughout the industry are just two of the recommendations from ‘Building Long-Term Savings in Europe,’ a report from the Think Tank on Asset Management. At an IFIC session taking place June 30 in Toronto, ON, Jean-Baptiste de Franssu, chair of the Think Tank and CEO of Invesco Europe, will explain its findings as well as the nine recommendations for the industry.  The Think Tank was organized to analyze European Asset Management industry practices – from product manufacturing through to distribution to the end client. For more information, visit

Business Case For Safety Examined

‘The Business Case for Health & Safety: Smart investment or lost money? You decide’ will be the focus of the next Economic Club of Canada session. Featured speaker is Steven W. Mahoney, chair of the Workplace Safety and Insurance Board. It takes place June 16 in Toronto, ON. For more information, visit


Tuesday, June 2, 2009

GM Pensions Retained

Pension plans for hourly and salaried employees at General Motors Corp. will be retained under the Chapter 11 bankruptcy reorganization plan worked out with the U.S. government. Under the reorganization plan, the U.S. Treasury will provide $30.1 billion of financing to support GM through an expedited proceeding. The combined $84.5 billion pension plans will be transferred to the new GM as part of the purchase process. The Pension Benefit Guaranty Corp. estimated that as of November 30, the GM pension plans for hourly and salaried workers, which cover 673,000 employees and retirees, had about $80 billion in total assets and were underfunded by about $20 billion. If the GM pension plans had been terminated, PBGC would have covered about $4 billion of the $20 billion shortfall.

Public Employers Modify Benefits

Public employers in the U.S. are modifying their employee healthcare benefits to include more cost-saving measures, says a survey by the International Foundation of Employee Benefit Plans (IFEBP).Health Care Plans: Impact of the Financial Crisis’ found that 72 per cent of public employers are increasing or considering an increase in their employees' deductibles, co-insurance, or co-pays. In addition, 74 per cent are increasing or considering an increase in employee premiums. Nearly half of public employers cited the financial crisis as the reason for considering higher deductibles and higher employee premiums.

Mercer Offers Fiduciary Management

Mercer has launched a fiduciary management tool to manage UK pension plan investments and liabilities. The goal of its ‘Dynamic De-Risking Solution’ tool is improving funding status. With the tool, funding status is monitored and rebalancing considered daily. As funding status crosses predetermined bands – for example, reaching 75 per cent funded from 70 per cent funded – the portfolio would automatically adjust to a new set of parameters set by trustees.

Database Measures Wellness Programs

Connex Health has developed an online measurement database for health and wellness programs. The database provides a solution for employers to monitor and measure the impact of multiple health and wellness programs over time. With multiple data filter functions, outcomes data can be used to target future interventions by demographic group or location. As well, users of the database will also be able to benchmark their results against other employers in the database and those in their own industry.

CPBI Ontario Offers Benefits Stream

Flex work, linking wellness and business success, and retiree benefits will be among the topics covered in the benefits stream at the CPBI Ontario Regional Conference. Along with pensions, investment, and the new small business stream, the benefit stream will provide attendees with information and education around the event’s central theme, ‘Taking Care of Business.’ It takes place October 5 to 7 in Collingwood, ON. For more information, visit


Monday, June 1, 2009

CPPIB Compensation Attacked

Compensation paid to senior executives at the Canada Pension Plan Investment Board is under attack. While the compensation paid to its president and chief executive dropped 30 per cent last year, NDP Leader Jack Layton says it should have been reduced a lot more. The board’s annual report shows the president and CEO earned a salary of $490,000, a bonus of $735,000, and long-term incentives of $1.6 million. He also received $59,000 in pension contributions and $9,600 in other compensation, which included life insurance and health and dental benefits. The previous year, his salary was $475,000, his bonus was $1.2 million, and long-term incentives were just under $2.4 million, plus $57,000 in pension contributions and $8,800 in other compensation. Layton calls this outrageous considering the Canada Pension Plan fund lost 18 per cent of its value last year and he is demanding that the Conservative government step in and slash the bonuses. Liberal MP Ralph Goodale called for "moral leadership" and asked the federal finance minister to invite the Canada Pension Plan Investment Board to review its bonuses in the context of a recession that's killing the jobs of 350,000 ordinary Canadians." However, the finance minister says the government will not get involved in the operations of the CPPIB which was set up as an arm's length manager to be free from political influence. Executive pay at the CPPIB is based on investment performance over a four-year period measured both in absolute terms and relative to market benchmarks. As a result, the compensation reported for fiscal 2009 was based in part on highly positive returns in 2006 and 2007 as well as on the losses of 0.3 per cent in 2008 and 18.6 per cent in 2009.

Depressed Employees Away Longer

Employees disabled by depression are away from work significantly longer than other employees on disability leave, says research by the Integrated Benefits Institute. Employees with depression have 44 per cent more lost time than employees who had no depression treatment during their disability leave, The true lost-time costs of these cases – including disability payments and lost productivity – are 2½ times the costs of medical care and pharmacy benefits combined. Lost productivity is the largest single cost component, making up 60 per cent of total costs.

Tenure Linked To Equity Allocation

When target-date plans are classified by participants' tenure, the average equity allocation of pure target-date fund holders by age and salary shows a different pattern from target-date investors in plans classified by participants' income, says an Employee Benefit Research Institute (EBRI) study. It finds plan demographics as a whole affect individual participant contribution rates and target-date fund investment choices by participants. Those in plans dominated by participants with high incomes tend to hold target-date funds with higher equity allocations than those in the plans dominated by participants with low income.

July Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including July 2009 are now available at An Excel spreadsheet on the website contains seven worksheets:

  • Commuted Values – 2009 Basis
  • Commuted Values – 2005 Basis
  • Commuted Values – 1993 Basis
  • Marital Breakdown – CSOP 4300 (March 2003)
  • Marital Breakdown – CSOP 4300 (March 2003 – ALTERNATE)
  • Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
  • Minimum Interest on Employee Required Contributions (including the 12 month average rates)

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