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Daily Benefits and Pensions News Alerts

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Friday, July 3, 2009

ACPM Honours Volunteer

The Association of Canadian Pension Management will honour one of its volunteers each year for their outstanding contribution in helping the organization reach its goals. The ‘ACPM Award for Exceptional Volunteerism’ will be presented annually at the gala dinner held at the ACPM National Conference each September. This year, the national conference is set for September 15 to 18 in Montreal, QC.
 

Arrow Hedge Using RBC Dexia

RBC Dexia Investor Services has been selected by Arrow Hedge Partners Inc. to provide shareholder services for a portfolio of funds in Canada. Arrow Hedge Partners is a Canadian-based investment management company that provides its clients with access to funds of hedge funds and single manager hedge funds.
   

Benefits Average Declines

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Thursday, July 2, 2009

Union Rejects Pension Freeze

Air Canada's largest union has rejected a labour deal that freezes pensions and wages for the next 21 months. The International Association of Machinists and Aerospace Workers – representing about 10,000 workers including mechanics, baggage and cargo handlers, aircraft cleaners, and electricians – voted 50.8 per cent against the deal. The union had been advising its members to accept the plan and hopes to work out a compromise with its members. Unions representing customer service agents and dispatchers had previously agreed to the pact.
 

Preferential Tax Treatment Not Being Considered

The preferential tax treatment granted in the U.S. for Health Care Trusts (HCT) is not being considered in Canada, says Eckler ‘GroupNews.’ At present, it appears that the HCT may be based on the health and welfare trust structure, modified slightly to accommodate the CAW agreements. Health and welfare trusts are arrangements created via administrative practice and interpretation of the Income Tax Act. They are not specifically defined in the ITA and their current provisions do not allow any pre-funding of benefits (retiree or otherwise). The current health and welfare trust rules allow employers to contribute to the trust (and get a tax deduction for the contribution). Permitted benefits paid to beneficiaries are not taxed to the recipient, except for employer-paid disability benefits.
 

Benefits Valued More Than Cash

Employees value their total benefits offering more than cash, says a study by the employee benefits group of Sun Life Financial. Of the supplemental benefits evaluated, employees ranked their dental insurance, 401(k)/retirement plans, vision insurance, and group life insurance as most valuable. When employees were asked to assume they had all the medical insurance their family needed and to distribute 100 points across other benefits based on how much they would value them, only 33 per cent of respondents assigned a value greater than zero to cash and only five per cent of the total assigned a value greater than 30 to cash. Cash was the least utilized category.
 

CAP Administration On Agenda

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Tuesday, June 30, 2009

Further Upside Potential For Canadian Equities

A majority of investment managers see further upside potential for Canadian equities, despite a rally that has seen double-digit gains in the S&P/TSX Composite Index so far this year, says the ‘Russell Investment Manager Outlook.’ A solid 45 per cent consider Canadian equities to be undervalued and only one-in-five think the market has become overvalued. Only eight per cent of managers say they are still bullish towards cash, and fully 61 per cent are bearish, indicating that stocks and bonds are once again seen as offering rewards commensurate with their higher risk profile.
 

Taxable Benefits Policies Changing

The federal government is changing employee taxable benefits policies in an effort to reduce the administrative burden for employers and ensure more fairness in tax administration. One change clarifies the rules under the Canada Revenue Agency’s gift and award policy which allows employers to give employees non-cash gifts and awards up to $500 per year, tax-free. The new rules state that employees are also eligible to receive a separate non-cash long service or anniversary award of up to $500 tax-free, under certain circumstances. Items of immaterial or nominal value – such as coffee, T-shirts, mugs, or plaques – will not be considered a taxable benefit to employees. The government also changed its policies with respect to loyalty programs. The rules previously required employees to calculate and include in their income the fair market value of any reward points accumulated by charging employer-reimbursed expenses to personal credit cards. Under the change, the CRA will no longer require these employment benefits to be included in an employee’s income.

Impact Of RAMQ Needs Review

RAMQ’s modification of the financial parameters for drug insurance could translate into an average reduction of approximately two per cent in drug costs for Quebec private plans mirroring its coverage, says a Mercer ‘Client Alert.’ It says this reduction would occur with a reduction in coinsurance from 69 per cent to 68 per cent, combined with an increase in maximum contribution from $927 to $954. However, if the drug coverage applicable to a plan’s employees who have not attained age 65 is more generous, there will be no financial impact to the plan. And if a plan reimburses the RAMQ copayments paid by employees who are aged 65 or over and are covered by RAMQ, an increase in drug costs of approximately three per cent on average could result. Mercer recommends that sponsors review their plans to assess the impact of the changes.
 

CIBC Mellon Gets ‘A’ Rating

Moody's Investors Service has assigned a long-term deposit rating of Aa2 and a short-term deposit rating of P-1 to the CIBC Mellon Trust Company (CIBC Mellon). Moody's also affirmed CIBC Mellon's bank financial strength rating (BFSR) of B-, its long-term issuer rating of Aa2, and its stable rating outlook. Thomas C. MacMillan, president and chief executive officer of CIBC Mellon, says "the ratings recognize our strong relationship with our parents, and our ability to offer world class solutions to the Canadian market."
 

Measurisk Passes Milestone

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Monday, June 29, 2009

Consulting Giants Merge

Consulting firms Towers Perrin Forster & Crosby and Watson Wyatt Worldwide plan to merge in a bid to cut costs amid an economic slump that has caused clients to curb discretionary spending. The combined company will be named Towers Watson & Co. It says it will take three years to achieve savings of $80 million through job cuts and the streamlining of overlapping operations. A large chunk of the synergies would come from North America, which accounts for 65 per cent of the revenue at Towers Perrin and 45 per cent at Watson Wyatt.

Ford Credit Canada is closing the first public auto securitization completed in Canada since the end of 2007. It is also the first public auto loan monthly pass-through amortizing securitization in Canada. In the past, securitizations were structured like a regular bond where investors received semi-annual interest payments and a bullet payment of principal at maturity. In this deal, investors will receive a mix of interest and principal on a monthly basis. HSBC and Scotia Capital are joint structurers, leads, and bookrunners.
 

Institutions Committed To Foreign Allocations

Canadian institutions appear committed to another portfolio strategy that characterized their portfolios in the years before the start of the crisis, the increase in allocations to non-Canadian assets since the elimination of the Foreign Property Rule in 2005. Greenwich Associates’ ‘Canadian Equity Investors Study’ says more than 70 per cent of participating institutions have left allocations to international equities unchanged from 2008-2009 with only about 15 per cent each saying they made moderate increases or decreases. Almost 45 per cent of institutions say they left allocations to domestic equities unchanged over the past 12 months, with 30 per cent making moderate increases and an equal share making moderate reductions.
 

Enterprise Of Future Examined

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Friday, June 26, 2009

Canadians Conservative Towards Alternatives

Canadian institutions have taken a more conservative approach than U.S. funds when it comes to investing in alternative asset classes and Greenwich Associates’ ‘Canadian Equity Investors Study’ reveals that some Canadian institutions are looking to scale back their exposures to some alternatives even further. Almost 30 per cent of participating Canadian institutions say they have already reduced their allocations to hedge funds, including almost 15 per cent saying they have scaled back these allocations "significantly." None of the institutions increased allocations to either hedge funds or private equity and 14 per cent made moderate cuts to their private equity allocations.
 

Caisse Rating Confirmed

DBRS has confirmed its ratings on the Caisse de dépôt et placement du Québec and CDP Financial Inc. It notes that the Caisse’s total portfolio recorded a return of negative 25 per cent in 2008 and missed its benchmark by a substantial 658 basis points, erasing nearly 2½ years of returns, and taking the 10-year average return down to 3.6 per cent. Nevertheless, the trends on the ratings remain stable in spite of the erosion in the Caisse’s net asset base, which was primarily driven by the sharp downturn in global equity markets.
 

Stable Value Funds Need Review

In today’s unpredictable market environment, even the ‘safest’ investments such as stable value funds carry considerable risks that plan sponsors and participants alike might not be aware of, says Watson Wyatt. Stable value funds invest in fixed income securities that are protected up to the amount of their book value by ‘wrap contracts’ issued by insurance companies and banks. This protection is partly the reason stable value funds have long been considered among the most secure investments participants can make in their 401(k) accounts. However, the recent market turmoil has affected both the underlying investments as well as their guarantees. It says major areas of concern – the loss of book value of investments due to credit rating deterioration in the wrap issuer structure and wrap issuers exiting contracts – could drive the fund’s crediting rate rapidly lower. It suggests that plan sponsors review their existing stable value investments and wrap contracts to ensure they are prepared if the market suddenly changes again.

