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30,000 Feet

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30,000 Feet - Second quarter, 2012

The Biggest Stories of The Quarter With Significant Ongoing Impact

REGISTERED PENSION PLANS ARE EVOLVING

On May 31, New Brunswick introduced a new form of pension program, referred to as Shared Risk Plans ("SRPs"). SRPs are designed to provide a middle ground between the typical defined benefit pension plan and defined contribution plans. SRPs provide relief from future indexing and salary increase obligations for accrued benefits through the enabling legislation. In return, it requires implementation of a rigorous risk management regime designed to ensure a high degree of benefit security, recognition of employee ownership of plan surpluses and creation of a formal arm’s length trust to operate the plan.

WHY PLAN SPONSORS SHOULD CARE

By eliminating much of the volatility in contribution levels and accounting costs that have been the bane of DB plans, SRPs may represent the next step in the evolution of pension plan design. If this design is successful in enabling plan sponsors to receive DC plan accounting treatment for their pension plan cost while retaining many of the advantages that employees associate with the traditional DB approach, it could provide the alternative that plan sponsors and employee groups have been seeking.

VRSP ON TARGET FOR JANUARY 1, 2013, IN QUEBEC

On June 12, Quebec introduced legislation regarding Voluntary Retirement Savings Plan (VRSP), Quebec’s version of the Pooled Registered Pension Plan (PRPP). Employers with five or more employees having at least one year of continuous service will be required to offer a VRSP, though there will be an exception for certain existing retirement savings plans and registered pension plans. The VRSP is intended to be a simple, low-cost savings vehicle. Employees are automatically enrolled, but can opt out. Employers need not contribute, but if they do, their contributions do not generate payroll taxes, an improvement over the treatment of group RRSPs. The Administrator of the VRSP, rather than the employer, assumes the fiduciary risk. Barring any surprises, legislation would become effective on January 1, 2013 and affected employers will need to offer a VRSP within 24 months.

WHY PLAN SPONSORS SHOULD CARE

With Quebec proceeding with its own brand of PRPPs, as well as the Federal Government for federally regulated plans, it is only a matter of time before the other provinces act as well. PRPPs could transform the retirement landscape if they are successful in improving coverage. Given that the fiduciary and administrative burden is lifted off the backs of employers, many existing DC plans and group RRSPs may eventually consider transitioning to PRPPs as well.

ABSENTEEISM NOT BEING TRACKED

The latest Sanofi healthcare survey shows that only 38% of employers with health benefit plans formally track absenteeism. Another 35% say they track it informally but 64% of the respondents admitted they do not know their company’s absenteeism rate.

WHY PLAN SPONSORS SHOULD CARE

As the saying goes, what gets measured gets done or, at least, is more easily improved. Absence results in lost productivity and revenue. Casual absences are costly but often overlooked, which means that the cost impact and underlying health issues can go unnoticed. Patterned absences are also often difficult to identify if absences are not tracked formally. Tracking absenteeism is one of the key tools in a broader health risk management framework. It is an entry point to addressing health awareness, prevention, intervention and recovery.


30,000 Feet - Second Quarter, 2012 (PDF)