Pension plan sponsors using group annuities to transfer risk and updates made to employment leaves
20 Jun, 2018, 12:00 ET
An in-depth look at these and other subjects are covered in the current issue of the Morneau Shepell News & Views
TORONTO, June 20, 2018 /CNW/ - Morneau Shepell released the June 2018 issue of its monthly newsletter, News & Views, in which the Company looked at a number of topics including: exploration of buy-out annuities as a risk transfer method; British Columbia, New Brunswick and Newfoundland and Labrador's expansion of certain types of employment leaves in alignment with the federal government's recent updates to employment insurance (EI) rules; the Ontario Court of Appeal's treatment of long-term disability (LTD) claims made after termination of employment; and the impact of an Alberta court ruling permitting common law spouses to divide pensions after relationship breakdown.
- Pension risk transfer activities are growing in Canada – Recent changes in legislation in British Columbia, Quebec and Ontario and economic pressure on sponsors of defined benefit pension plans have prompted plan sponsors to diversify their assets in order to reduce investment risks. While some sponsors have opted to reduce their allocation to equities, others have moved to a full liability driven investment (LDI) strategy. Since these strategies do not deal with the risk that retirees may outlive actuarial projections, some sponsors are considering the options of purchasing annuities for pension plans. This article discusses in detail the pros and cons and steps involved in buy-out annuity purchases by pension plan sponsors.
- Employment leave provisions amended in some provinces – Amendments to employment standards legislation in British Columbia, New Brunswick and Newfoundland and Labrador have aligned certain types of leave with the federal government's recent changes to EI rules effective December 3, 2017. The types of leave updated include maternity, pregnancy, parental, child care, compassionate care, care of a critically ill adult, domestic violence leave, and leaves upon the disappearance of a child and death of a child.
- Injured former employee successful in LTD claim – The Ontario Court of Appeal in MacIvor v Pitney Bowes held in favour of a former employee who submitted an LTD claim two years after resigning and five years after the injury itself. Although the circumstances and ruling of MacIvor are uncommon, employers and insurers should take note that terminating an employment relationship does not necessarily bar an employee from making future LTD claims for injuries that occurred while employed.
- Alberta permits pension benefits to former common-law spouses – On May 23, 2018, the Alberta Superintendent of Pensions issued Employment Pension Plans Act (EPPA) Update 18-03, which describes a recent Alberta court ruling that allows up to 50 per cent of the pension benefits earned during a relationship to be transferred to a former common-law partner. Previously, Alberta legislation restricted such pension division to formerly married couples. The court decision and Update apply to all non-federally regulated employees regulated by Alberta pension legislation.
- Tracking the funded status of pension plans as at May 31, 2018 – Morneau Shepell shared the changes in the financial position of a typical defined benefit plan with an average duration since December 31, 2017. The graph in the newsletter shows the impact of three typical portfolios on plan assets and the effect of interest rate changes on solvency liabilities of medium duration.
- Impact on pension expense under international accounting as at May 31, 2018 – Morneau Shepell showed the expense impact for a typical pension plan that starts the year at an arbitrary value of 100 (expense index). Since the beginning of the year, the slight increase in the discount rate combined with returns slightly below expectations (relative to the discount rate) has resulted in the pension expense returning almost to its level to the beginning of the year.
About Morneau Shepell
Morneau Shepell is the only human resources consulting and technology company that takes an integrated approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. As a leader in strategic HR consulting and innovative pension design, the Company helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations. With more than 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.
SOURCE Morneau Shepell Inc.
For further information: Heather MacDonald, Morneau Shepell, 416.390.2625, [email protected]
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