Solvency Relief Requires Communications

With the enactment of the solvency funding relief regulations in Ontario and at the Federal level, plan sponsors and administrators must now start the process of selecting the appropriate options for their situation, says a Hicks Morley ‘FTR Now.’ Where this will require the consent of members, former members and unions, communications will be very important. In particular, both solvency relief programs require plan sponsors to engage their collective bargaining agents as trade unions are empowered to object on behalf of their members.
 

Managers Turn To Outsourcing

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Thursday, June 25, 2009

Large Fixed Income Allocations Maintained

In the years leading up to the global financial crisis, Canadian institutions maintained relatively large allocations to fixed income in comparison to institutions in the United States, says Greenwich Associates’ ‘Canadian Equity Investors Study.’ That choice served Canadian institutions well in 2007 and 2008, and the results of the survey indicate that institutions are maintaining the approach in 2009. Approximately 15 per cent of Canadian institutions have left their fixed income allocations entirely unchanged from 2008 to 2009, while almost 45 per cent have made moderate increases and an equal proportion made moderate decreases. No Canadian respondents made ‘significant’ additions or cuts to their fixed income allocations over that period.
 

Ontario Solvency Relief Measures In Place

Ontario pension plan administrators with valuation reports to file in the near future will want to review the relief options available to them as soon as possible and determine the appropriate course of action, says a Watson Wyatt special memo. Those sponsors who wish to take advantage of the measure which extends the amortization period for the new solvency deficiency by up to five more years – provided that no more than one-third of eligible members and former members object – should carefully consider the consent requirements and ongoing disclosure requirements of electing that option. Should that option be pursued and consent sought, the right message to members will be critical to avoid objections. Ontario’s solvency relief measures for Defined Benefit plans give sponsors two other options. They can defer, for up to 12 months, the commencement of the amortization payments to liquidate any new going concern unfunded liability and/or new solvency deficiency. Or, they can consolidate previously established solvency deficiencies. The measures also include restrictions on contribution holidays for 2010 to 2012.
 

Employers Slow To Recognize ‘Retirement Challenge’

The desire to delay retirement does not compel employers to encourage saving for retirement by their employees, says research by the Center for Retirement Research. The research found "the presence of a significant retirement challenge” where there is either a large number of unprepared employees or a large number of employ­ees wanting to stay on the job well past the traditional retirement age. However, it suggests employers have been slow to recognize the personnel management implications of the shift away from traditional pension programs and their interest in retirement-related initiatives is still driven by their value in attracting and retaining employees. However, the research found the employer's expected rate of employment growth and the size of the employer have a statisti­cally significant positive effect on the encouragement of retirement saving.
 

Templeton Forum Set For July 23

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Wednesday, June 24, 2009

Employers Take Prudent Measures

Canadian employers are proactively and prudently taking measures to contain costs and manage risk while trying to minimize the impact on employees, says Mercer’s ‘Leading Through Unprecedented Times’ survey. Canadian employers were prepared for the worst in the fall of 2008; waiting to see if deep staffing, benefits, and compensation cuts would be necessary to deal with the failing economy. However, very few employers (less than five per cent) took or planned drastic measures such as eliminating group benefits to control health and benefit costs. This compares to 14 per cent of employers who said they were likely to do so in November. When it comes to health benefits, 60 per cent of Canadian employers said they have, or plan to implement, a wellness program this year. When it comes to retirement plans, 60 per cent of Canadian employers with Defined Benefit pension plans have taken, or are very likely to take, actions to mitigate risk in 2009. More than three-quarters (78 per cent) of Canadian employers indicated that their employees are significantly or moderately concerned about the impact of economic turmoil on their retirement plan investments. Accordingly, 61 per cent of Canadian employers with Defined Contribution pension plans have taken actions, or are very likely to take actions in 2009, to ensure that members of the plans better understand their investment choices, options, and long-term savings objectives.
 

Shift Away from Electronic Trading

During the volatile months of 2008-2009, Canadian institutions shifted trading volumes from electronic platforms back to high-touch trades, says Greenwich Associates’ ‘Canadian Equity Investors Study.’ Approximately 20 per cent of Canadian equity trading volume was executed via electronic systems in 2007-2008 and 69 per cent was done through high-touch trades. In 2008-2009 electronic trading dropped to 17 per cent while high touch trading grew to 74 per cent. One reason for the shift back to high touch execution was the breakdown in many algorithmic trading strategies during the crisis. However, with volatility falling back to historic norms and many algorithms being updated to incorporate new data patterns, Canadian institutions seem poised to make a more aggressive move into electronic trading. Institutions expect to be executing 22 per cent of their total Canadian equity trading volume via electronic systems by 2012, at which point they expect to have reduced high-touch execution to less than 60 per cent of their trading business.
 

NHL Shortchanged Widows

The National Hockey League has underfunded its players’ pension plans and shortchanged widows, says an Ontario Superior Court judge. The NHL Players' Association alleged that errors in the calculation of pensions for players who died before 1986 meant their surviving spouses received as little as 10 per cent of the funds entitled to them. The decision means the league may have to make retroactive payments to the widows and put as much as $30 million into the pension fund. The NHL can seek to appeal the decision.  

Vijh Now Vice-president

Raj Vijh is vice-president, investment finance, in the treasury, risk, operations, and technology group at the CPP Investment Board. He will lead the team responsible for investment operations as well as the valuation and reporting of the investment portfolio. He has more than 15 years of experience in the investment management industry. Previously, he was managing director of Russell Investments’ Americas private client services business operations and administration group.  

IFEBP Planning Trustee Courses

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Tuesday, June 23, 2009

Commission Rates Decline

Commission rates paid by Canadian institutions to brokers on trades of domestic equities declined sharply from 2008 to 2009, says Greenwich Associates’ ‘Canadian Equity Investors Study.’ The "all-in" blended commission rate paid by institutions on trades of Canadian equities fell to an average 2.7 cents per share in 2009 from 3.4 cents in 2008 as average rates declined on both "high touch" trades facilitated by broker sales traders and electronic execution. The average rate on high-touch trades dropped to 3.7 cents per share in 2009 from 3.9 cents in 2008, while the average rate on self-directed electronic trades fell to 1.4 cents per share from 1.9 cents.
 

Manitoba Seeks Comments

Manitoba is seeking input on proposed amendments to its pension benefits regulation. Significant changes include clarifying administrator responsibilities, providing for the rights and obligations of pension committees and their members, and expanding the disclosure requirements for plan members and other beneficiaries. The proposed changes have been organized into 11 separate parts which are available at http://www.gov.mb.ca/labour/pension/index.html. Comments on the proposed regulation changes must be submitted by August 15.
 

Employers Reinstate Matches

Almost half (48 per cent) of U.S. employers who reduced their employer 401(k)/403(b) matches plan to reinstate them within the next 12 months, says a survey by Watson Wyatt. However, not all the changes made during the economic crisis will be rolled back. Nearly half (46 per cent) do not plan to reverse the increases in the percentage that employees now pay for healthcare premiums. “While more employers now feel the worst of the current downturn may be behind them, most are not expecting to go back to ‘business as usual’,” says Laura Sejen, global director of strategic rewards consulting. “The challenge for companies will be to determine which cost-cutting changes can be reversed and which will become ingrained into the permanent business environment.”
 

Minority Want Details On Fees

Only 31 per cent of U.S. workers prefer a highly detailed account of fees and expenses, says the ‘10th Annual Transamerica Retirement Survey.’ It found more than half prefer some form of summary information while 14 per cent have no preference. Thirty-two per cent of workers prefer the information to be somewhat summarized with a breakdown of fees for services and investments, while 22 per cent prefer a high level summary with a total, all-inclusive cost. Three-quarters would prefer to receive information through an electronic format such as electronic quarterly account statements or through their plan provider's Website.
 

