benefits
Effective Planning
MODERN DEFINED BENEFIT PENSIONS CAN SUBSTANTIALLY IMPROVE
OUTCOMES FOR BUSINESSES
By Derek W. Dobson
Anxiety about an uncertain financial future in retirement
can lead to missed days of work and reduced productiv-ity.
In a global survey, Willis Towers Watson found that
employees with financial worries report worse health,
higher stress, more absences and lower engagement levels than did
employees without financial concerns.
Contributing to the financial wellness of employees has been
a challenge for employers for decades. The main choices that
were available (such as traditional Defined Benefit or Defined
Contribution plans) pushed major risks and costs onto either the
employee or the employer.
Fortunately, the expanded availability of Modern Defined
Benefit (MDB) pension plans provides an elegant and cost-effective
solution to all workplaces in Canada. These innovations
meet the most important objectives of both employees and employ-ers
– secure, efficient, risk-managed pension plans with stable and
affordable contributions and no accounting risks.
Jointly sponsored multi-employer MDB pension plans are inde-pendently
administered and governed, removing all pension risks
from the employer. Employers simply match employee contribu-tions;
that’s it!
With MDB, employers are not responsible for day-to-day
administration of the plan or the risks that come with traditional
pension plans. These plans operate and invest efficiently to pro-vide
a higher lifetime pension at a lower risk and cost than other
retirement savings vehicles. In other words, more benefits per con-tributed
dollar. At the same time, they charge no extra cost or
effort for running a pension plan.
MDB plans address the core needs of an organization’s
stakeholders:
■■ They tackle employee financial stress, which can be a drag on
productivity and engagement and can result in higher benefit costs.
■■ They act as a valuable attraction and retention benefit, meeting
a key need of human resources professionals in a tightening job
market. They also better manage presentism by giving employees
the confidence to retire when the time is right.
■■ They operate efficiently and without cost volatility to align
with the objectives of chief financial officers. Savings from the
conversion of current pension programs can be reinvested in the
business and jobs.
IMPROVING BUSINESS OUTCOMES
As noted earlier, an employee’s personal financial anxiety can
negatively affect the bottom line. Multiple surveys confirm that
Canadians are stressed about retirement (and many should be). In
September 2018, the Canadian Payroll Association reported that:
■■ Forty-six per cent of Canadians said financial stress is impacting
their workplace performance.
■■ Seventy-two per cent said they have only saved a quarter or less
of what they feel they will need to retire.
A nearly 75 per cent savings gap does not bode well for
workplace productivity and a 2016 survey of Canadian atti-tudes
toward retirement bears this out. The Canadian Public
Pension Leadership Council (CPPLC) found that over half of all
Canadians (51 per cent) said that retirement-planning stress has
a medium-to-high impact on their work. In addition, employees
who have to manage their retirement account are more likely to
see stress affect their work:
■■ Sixty-nine per cent of group RRSP members said retirement-planning
stress impacted their work.
■■ Forty-nine per cent of Defined Contribution (DC) plan
members said retirement-planning stress impacted their work.
MDB plans deliver highly desired, predictable and secure life-time
retirement income. Members are not required to make
investment decisions, decide how to time their retirement to the
market cycle or decide how to withdraw their savings in retire-ment.
With fewer decisions, plan members are less stressed.
MDB plans also support the needs of HR professionals as they
search for new talent and look to reduce training and recruitment
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