News Column

ACPM proposes a new model to address Defined Benefit Plan Pension challenges

May 14, 2014



Supports the preservation of defined benefit pension plans in the private sector

TORONTO, May 14, 2014 /CNW/ - Defined Benefit (DB) pension plans in the private sector are a vital component of the Canadian retirement income system. However, in recent years, there has been a trend by corporate plan sponsors to move away from DB plans, particularly for single employer DB plans in the private sector. Exacerbated by a prolonged low interest rate environment, these plans have faced significant funding challenges in recent years. Funding rules established decades ago in a significantly different economic environment have resulted in extreme contribution levels that have put additional pressure on these plans. Temporary solvency relief measures have been implemented by governments to relieve this pressure but have not addressed the underlying issues. It is clear that more fundamental changes are required to ensure the sustainability of this vital component of Canada's retirement income system.

With today's release of "DB Pension Plan Funding: Sustainability Requires A New Model" *, the Association of Canadian Pension Management (ACPM) believes a new funding regime must be developed to preserve DB pension plans. Without these changes, the prevalence of DB pension plans will continue to decline - a development that will be a significant loss to Canada's retirement income system. This paper explains why funding requirements for private sector single employer DB pension plans should be changed, why solvency funding no longer works and why a new funding model is needed. Andrew Harrison, Chair of the ACPM Board of Directors, added that "We believe this paper will open the door to discussions about the important changes that are required to ensure the continuation of single employer DB pension plans in the private sector."

Ensuring that DB pension plans continue as viable options for coverage is one of the tenets of the ACPM Five Point Plan** that outlines the steps to providing universal access to retirement income coverage in Canada, ACPM believes that the combination of employment pension plans and individual retirement savings along with government programs are essential to providing Canadians with retirement income security and adequacy.

In addition to "DB Pension Plan Funding: Sustainability Requires A New Model", ACPM is expecting to release other papers in the near future including "ACPM Principles for Mandatory Public Pension Plans" and a supplement to its 2012 ACPM Target Benefit Plan paper.

The Association of Canadian Pension Management (ACPM) is a national, non-profit organization and the voice of plan sponsors, administrators and their service providers. Our membership represents over 400 companies and retirement income plans that cover more than 3 million plan members, with assets under management in excess of $330 billion.

(*)(**)  Available at the ACPM website - www.acpm-acarr.com

SOURCE Association of Canadian Pension Management


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