Fixed Income Drives Performance

Securities industry performance in the first quarter was driven by fixed income trading, says a report from the Investment Industry Association of Canada (IIAC). Both areas posted more than 40 per cent increases in revenues from the previous quarter. Fixed income trading desks experienced exceptional results in during the quarter, setting a new record high with $556 million earned in the period, up 44 per cent from the fourth quarter of 2008 and more than double the level witnessed a year ago. While equity trading only contributed $96 million to total industry revenue during the quarter, it still represented an 88 per cent and 71 per cent increase quarter-over-quarter and year-over-year respectively and achieved its highest level in nearly two years.
 

Stefanelli Moves To Janus

Jason Stefanelli is vice-president and institutional sales director with Janus Capital Group Institutional. He will be responsible for marketing Janus, Perkins, and INTECH-managed strategies to the institutional market in Canada. He previously served as vice-president with Wellington Management Company, LLP, responsible for business development and consultant relationship efforts in Canada.
 

Bell Manulife’s CFO

Michael W. Bell is senior executive vice-president and CFO of Manulife Financial. For the past six years, he has served as executive vice-president and CFO at CIGNA Corp. where he was responsible for all global financial operations including finance, accounting, treasury, tax, investor relations, and capital planning.
 

Freyne Interim CFO

Colm Freyne is interim chief financial officer for Sun Life Financial Inc., effective July 1, 2009. He replaces Rick McKenney, who will be taking up an executive position with a U.S. financial services company. Freyne is currently its senior vice-president and controller. 

Securities Law Examined

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Monday, June 22, 2009

National Plan Could Soon Be Reality

A national supplemental pension plan could be a reality in the next two to three years, says Iris Evans, Alberta’s finance minister. The Alberta and British Columbia governments are calling for creation of a pension plan for residents in the two provinces who currently have no pension coverage. However, Evans says it would be ideal to establish such a system at a national level as opposed to provincially. With more provincial finance ministers on board with the idea, she is “reasonably confident” that a national plan could soon become a reality. The finance ministers are to meet in July to present a framework to Ted Menzies, parliamentary secretary to the Minister of Finance, who recently led national consultations on federal pension plan legislation.
 

Target Date Funds Need Benchmarks

The time is right for fund managers to take a closer look at the risks inherent in Target Date funds and communicate these risks to plan sponsors, says Watson Wyatt. One way to do this is to adopt benchmarking policies that more closely reflect the long-term goal of saving for retirement that the funds are trying to achieve. Its analysis of 72 Target Date funds shows great variation in stock allocations from fund to fund. Shorter-horizon funds contained a range of 32 to 80 per cent in equities, while longer-horizon funds contained a slightly higher range of 51 per cent to 95 per cent in equities.
 

Essential Pension Course Returns

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Friday, June 19, 2009

Labour Rejects ABC Plan

A proposal for a government-sponsored supplemental pension plan being floated by the Alberta and B.C. governments may actually make a bad situation worse, say labour leaders from western Canada. While they agree pension reform is needed, they charge that the ABC Plan is a meager supplemental program that employers can simply opt out of and which shifts all the risks onto the shoulders of individual Canadians. An actuarial analysis of the plan prepared for the Alberta Federation of Labour shows that – even when added to existing benefits provided by CPP and OAS – the proposed ABC plan would generate as little as 14 per cent of pre-retirement income for individuals enrolled in the plan. The federation says this is far short of the recommended threshold of 70 per cent. The ABC plan also gets low marks because it allows employers to opt out and it wouldn't require all employers to match contributions made by individual employees.
 

Full Recovery Slow To Come

The worst of the economic and financial turmoil has passed, but a full recovery will be slow to come, says a Desjardins Group economic forecast. Its economists expect economic recovery in both Canada and the U.S. to be a gradual process. They predict that Canada’s real GDP will fall 2.6 per cent in 2009 and then climb 1.7 per cent in 2010, while American GDP will drop three per cent this year, followed by growth of 1.4 per cent in 2010. The global financial system faces an especially slow recovery since the balance sheets of financial institutions are still contaminated by toxic assets and losses on loans are mounting. However, a recovery of the American economy will lead the rest of the world out of recession. “It is at the heart of the world’s commercial and financial trade and it will take more than one recession to change this fact. It is, therefore, unlikely that the planet’s economy will emerge from a recession separate from the United States, especially as commercial trade between nations has exploded in the last few decades,” says the forecast.

Workers Delaying Retirement

A significant number of older U.S. workers are planning to delay their retirement as a result of large losses to their retirement funds, says a survey by Watson Wyatt. It found that a third (34 per cent) of all workers have increased their planned retirement age in the last 12 months. These changes are more pronounced for older workers. Forty-four per cent of those aged 50 and over plan to delay their retirement, compared with only 25 per cent of those under 40. Although the average planned retirement age for all employees is 65 years old, half (50 per cent) of those aged 50 or more plan to retire at age 66 or later. Three-quarters (76 per cent) of older workers (aged 50 to 64) cited the decline in the value of their 401(k) accounts as the most important reason why they are planning to postpone their retirement, followed by the high cost of healthcare (63 per cent) and higher prices for basic necessities (62 per cent).
 

Better Information Needed On Target Date Funds

There needs to be better information about Target Date funds and their usage in the 401(k) market, says Mark Wayne, representing the National Association of Independent Retirement Plan Advisors. He told officials at the U.S. Department of Labor and the Securities and Exchange Commission that “Plan sponsors and participants need a clear understanding of the different asset allocation strategies employed by different Target Date funds in their plans.” The association strongly agrees with the theory behind offering these funds as 401(k) plan investments. For many participants, they are effective mechanisms to ensure participants have an appropriate investment selection and their investment portfolios are rebalanced on an ongoing basis. However, Wayne, president of Freedom One Investment Advisers, said the current disclosure requirements under securities law are inadequate, do not meet a ‘truth-in-labeling’ approach, and produce confusion among plan sponsors and participants about the true meaning of “target date.” 
 

MacKay Shields Acquires Mariner

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Thursday, June 18, 2009

Institutions Consider Manager Changes

A record number of financial institutions including pension funds will replace their asset managers in the third and fourth quarters of 2009, says Mellon Transition Management, the transition management specialist for BNY Mellon Asset Management. This prediction is based on the more than 40 per cent increase in the number of pre-trade inquiries during the first five months of 2009 and the substantial jump in executed transitions in the second quarter of 2009 versus the 2009 first quarter. Pretrade inquiries have proven to be a good predictor of transition activity, often leading actual transition activity by several months. Pre-trade inquiries are done by institutions to gauge the costs and risks of switching managers.
 

Executives Seeing Recovery

The economic downturn is not as bad as some would think says a study of more than 200 senior financial executives by Canadian Financial Executives Research Foundation (CFERF), the research institute of FEI Canada. The study reveals that a majority of companies will see revenue either grow or remain unchanged for 2009. The results show companies across Canada have intensified their focus on cash management, with 75 per cent of respondents indicating that they are more focused on cash management issues now than they were at the same time last year. While study respondents reported an overall positive outlook for an expedient economic recovery, not all industries expect to fare evenly. Still manufacturing companies, arguably the hardest hit in the past several months, were the most optimistic for recovery in 2010.  It also found that freezing executive compensation and deferment of capital investments emerged as the key cost management techniques expected to prevail in the coming year.

CFIB Extends Agreement

Sun Life Financial has extended its agreement with the Canadian Federation of Independent Business (CFIB) to offer group insurance coverage to its members nationally. The plan will be available exclusively to all CFIB members regardless of size. Sun Life Financial first announced the agreement in November when the plan was offered to CFIB members in Atlantic Canada.
 

Aurion In Infrastructure Venture

Infrastructure Management Group, Inc. (IMG) and Aurion Infrastructure Inc. (AII), a subsidiary of Aurion Capital Management Inc. (Aurion), have formed IMG Aurion Infrastructure LLC (IMG Aurion) a strategic venture that will provide investment advisory services to institutional investors in connection with investments in mid-market infrastructure across North America. The venture will combine the industry expertise and infrastructure market presence of IMG and AII with Aurion’s pension fund and portfolio management capabilities to provide institutional investors with investment products within the infrastructure asset class including commingled funds, separate account mandates, and co-investment opportunities.
 

Committee Okays DC Bills

Defined Contribution pension plan-related bills aimed at enhancing fee disclosure requirements and barring plans from offering participants investment advice that might be subject to conflicts of interest have been approved by a U.S. House subcommittee. The fee disclosure measure retains a controversial provision that effectively requires DC plans to include at least one index fund as an investment option. The investment advice legislation was revised to make clear its provisions wouldn't pre-empt existing advice arrangements.
 

