A model for better governance and greater stability of collectively-bargained Canadian pension plans using a multiple employer structure
Andrews, Doug (2009) A model for better governance and greater stability of collectively-bargained Canadian pension plans using a multiple employer structure. In, UNSPECIFIED , Society of Actuaries. (In Press).
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This report deals with the Canadian pension regulatory environment and specifically Ontario. It proposes that unrelated employers be permitted to amalgamate their pension plans into a single plan using a multiple-employer structure, provided that all of the members of the single plan are represented by a union and the union has consented to the arrangement. It provides recommendations on how plans adopting this multiple-employer structure should operate in order to ensure that risks are appropriately allocated among stakeholders and that that there is strong governance.
The pension formula would be defined benefit. The basic structure of the plan would be that the participating employers are required to contribute at a negotiated cents-per-hour rate based on the hours worked by covered employees. This would be the only financial obligation of the participating employers. The legal Administrator of the plan would be a joint board of trustees.
There are a number of problems with the way in which Canadian multi-employer pension plans that are jointly trusteed and that are of the defined contribution – defined benefit type operate, especially with respect to governance. This paper makes a number of recommendations to improve plan governance, including only selecting independent experts to act as trustees and the compensation of trustees. In order to ensure the security of member benefits, the benefit formula would specify an ultimate benefit. With respect to the ultimate benefit, very conservative investment strategies would be employed and the benefit would be funded on a risk-free basis. Excess benefits would be provided to the extent that plan performance permitted. These excess benefits could be adjusted upward or downward depending on plan performance.
This pension design would not be permitted in the current Ontario and Canadian regulatory environment. This report identifies a number of legislative and regulatory changes that would be required.
The recommended plan is assessed using the measurement framework developed as part of the Retirement 20/20 project. The recommended approach scores very highly with respect to how risks are allocated. It also scores highly on governance.
|Item Type:||Book Section|
|Keywords:||administrator, annuitization, basel accord, board member selection, enterprise risk management, governance, investment policy, minimum funding standard, multi-employer pension plans, multiple-employer structure, pension protection fund, pension plan design, retirement 20/20, risk mapping, solvency ii|
|Subjects:||Q Science > QA Mathematics|
|Divisions:||University Structure - Pre August 2011 > School of Mathematics > Statistics
|Date Deposited:||12 May 2010 12:58|
|Last Modified:||27 Mar 2014 19:11|
|Publisher:||Society of Actuaries|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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