Actuaries Release 10-Point Prescription For Canada's Ailing Pension System

    TORONTO, June 25 /CNW Telbec/ - Canada's actuaries are calling for bold
public policy measures and strong leadership by plan sponsors and members to
reverse the steady decline in defined benefit pension plans and to protect the
financial security of millions of Canadians when they retire.
    Noting a wide range of factors contributing to the erosion of defined
benefit pension plans, the Canadian Institute of Actuaries has released a
10-point action plan designed to put Canada's ailing pension system back on
track and restore defined benefit pension plans as an attractive retirement
savings vehicle for working Canadians and their employers.
    "Healthy defined benefit pension plans are too important to Canadians, to
our economy and our future to let them slowly die as a result of
misperceptions and false economies," said the Institute's president,
Normand Gendron. "Our plan sets out how the system can pull defined benefit
pension plans back from the brink and create a healthy pension environment
that protects the adequacy and security of Canadians' retirement income.
    "Employees, employers, retirees, unions, professional advisors and
governments all must work together to restore the health of defined benefit
pension plans. It's in the best interests of Canada's pension system and the
financial security of Canadians," Gendron added.
    Earlier today, Gendron announced the Institute's 10-point Pension
Prescription during a speech to the Economic Club of Toronto. The document
notes that Canada's patchwork of regulations, legal decisions, tax rules,
changes to accounting standards and other factors have all contributed to the
erosion of defined benefit pension plans.
    To address these issues, the Institute's Pension Prescription calls for
the following measures:
    1.  Pass legislation to allow employers to set up 100 percent employer-
        funded Pension Security Trusts that would be separate from, but
        complementary to, regular defined benefit pension plan funds.

    2.  Pass legislation to allow the use of irrevocable letters of credit to
        secure solvency deficiencies.

    3.  Pass legislation to improve the transparency of plan funding and
        governance by requiring plan sponsors to establish a written funding
        policy for defined benefit plans.

    4.  Expand annual disclosure required by plan sponsors to include funding
        policies, investment policies, the plan's current funded status and
        the date of the next plan valuation.

    5.  Pass legislation to require each defined benefit plan to build up a
        Target Solvency Margin.

    6.  Establish a task force, with representation from the profession and
        pension regulators, to develop guidance on appropriate levels of
        solvency margins.

    7.  Change the tax rules to allow plan sponsors to develop larger

    8.  Pass legislation to protect underfunded pension benefits by according
        them treatment similar to that of unpaid pension plan contributions
        in bankruptcy and restructuring proceedings.

    9.  Bring responsibility for pension matters within the authority of
        provincial finance ministers.

    10. Examine alternate ways of handling underfunded plan wind-ups for
        insolvent employers, such as establishing a new pension insolvency
        insurance vehicle.
    The Institute's Pension Prescription notes that defined benefit plans
offer predictability, more security and less risk to plan members, while
helping employers to attract and retain employees and better manage their
workforce. Defined benefit plans also generate higher investment returns and
provide superior pension coverage for employees in all sectors.
    "Canadians have one of the best pension systems in the world, but that
system must include defined benefit pension plans. Our Pension Prescription,
if implemented, will help to secure defined benefit plan benefits for members
and foster a pension system that encourages employers to create and maintain
defined benefit plans."

    The Canadian Institute of Actuaries is the national organization of the
actuarial profession. Member driven, the Institute is dedicated to serving the
public through the provision, by the profession, of actuarial services and
advice of the highest quality. In fact, the Institute holds the duty of the
profession to the public above the needs of the profession and its members.
Actuaries employ their specialized knowledge of the mathematics of finance,
statistics and risk theory on problems faced by pension plans, government
regulators, insurance companies (both Life and Property/Casualty), social
programs and individuals.

For further information:

For further information: Josée Racette, (613) 236-8196 ext.107;

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