Opportunity Exists For Philanthropy Growth

With the billion of dollars soon to be inherited by boomers, the greatest opportunity exists for the growth of philanthropy, says Brad Offman, vice-president, strategic philanthropy, at Mackenzie Investments. The conference chair for Mindpath’s ‘Growing Your Financial Advisory Practice Through Philanthropy’ conference also said advisors will play a key role in this process. For example, in most provinces, a $100,000 charitable gift can reduce a tax bill by about $45,000. This will provide an individual investor with greater tax referral opportunities than an RRSP contribution of the same amount, he said. The conference was designed for senior philanthropy consultants, advisors, and managers of planned giving.
 

CPBI Ontario Ushers In New Era

Michael Worb, chair of the Canadian Pension and Benefits Institute Ontario, wants to usher in a new era for the Ontario chapter of this organization. “The Ontario chapter has always been committed to continuous education within our industry, but we’re looking to inject a new level of excitement and interest into our plan sponsor audience.” In particular, it wants to help the plan sponsor members realize how critical it is to stay on top of industry trends and dialogue so they can make the best, most informed decisions regarding their benefits and retirement programs. To achieve this, it plans to offer strategic programs focused on plan sponsor educational needs in the areas of pension, benefits, and investment.
 

Communicating Plan Information Challenging

The challenge of communicating information about the pension plan was among the top five most important issues cited by employers in Buck’s last survey of Canadian pension plans. The annual pension statement is often the only time employees are reminded of what they’re building for retirement. These statements too often have all the interest, appeal, and clarity of an insurance contract and, as a result, the usefulness of the statement as a retirement planning tool is lost to members, as is the chance to help build employee understanding and engagement. It should provide a few common sense features such as an at-a-glance summary of how much the member has contributed, what the normal retirement date is, and an estimate of the annual pension earned so far, without paragraph after paragraph of hedging and qualifying language.
 

Blunt Chair Of HRPA

Antoinette Blunt is board chair for the Human Resources Professionals Association. She is president of Ironside Consulting Services Inc., an HR consultancy in Sault Ste. Marie, ON, specializing in the provision of human resources, labour relations, and management services for employers in Northern Ontario.

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Wednesday, June 17, 2009

U.S. Funded Status Improves

In May, overall U.S. pension plan funded status improved for the third straight month, says Watson Wyatt’s ‘Investment Brief.’ Asset performance continued to rise, while interest rates on swaps increased by 40 basis points, consequently reducing liabilities for the second consecutive month. Together, these two events helped strengthen the funded status of pension plans from a market/implementation perspective.
 

CPPIB Raises Bid

The Canada Pension Plan Investment Board (CPPIB) is raising its bid for Macquarie Communications Infrastructure Group, a communications network company with operations in Australia and the United Kingdom. It has added another 50 Canadian cents to the $2.50 it offered initially for each Macquarie share. It says uncertainty has started to subside in capital markets, and that it was the right time to raise its offer.
 

Minority Of Sponsors Have Clear Chain

A 2009 retirement plan survey conducted by tax and audit firm Grant Thornton found that less than a third of plan sponsors reported a “clear chain of authority for their plan’s governance committee,” says a Buck ‘Outlook.’ This is a drop from last year’s 41 per cent. Other indications of a falling off in applying best practices to plan governance are that only 58 per cent of plan sponsors maintain minutes of meetings, down from 79 per cent last year; 27 per cent use an independent party to analyze plan fees, down from 45 per cent last year; and 65 per cent do not require plan management to periodically sign conflict-of-interest statements. Plan sponsors are responsible, through their governance structure, for ensuring proper administration, management, and investment review of their plans and there may be costly legal implications for insufficient governance processes.
 

Ontario Allows TFSA Beneficiary Designation

Ontario residents can now designate beneficiaries for their Tax-Free Savings accounts. This will allow a TFSA owner’s funds to flow more directly to their heirs at the time of death. Similar legislation has been passed by British Columbia, Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, P.E.I., Northwest Territories, and the Yukon Territory since the launch of the TFSA at the beginning of 2009. Beneficiaries will receive funds outside of a will in the same way that they currently receive proceeds of registered retirement savings plans. This makes it easier to transfer the assets in the account upon death and eliminates probate fees.

Change Management Needs Planning

Change management needs to be planned to get everyone onside, says Tina Hamilton, a people resource specialist. Speaking at the 13th Annual Blevins Insurance Group Client/Carrier Appreciation Day, she said the global economic crisis has had a serious impact on the workplace. For example, one in five Canadian workers fears they will lose their job and the fact many companies are doing more with less has increased stress and anxiety levels in the workplace. To deal with the financial situation, companies are turning to change management and must deal with the issue of helping people through the change. She said to do so effectively, the company must introduce the change and explain why it is necessary. Employee concerns must be addressed and, while explaining what will change is necessary, what will not change should be emphasized.
 

Sienna Takes New Role

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Tuesday, June 16, 2009

Positive Indicators Emerging

Following a first quarter dominated by negative economic news, positive indicators are beginning to emerge from the gloom, says a report by RBC Economics. It predicts that while Canada's economy experienced its largest one quarter contraction since 1991, this likely will prove to be the worst quarterly showing in this recession. Leading indicators suggest that the worst has also passed for the global recession, with recent data pointing to a recovery later this year. In the U.S., some encouraging signs are beginning to appear. Buoyed by low interest rates, an easing in credit conditions, and the government's fiscal stimulus package, the U.S. housing market is showing some stability and consumer confidence is rising, pointing to the possibility of a moderate turnaround for the American economy by the second half of 2009.

Pharmaceutical Cost Trend Reverses

Costs for pharmaceuticals in 2009 have increased by 15.19 per cent, dramatically reversing a four-year downward trend in prescription drug prices, says Buck Consultants’ ‘2009 Canadian Health Care Trend Survey.’ “Medications for the treatment of cancer, depression, rheumatoid arthritis, and cardiovascular conditions in an aging workforce are the main contributing factors to this upswing,” says Michele Bossi, health and productivity consulting practice leader. The overall healthcare trend (including prescription drugs, medical plans, hospital coverage, and dental care) continues to increase at just under 15 per cent, up from 13.76 per cent in 2008. The cost increase for medical plans (excluding prescription drugs) has climbed to 14.14 per cent for 2009 from 13.09 per cent in 2008. Many employers, having already implemented plan design changes to curb cost trends, are beginning to shift to a proactive approach to healthcare cost containment such as wellness programs.
 

Air Canada Gets Pension Moratorium

Sun Life Returns To UK

Sun Life Financial Inc. is buying UK insurer Lincoln National Corp. The two have similar businesses in the UK and the acquisition will increase Sun Life's UK assets under management by almost 60 per cent to $19 billion, while doubling the number of policies it has to 1.1-million. It will acquire Lincoln National's life insurance, pensions, and annuities. Sun Life has been in the UK more than a century, but stopped selling new products early in the decade after suffering losses in its annuities business. The deal is still subject to approval from regulators and is expected to close in the third quarter. 

Manager Turnover Looming

Employment Flexibility Remarkable

The flexibility of Canadian employers and employees during this economic downturn has been remarkable, says Christopher Andree, of Gowling Lafleur Henderson LLP. Speaking at the International Foundation of Employee Benefits Plans’ ‘Concepts and Practices of Canadian Benefits for Canadian and U.S. Corporations,’ he said early in the downtown employers were able to use it to remove employees from their workplaces who did not want to be there. However, they then recognized that they would need a team in place when things turned and took steps to keep their teams together. Unionized employees have also been willing to accept changes in their jobs such as reduced work weeks which could, in better times, have been cause for constructive dismissal.
 

Bauslaugh Heads IPEBLA Committee

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Monday, June 15, 2009

DB Plans Back Match Suspension

Many workers at U.S. companies which have suspended their 401(k) match are still covered by a traditional Defined Benefit pension plan, says a report from the Employee Benefit Research Institute (EBRI). Of 251 401(k) plan sponsors that have suspended matching contributions for their approximately 4.4 million workers, those employing 50 per cent of the workers also maintained an open DB plan. An additional 16 per cent of workers were with employers funding a frozen DB plan and eight per cent were with an employer that had both an open and a frozen DB plan that carried funding obligations.
 

