Fix Canada's ailing pension system to help more Canadians enjoy an independent retirement

    Actuaries Call on Governments to Implement 10-Point Prescription

    MONTREAL, Oct. 3 /CNW Telbec/ - To help millions of Canadians save for an
independent retirement, governments must take bold action to reverse the
decline in defined benefit pension plans and strengthen Canada's registered
pension system, say Canada's actuaries.
    Citing the erosion of defined benefit pension plans, which offer working
Canadians and their employers an attractive and reliable retirement savings
vehicle, the Canadian Institute of Actuaries is calling on governments to
implement a 10-point action plan designed to restore the health of defined
benefit plans.
    "Defined benefit pension plans are too important to our economy and to
the future of Canadians to let them slowly die as a result of misperceptions,"
said the Institute's Immediate Past President, Normand Gendron, in a speech to
the Economic Club of Canada today in Montreal. "Our plan describes how the
system can pull defined benefit plans back from the brink and create a healthy
pension environment that protects the adequacy and security of Canadians'
retirement income.
    "Governments, employees, employers, retirees, unions and professional
advisors all must work together to restore the health of defined benefit
pension plans. To do so will serve the best interests of the pension system
and the millions of Canadians who risk losing an important element which
allows them to save towards the goal of an independent retirement," Gendron
    In his speech, Gendron described how defined benefit plans offer
predictability, security and less risk to plan members. They help employers
attract and retain employees, and they generate higher investment returns and
provide superior pension coverage for employees in all sectors. But defined
benefit plans have steadily eroded as a result of Canada's patchwork of
regulations, legal decisions, tax rules and changes to accounting standards
have been the main causes for the weakness in private sector defined benefit
    To address these concerns, the Institute's Pension Prescription calls on
governments to implement the following measures:

    1.  Pass legislation to allow employers to set up 100 per-cent 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. (The federal government and some
        provinces, including Quebec, have already done this.)

    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. (Quebec has already introduced the solvency
        margin concept.)

    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 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.

    Currently, 4.5 million Canadians-including 1.3 million Quebeckers-are
members of more than 7,000 defined benefit pension plans.
    "For Canadians to continue to have one of the world's best pension
systems, the system must include healthy defined benefit pension plans,"
Gendron said. "Implementing our Pension Prescription will help secure benefits
for plan members and foster a pension system that encourages employers to
create and maintain these important retirement savings vehicles."

    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; For
media interviews: Diane Jeannotte, (514) 772-8019;

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Canadian Institute of Actuaries

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