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The Need for Pension Reform – the CFO View
Chief Financial Officers (CFOs) are critical to the survival and prosperity of private sector defined benefit (DB) pension plans, as they are generally the corporate officers who are driving decisions to close or terminate these plans. The current pension environment is clearly different from that of just a few years ago, and this requires changes on the part of regulators and governments. A more level playing field is needed if CFOs are to be convinced to maintain, and even expand, the level of DB coverage in Canada.
Proposals for Strengthening the Federal Legislative Framework for Defined Benefit Plans
Watson Wyatt responded to the federal Department of Finance's May 2005 consultation paper aimed at strengthening the legislative and regulatory framework for DB pension plans. We believe strongly that preserving the DB pension system and improving it to serve the needs of today’s (and tomorrow’s) workforce is a necessity. An appropriate degree of simplicity and flexibility would also make the system more workable. The consultation paper's proposals and our recommendations are discussed in this article.
Improving Defined Benefit Pension Funding – The Quebec Way
The Régie des rentes du Québec also released a working paper on the funding of DB plans in May 24, 2005. Watson Wyatt's response concurs with the Régie's approach which demonstrates that employers who offer DB pension plans are a critical link in the pension system. Attempting to implement measures that will combine benefit security and funding flexibility is certainly a positive step. The gist of the working paper and our recommendations are discussed in this article.
CAPSA Proposes Model Law Funding Principles
The Canadian Association of Pension Supervisory Authorities (CAPSA) is accepting submissions regarding its consultation paper on funding principles for DB pension plans until November 30, 2005. Its intention is to address the needs of stakeholders by establishing principles that reduce compliance costs and simplify administration of multi-jurisdictional pension plans. This article discusses our concern that some of CAPSA’s proposals will worsen the current asymmetry problem, rather than improve it, which will be reflected in our submission.
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