Employers Turn To Social Media

Reduced communication budgets and resources are prompting employers to use social media to keep their workforce engaged, says a survey by the International Association of Business Communicators (IABC) Research Foundation. Its ‘Employee Engagement Survey’ found almost four-fifths of respondents report that they use social media frequently to engage employees and foster productivity. Company blogs are the most popular social media tool currently in use (47 per cent), with discussion boards ranking the highest for future planned use (33 per cent). Currently few use social networking sites such as Twitter, Yammer, and Facebook, but organizations are planning to use those tools even more in the future.
 

UK Firms Raise Life Estimates

The average UK company has raised its estimates of how long pension scheme members will live after they have retired by 3½ yesrs since 2004, says a survey by KPMG. Its ‘2009 Pensions Accounting Survey’ also found that UK companies are reserving an extra £40 billion to pension liabilities because of uncertainty in financial markets. The study found that in 2008, the percentage of employers basing their longevity assumption on an actuarial table whose data were compiled in 1992 fell sharply to 59 per cent of those surveyed, from 91 per cent of companies in 2007. That 1992 table has been found to underestimate life expectancy by a significant margin and is no longer used by the insurance industry as the basis for setting reserves. 

Bergeron Replacing Masson

Claude Bergeron is executive vice-president, legal affairs, and secretariat at the Caisse de dépôt et placement du Québec. He joined the Caisse in 1988 and is replacing Suzanne Masson, executive vice-president, corporate affairs, and secretary, who is retiring. Véronique Mercier is vice-president, communications. She was office manager and press secretary to Quebec's finance minister and press secretary to the premier of New Brunswick.  

Seminar Looks At Green Funds

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Friday, June 12, 2009

U.S. Promises ‘Say On Pay’ Legislation

The U.S. Treasury Department is promising legislation to require ‘say on pay’ provisions at public companies and regulatory oversight of compensation committee independence. The department will support efforts in Congress to pass ‘say on pay’ legislation, giving the U.S. Securities and Exchange Commission the authority to require companies to give shareholders a non-binding vote on executive compensation packages. It will also propose legislation giving the SEC the power to ensure that compensation committees are more independent. For example, they would be given the responsibility and the resources to hire their own independent compensation consultants and outside counsel. These measures would help meet the principles the department believes should be followed to better align pay with performance. These include a belief that compensation plans should properly measure and reward performance and compensation should be structured to account for the time horizon of risk.
 

OMERS Can Offer Third-party Services

OMERS has been granted expanded powers by the Ontario government to provide third-party investment and pension administration services. The amendment to the Ontario Municipal Employees Retirement System Act, 2006, was part of the Ontario government's 2009 budget Bill 162, which received Royal Assent June 5. The changes allow OMERS to establish authorized subsidiaries to provide investment management and pension administration services to smaller pension plans, governments, certain educational institutions, and non-profit organizations.
 

BMO Buys Integra GRS

Bank of Montreal is purchasing the recordkeeping business of Integra GRS from Integra Capital Management Corporation. The GRS business provides recordkeeping and administrative services for capital accumulation plans. “This acquisition is an extension of our existing wealth management offering,” says Ed Legzdins, senior vice-president, retail investments, private client group; and managing director, international, BMO Capital Markets. “Complementing Integra’s full selection of funds with BMO’s retail investment products gives us the opportunity to develop a group retirement services platform and offer a suite of products through the institutional pension market.” Joan Johannson, president and managing director of Integra GRS, says, “Our management team and employees are very excited about joining one of Canada's premier financial services companies. We look forward to expanding our services for our clients and their plan members who will be reassured to know that it is business as usual with the same team in place, dedicated to service excellence.”
 

BlackRock Acquiring Barclays

Barclays will sell its global investors’ money management arm to BlackRock. The $13.2 billion purchase makes this the largest deal ever for a dedicated money management firm and makes BlackRock – with more than $2.7 trillion in assets under management – the world’s biggest money manager. Barclays will retain a 19.9 per cent stake in the new firm, which would be called BlackRock Global Investors. One issue to be resolved is its iShares exchange traded funds business. This was sold to CVC Capital Partners in April, but the deal included a 45-day period during which Barclays could entertain competing bids. CVC now has five business days to match BlackRock's offer for all of BGI, not just the iShares business.  

Saskatchewan Offers Funding Relief

Unlike other jurisdictions that have required that member consent be obtained as a precondition to the funding relief, Saskatchewan’s funding relief proposal for sponsors of registered pension plans is less arduous as plan sponsors have the ability to unilaterally elect funding relief, says a Mercer ‘Communiqué.’ Under the funding relief proposal, Defined Benefit plan sponsors can elect a three-year moratorium from funding a new solvency deficiency revealed in a valuation prepared between December 31, 2008, and January 1, 2011. This election can only be made once. At the end of the solvency moratorium period, any solvency deficiencies existing at that time must be funded over no more than five years. During the moratorium period, there is no requirement to make special payments towards a newly established solvency deficiency, subject to conditions such as only allowing benefit improvements where those improvements are established by a collective bargaining agreement.
 

Market Value Of Funds Dips

The market value of retirement savings held in employer-sponsored pension funds declined by $58.1 billion to $810.9 billion  during the fourth quarter of 2008, says Statistics Canada. The 6.7 per cent decline was attributable mainly to a fall in the market value of stocks and equity funds. The drop followed a decrease of $82.7 billion in the third quarter, which was the largest quarterly decline in a decade. Expenditures of $49.3 billion exceeded revenues of $21.6 billion in the fourth quarter for a negative cash flow of $27.7 billion. This was the third time in 2008 that pension funds experienced a negative cash flow.
 

Beettam Heads CLHIA

Ronald Beettam, president and CEO of Equitable Life of Canada, has been elected chairman of the Canadian Life and Health Insurance Association Inc. (CLHIA). He previously served on the board for two years and as chair of the standing committee on standards and marketplace relations. Joining him on the board are Alain Néemeh, president and CEO, RGA Life Reinsurance Company of Canada; Yvon Charest, president and CEO, Industrial Alliance Insurance and Financial Services Inc.; Mary Forrest, head of North America (Life), Munich Reinsurance Company; Mario Georgiev, president of Optimum Reassurance Inc.; Donald Guloien, president and CEO of Manulife Financial; Pierre-Yves Julien, president and CEO, Medavie Blue Cross; D. Allen Loney, president and CEO, the Great-West Life Assurance Company/London Life Insurance Company/The Canada Life Assurance Company; Peter McCarthy, president and CEO, BMO Life Assurance Company; George Mohacsi, president and CEO, Foresters; Mary Nemeth, vice-president and chief operating officer, The Wawanesa Life Insurance Company; and Don Stewart, CEO, Sun Life Financial Inc.
 

Pepin Speaks At CPBI Atlantic

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Thursday, June 11, 2009

Equities Expected To Perform Best

Equities are expected to perform best in the short and intermediate term, says Morningstar's institutional investment manager survey. While fixed income shared second spot with commodities over a one-year horizon, respondents had stronger convictions about the prospects of a commodities revival over a three- to five-year horizon. Expectations for real estate over the next year continue to be bearish with managers generally favouring cash over it.
 

‘Perfect Storm’ Threatens Retirement Plans

A 'Perfect Storm' of demographic, individual, and financial elements is poised to derail people's retirement plans unless they prepare properly now, says a survey from HSBC Insurance. Its fifth annual 'Future of Retirement study' shows people's short-term survival strategies in the midst of the recession are creating a serious long-term pensions 'downturn deficit' and there is a continuing lack of pensions planning, even though people are aware that they are likely to live longer. This is being exacerbated by poor levels of financial understanding, education, and access to advice. As well, people are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement The consequence of these combined factors is that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning.
 

Regulation Protects Depositors

The point of regulation is to protect depositors, not market participants, says Dale Harrison, vice-president, portfolio manager (Canadian equity – financials), at Phillips, Hager & North Investment Management Ltd. Speaking at the Morningstar annual investment conference, he said when people buy financial instruments, it is up to them to do the research or hire someone to do so. It is not up to the regulators to review new products that are being created.
 

Return To Mindset Needed

Mutual funds need to return to the mindset on which the industry was founded, says Don Phillips, managing director of Morningstar. Speaking at its annual investment conference, he said in recent years fund companies have seen themselves as one of many financial services entities selling to investors. However, they need to view themselves as being on the investor's side, helping them to navigate the world of financial services. If they fail to do this and the investor loses, he said, then everyone loses.
 

Not The Time To Cut-back

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Wednesday, June 10, 2009

Court Rejects Chrysler Appeal

The U.S. Supreme Court has rejected an appeal by two Indiana pension funds to block Chrysler's sale to Fiat. The funds contended the sale unlawfully rewarded unsecured creditors – such as the union – ahead of secured debtholders like themselves. The pension plans attempted to use Fiat’s June 15 deadline by trying to persuade the justices that there was no reason to rush to meet that deadline. However, Chrysler, Fiat, and the Obama administration warned that t Chrysler was losing $100 million every day its plants remain closed and that the deal would automatically terminate in less than a week, with no guarantee that a new agreement would be reached. The Indiana funds hold less than one per cent of Chrysler's secured debt.

Hedge Fund Survival Debated

“Hedge funds are not dead and will survive … but many things need to change,” says Toreigh Stuart, of Man Investments Canada. Stuart defended his position at AIMA Canada’s annual parliamentary debate which explored whether the investment strategy could survive. As long as investors continue to seek more choices than traditional funds can offer, and continue to want to manage short-term risk, hedge funds will never die Stuart said. On the opposing end, Tom Bradley, of Steadyhand Investment Funds, said the hedge fund model is dying, as it is too benchmark oriented, cannot provide the proper transparency to clients, and will soon succumb to regulations and a shrinking of the industry. Stuart acknowledged that the industry is continually evolving and that, in time, weaker hedge fund managers “will be weeded out” while stronger ones will carry on and prosper.
 

Next Generation Turning Away From Internet

The current generation may be the one which invented, used, and abused the Internet, says Dr. Nick Bontis, director of the Institute for Intellectual Capital Research. Speaking at the LOMA/LIMRA Annual Conference, he said, however, the next generation is already turning away from the Internet and using different social communication tools. Part of the reason for its demise may the volume of eMail most business people already get. eMail traffic is growing increasingly burdensome with the average financial professional getting more than 80 eMails a day right now, almost double the number received in 2006. Of this, only about 10 per cent of the messages actually drive shareholder value with the rest things like copied messages and spam. He also warned that another shift is coming, away from the use of English to other languages on the Web. Right now about 75 per cent of all Web content is in English. Over the next few years, that will drop to about 25 per cent as more content shows up in languages such as Mandarin Chinese and Arabic. This means that individuals using the web for searches may only be scratching the surface of the information available.
 

Exchange Offers New Forms Of Insurance Pooling

The creation of a health insurance exchange that would offer new forms of insurance pooling, combined with an individual mandate and guaranteed issue, would restructure the U.S. health insurance market and has major implications for the existing employment-based benefits system that provides the majority of Americans with health coverage, says a study by the Employee Benefit Research Institute (EBRI). The question of a health insurance connector/exchange and the various interdependent policy components has been central to the national health reform debate since the state of Massachusetts adopted that approach. The report is neutral on whether an exchange should or should not be formed, but instead lays out the various interdependent policy components that are essential for the success of such a program. It discusses issues that must be addressed when designing an exchange in order to reform the health insurance market and also examines state efforts at health reform that use an exchange.

More Consolidation Possible

The consolidation in the life insurance industry which saw 66 per cent of the firms vanish over the last 20 years is happening in other sectors as well, says Paul Grimes. And he warned the consolidation may not be over given the current financial crisis. However, he told delegates at the LOMA/LIMRA Annual Conference this is not necessarily a bad thing for companies which are focussed on what they are doing. In fact, one of the opportunities coming in the financial sector is the growing need for financial advisors. With Defined Benefit plans disappearing, those workers with Defined Contribution plans are going to be looking for experts to help them manage their saving for retirement.
 

Bradie To Succeed Garner

Steve Bradie will assume the post of CEO at Green Shield Canada when J. David Garner retires. Bradie is currently executive vice-president and chief operating officer. He joined the company in 1987, gaining experience in finance, human resources, and claims administration.  He assumed the position of vice-president, claims and administration, in 1996 and was appointed executive vice-president and chief operating officer in 2004. The process of transition will begin immediately and will determine the exact timetable and strategy for the handover.
 

Hockin Speaking At Alternatives Conference

As the largest Canadian conference serving the alternative investment sector, delegates to the 2009 World Alternative Investment Summit Canada will hear renowned national and international speakers addressing key industry issues. Speakers will include Tom Hockin, Expert Panel on Securities Regulation; Chris Addy, Castle Hall Alternatives; and Natalie Dempster, World Gold Council. It takes place September 14 to 16 in Niagara Falls, ON. For more information, visit www.waisc.com
 

Future Of Credit Rating Agencies Examined

‘The Future of Credit Rating Agencies: Regulation and Accountability’ will be the focus of a Rotman School of Management Capital Markets Institute session. Professor Stephane Rousseau will present his latest research paper on credit rating agencies. This presentation will be followed by an expert panel that includes Dr. Marlene Puffer, Ted Price, Sean Rogister, and Professor Alan White who will react to Rousseau’s paper as well as provide their own unique perspectives. It takes place June 25 in Toronto, ON. For more information, visit www.rotman.utoronto.ca/events

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Tuesday, June 9, 2009

Air Canada Gets Pension Agreement

RPP Membership Increases

Membership in registered pension plans (RPPs) in Canada at the start of 2008 was up 2.4 per cent over the number in plans at the beginning of 2007, says Statistics Canada. RPPs, has 5.9 million member, an increase of more than 140,000 from the previous year. The number of RPPs reached 19,185, an increase of 590. Increases in the number of plans in recent years have come mainly from plans with fewer than 10 members. These small plans accounted for more than one-half of all RPPs, but less than one per cent of total membership. The 28 plans with 30,000 members or more accounted for about 47 per cent of all membership. Public sector plans added 96,500 members in 2007, accounting for nearly 70 per cent of the total increase. Defined Benefit pension plans remained the predominant type, accounting for 4.5 million members or nearly 77 per cent of total membership. However, defined contribution plans reached 935,000 members in 2007, accounting for close to 16 per cent of the total.
 

Workers Can Rely On 401(k) Plans

Members of 401(k) plans can do fine financially relying just on their workplace plan, says a study for the Pension Research Council at The Wharton School at the University of Pennsylvania. ‘Can 401(k) Plans Provide Adequate Retirement Resources?’ concludes that "moderate 401(k) contribution rates can lead to adequate income replacement rates in retirement for many workers; that adequate asset accumulation can be achieved using only a 401(k) plan; and that these results do not rely on earning an investment premium on risky assets." As well, because Social Security provides the bulk of most individual's retirement income and represents a floor beneath which retirement income cannot fall, the risk as a percentage of total retirement assets is not as large as would be suggested by examining the 401(k) plan distributions separately.
 

Teachers’ Sues Over Breach Of Duty

The Ontario Teachers' Pension Plan is suing Chesapeake Energy, accusing the chief executive and directors of breaching their fiduciary duties to shareholders "by approving excessive expenses." Teachers’ also plans to withhold votes for ‘conflicted’ directors at the natural gas producer’s annual general shareholders meeting. Teachers’ will also vote in favour of shareholder proposals calling for de-classification of the board of directors and majority voting for directors.
 

Average Contribution Exceeds Minimum

The average contribution to UK Defined Contribution schemes comfortably exceeds the minimum proposed for personal accounts due in 2012, says Capita Hartshead's 16th annual pensions administration survey. However, it says bigger contributions are needed. Its survey found employees are now paying an average four per cent of earnings into DC schemes, which is then topped up by an average seven per cent contribution from their employer. The firm warned that at this level of contribution, DC schemes which were not supplemented by other savings were likely to deliver only modest pensions for many members, particularly for individuals with shorter savings histories.
 

Rio Tinto Using State Street

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Monday, June 8, 2009

Funds Want Chrysler Sale Delayed

Two Indiana pension funds want the sale of Chrysler LLC to a group led by Italian carmaker Fiat SpA delayed while they challenge the deal. In a filing with the U.S. Supreme Court, they argue the sale unlawfully rewards unsecured creditors – such as the union – ahead of secured lenders and that Chrysler is pursuing an illegal reorganization plan through a ‘sham sale.’ A ruling could set a precedent for the case of General Motors Corp, which is using a similar sale strategy. A New York appeals court has approved the sale, but stayed the closing to give the Indiana State Police Pension Fund and the Indiana Teacher's Retirement Fund, as well as the state's Major Moves Construction Fund, time to block the sale while they appeal.
 

OSFI Gives Guidance To Plans

Pension plans registered under the Pension Benefits Standards Act, 1985 (PBSA) can continue to fund using the normal funding rules or take advantage of funding relief options if the Solvency Funding Relief Regulations, 2009, come into force, says the Office of the Superintendent of Financial Institutions (OSFI). “Plan sponsors may be waiting for the final version of the funding relief regulations before deciding on funding relief. However, many federally regulated pension plans are required to file an actuarial report for the plan-year ending December 31, 2008, and, unless otherwise directed by the Superintendent, this report is due by June 30, 2009,” says a letter from the Superintendent. For actuarial reports filed for a plan year-end dates between November 1, 2008, and October 31, 2009, the Superintendent says the filing deadline is the later of August 14, 2009, or six months after the plan year-end date.
 

Equities Good News For Funds

U.S. Capital market results were generally favorable in May, extending the recovery that started almost three months earlier, says Towers Perrin's ‘Capital Market Update.’ It says the month’s good news was driven by equity results. However, the positive impact was blunted by a decline in long corporate yields which pushed up liability values. The bottom line indicated a slight 0.5 percentage point increase in its benchmark plan’s funded ratio. Even with the increases, May’s 69.7 per cent funded level represents a 22 percentage point decline over the past 12 months.
 

PIMCO Launches Website

PIMCO has launched a Canadian version of its website. It offers detailed information about the company as well as information about its investment strategies and the broad fixed income market. It also offers access to current and archived publications such as Bill Gross' ‘Investment Outlook,’ research pieces, and interviews with its investment professionals. The Canadian site can be seen at www.pimco.ca
 

ACPM Looks At ‘Changing Currents’

The ‘Changing Currents’ of the retirement income world is the theme of the Association of Canadian Pension Management’s 2009 national conference. Set for September 15 to 18 in Montreal, QC, it will address pension, investment, economic, and governance issues through the framework of ‘changing currents.’ Plenary sessions will look at the ‘Pension Review Reports – What does it all mean?’, Governance Committee Behaviour in Turbulent Times, Investment ‘Seenarios’ or ‘Scarnarios,’ and ‘The Pension Plans of the Future: Looking Back – Moving Forward.’ For more information, visit www.acpm-acarr.com

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Friday, June 5, 2009

Workplace Can’t Handle Return To Work

Far too many supervisors and managers in the Canadian workplaces are not equipped to deal with employee health, productivity, absenteeism, disability, and employees returning to work after an absence, says a Shepell-fgi survey. ‘The Missing Link: The Supervisor's Role in Employee Health Management’ concludes that supervisors do not receive data on real-time employee absence and organizations do not have structured processes in place that supervisors can consistently use to address intermittent problems with employee absence or significant changes in employee productivity or behaviour. Organizations need to establish preventative measures to include proactive promotion of EAP-based employee needs, both at the broader organizational level and at the workgroup level, and establish regular and formal manager/supervisor training to identify and respond to declining productivity and changes in employee behaviour.
 

Air Canada Mediator Appointed

The federal government has appointed a mediator in the pension talks between Air Canada and its unions. James Farley, a former Ontario Superior Court Justice, has been asked to mediate between Air Canada, its unions, and its retiree associations in devising a sustainable path for the airline company's pension plan. Its pension solvency deficit reached $2.9 billion last year and the airline says a moratorium on its pension funding is critical to the airline avoiding a second bankruptcy filing in six years.
 

Moving Out Of Drug Silo

Assisting plan sponsors in managing their limited financial resources in the drug plan area is critical, but there is a great deal more that can be done with a plan’s drug claim experience. Michael P. Sullivan, president of Cubic Health, told a Connex Health ‘Benefits Breakfast Club’ session that there is an opportunity to move away from the drug silo to other areas which are complementary. These include integrating disability, absence, and drug claims data to better manage benefit lines. He said plan sponsors should also evaluate population health, financially model the impact of alternate plan designs, and model future costs, including post-retirement liability assessments, using more than “just a number picked from the heavens.”
 

Healthcare Coverage To Rise

Costs for the most popular types of healthcare coverage in the U.S. are projected to increase at double-digit rates through the remainder of 2009 and into 2010, says a Buck Consultants, an ACS company, survey. Its ‘20th National Health Care Trend Survey’ shows costs for the most popular plans will increase by more than 10 per cent, although they are slightly lower than the 11.1 per cent projected increase in the 19th survey. Health insurers reported an average prescription drug trend of 10.8 per cent, down 0.6 per cent from the 11.4 per cent reported in the prior survey. This is three percentage points higher than the 7.8 per cent reported by pharmacy benefit managers.
 

BMO ETFs Start Trading

BMO Exchange Traded Funds have started trading making BMO Financial Group the only major Canadian financial group to offer a family of ETFs. The funds include a Canadian government bond index and a U.S. equity index. ETFs are similar to index mutual funds, except they are listed and traded on a stock exchange like regular stocks. Each fund consists of a basket of stocks that tracks the performance of a specific market index, such as the Dow Jones Industrial Average.
 

Courville Heads MFC

Jean-Francois (J-F) Courville is chief executive officer at MFC GlobalInvestment Management. Previously, he was president and chief operating officer. He joined the company in 2007 from State Street Canada where he had served as president and CEO since 2005.

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Thursday, June 4, 2009

Bumpy Journey To New Normal Ahead

The world of mean-reversion has come to an end with major forces shaping a bumpy journey to a new normal, says Ed Devlin, executive vice-president, head of Canadian portfolio management at PIMCO. Speaking at its ‘Do You Have a 2007 Approach For A 2009 Market?’ Perspectives session, he said credit markets present attractive opportunities, but seniority in the capital structure makes the most sense in today’s environment. However, sector choices matter. Some investment grade sectors are attractive, but many are likely to suffer downgrades and may even default. As a result, dedicated or tactical exposure to investment grade credit will be based on investors’ needs. Another option is high quality investment grade credit which may serve as an attractive return engine while dampening the volatility associated with equities.
 

Rule Simplifies Retirement Planning

It’s not a question of how much income replacement is needed, it’s how much you’ll need to collect from investments, benefits, and pensions per year in retirement, says Russell Investments Canada. Its ‘Retirement Rule of $20’ simplifies retirement planning by breaking it down. It says for every $1 of annual income you expect to need over your retirement, you will need $20 saved at the day of your retirement (with inflation indexing). The rule is based on current data regarding average life expectancies and the long-term rate of return from a balanced retirement portfolio consisting of 35 per cent equities and 65 per cent bonds.
 

CLHIA Sets Healthcare Policy

The Canadian Life and Health Insurance Association (CLHIA) has set out a number of recommendations for achieving a renewed and sustainable public healthcare system. The ‘CLHIA Report on Health Care Policy: Towards a sustainable, accessible, quality public health care system’ says its recommendations would increase the efficiency and cost effectiveness of Canada’s public healthcare system and improve overall care for Canadians. It includes governments taking an approach focused on the individual receiving care, investing more in wellness and disease prevention, and assisting Canadians in managing their needs for continuing care. It also recommends that no Canadian should take on undue financial hardship as a result of prescription drug costs.
 

Nortel Reduces Transfer Ratio

Nortel Networks has been given approval by the Ontario Superior Court of Justice to reduce the transfer ratio for its Canadian Defined Benefit plan from 85 per cent to 69 per cent. The court has also ruled that employees who have already transferred out of the system can still receive the higher rate, while subsequent commutes will only receive 69 per cent of the value of their pensions. After the initial transfer, the remaining 31 per cent balance must be paid by the pension plan over a five-year period – as required by legislation – dependent on the results of the current restructuring process. The court’s decision will only affect members of the Canadian plan who have chosen to transfer the commuted value of their pension entitlements to another retirement savings vehicle.

Impact Of Buy-side Grows

As institutions shift trading volumes to electronic platforms and internalize trading functions once provided by their broker-dealers, the performance of buy-side trading desks is having a growing impact on investment returns, says a Greenwich Associates survey. In an effort to improve that performance, institutions are adopting Transaction Cost Analysis (TCA) as a core part of their equity investment and trading operations. However, even as more institutions integrate these performance measurement tools into their investment processes, questions about TCA's limitations persist and many traders remain ambivalent about its ultimate impact. Traders are not enthusiastic about TCA's ability to add value to the process of allocating trading business to broker dealers, and only a relatively modest proportion thinks TCA can have a strong impact on investment returns.
 

Older Workers Grow Less Confident

Older workers are much less confident about their retirement security than they were two years ago, says a Watson Wyatt survey. The number of workers aged 50 to 64 who are very confident about having enough resources to live comfortably five years into retirement dropped to 44 per cent from 63 per cent in 2007. The numbers for affording a comfortable lifestyle 15 years into retirement are even bleaker. Only 18 per cent think they have sufficient resources to be comfortable for this long, compared with 34 per cent who felt that way in 2007. However, the survey found that workers with Defined Benefit plans are much more confident in their retirement prospects than those who participate only in a Defined Contribution plan.
 

RI Champions Emerging

A group of responsible investment (RI) champions is clearly starting to emerge among UK corporate pension funds, says the UK Sustainable Investment and Finance body (UKSIF). Its ‘2009 Responsible Business: Sustainable Pension’ report says there was "clear and exciting evidence" that pension fund investors are promoting RI and that trustee leadership is driving this change. It suggested trustees, supported by increasingly well-informed investment consultants, are demonstrating how best practice in RI can be achieved in practical and affordable ways.
 

CIBC Mellon Releases CSR Review

CIBC Mellon has released its inaugural corporate social responsibility (CSR) review. ‘Taking care’ provides details of the company's progress on its CSR commitments made to date and its objectives for 2009. The review addresses a wide range of topics in five key areas – compliance and ethics, clients and products, employees, community, and environmental sustainability. It also features the company's CSR and environmental sustainability statements and commitments, along with key performance indicators for 2009. To see the review, visit http://www.cibcmellon.com/
 

Session Looks At Healthcare Fraud

The existence of healthcare fraud and abuse is an unfortunate reality. Since it is important for all stakeholders to acknowledge this risk and understand their role in managing the impact, the Toronto Area Chapter – ISCEBS has invited Jeff Alcock, manager of investigation services for Manulife Financial group benefits and past chair of the Canadian Health Care Anti-Fraud Association, to  discuss the importance of engaging all stakeholders, with particular focus on the role of the plan member in mitigating the risk and impact to group benefit plans. ‘Health Care Fraud and Abuse’ takes place June 16 in Toronto, ON. For more information, visit http://www.iscebs.org/PDF/chapters/090616_tor.pdf
 

Conference Examines Philanthropy

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Wednesday, June 3, 2009

CPPIB Asked To Review Pay

All government-owned companies, including the Canada Pension Plan Investment Board, have been asked to review compensation practices, says Finance Minister Jim Flaherty. He said last April leaders of the Group of Twenty countries agreed with principles on executive compensation set out by the Financial Stability Forum. He has asked all government-owned companies to confirm that they are in compliance with the principles. The principles attempt to end a culture among financial institutions that promotes too much risk-taking. It is calling for bonuses in a mixture of cash and shares, and tying compensation to long-term profitability rather than short-term revenue.
 

Ottawa Modernizing CPP

Ottawa has proposed several changes to the Canada Pension Plan to modernize and improve the financial sustainability of the plan. The changes would “modestly” expand pension coverage and provide greater flexibility for older workers to combine pension and work income. To improve the plan’s flexibility, the Work Cessation Test, which requires individuals who apply to take their CPP benefit early to either stop work or reduce their earnings, would be removed. By removing the test, individuals could take their benefit as early as age 60 without any work interruption or reduction in earnings. Another change to improve flexibility would increase the general low earnings drop-out from its current level of 15 per cent to 16 per cent in 2012 and to 17 per cent in 2014. This ensures that average earnings are not affected by a certain number of years of unusually low earnings that occur during periods of unemployment, full-time post secondary attendance, or for other reasons. Individuals would be able to exclude up to eight years of low earnings, up from the current limit of seven years.
 

Financial Industry Must Speak Up

People are mad about financial markets and are complaining to politicians and regulators, says Tom Caldwell, CEO of Caldwell Financial Ltd. Speaking at the ‘2009 FPL Canadian Electronic Trading Conference,’ he said both politicians and regulators like to look like they are doing something and that means more regulation, which will add cost to the investment industry. As a result, he urges everyone in the industry to get involved and let the regulators know if they have ways to make things simpler. Too often, regulation is developed in response to situations, not to anticipate problem. This makes existing regulations more complicated. Caldwell said the industry must speak up against this.
 

Optimism Boosts Markets

Optimism that the worst of the economic recession is over helped boost market performance in May as equities rallied strongly for a third consecutive month, says Morningstar Research Inc.’s preliminary performance report. While there were relatively small losses for four of its 24 fund indices that track equity funds, the top indices registered double-digit gains. By far, the top performer was the precious metals equity fund index which advanced 23 per cent in the month, largely thanks to a strong rally in gold. Gold prices rose by 10 per cent for the month, bringing the spot price up to US$975 – a level last seen in late February. The worst performance, a decline of 3.3 per cent, came from U.S. small/mid cap equity.
 

Short-selling Ban ‘Absolute’ Mistake

The short-selling ban in Canada during the financial meltdown last year showed what an “absolute” mistake it was, says Doug Clark, managing director, quantitative execution services at BMO. Speaking at the ‘2009 FPL Canadian Electronic Trading Conference,’ he said the ban in Canada was unique because it was only on financial services companies cross-linked to the U.S. For those companies not linked, short-selling was allowed to continue. However, for those under the ban, spreads widened and liquidity dried up which had a negative effect on investors, He warned that we are about to see the same thing happen again as they are talking about another short-selling ban in the U.S. and Canada is sure to follow.
 

Regulation A Disability For Financial Services

Securities regulation in Canada should be principle-based and focused on outcomes, says Tom Hockin, chair of the expert panel on securities regulation. He told the ‘2009 FPL Canadian Electronic Trading Conference’ that the fragmented system of securities regulation in Canada is a disability for the financial services sector as it means there is no single body to deal with systemic risk. For example, Canada survived the ABCP crisis, but barely because of this. Reduction of systemic risk, he said, should be one of the guiding principles. This would allow regulation to respond quickly to market events which might cause systemic risk in Canada.
 

OMERS Acquires Nordco

OMERS Private Equity is acquiring Nordco Inc. from private equity firm The Riverside Co. Nordco is a provider of rail infrastructure services and operates manufacturing facilities in Oak Creek and Oshawa, ON. Riverside bought Nordco in 2003 in a management-backed buyout.
 

Think Tank Discusses European Practices Report

Evolving a unified regulatory approach to create a level playing field among investment products and re-invigorating the relationship with the investor by encouraging better information flows throughout the industry are just two of the recommendations from ‘Building Long-Term Savings in Europe,’ a report from the Think Tank on Asset Management. At an IFIC session taking place June 30 in Toronto, ON, Jean-Baptiste de Franssu, chair of the Think Tank and CEO of Invesco Europe, will explain its findings as well as the nine recommendations for the industry.  The Think Tank was organized to analyze European Asset Management industry practices – from product manufacturing through to distribution to the end client. For more information, visit www.ific.ca
 

Business Case For Safety Examined

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Tuesday, June 2, 2009

GM Pensions Retained

Pension plans for hourly and salaried employees at General Motors Corp. will be retained under the Chapter 11 bankruptcy reorganization plan worked out with the U.S. government. Under the reorganization plan, the U.S. Treasury will provide $30.1 billion of financing to support GM through an expedited proceeding. The combined $84.5 billion pension plans will be transferred to the new GM as part of the purchase process. The Pension Benefit Guaranty Corp. estimated that as of November 30, the GM pension plans for hourly and salaried workers, which cover 673,000 employees and retirees, had about $80 billion in total assets and were underfunded by about $20 billion. If the GM pension plans had been terminated, PBGC would have covered about $4 billion of the $20 billion shortfall.
 

Public Employers Modify Benefits

Public employers in the U.S. are modifying their employee healthcare benefits to include more cost-saving measures, says a survey by the International Foundation of Employee Benefit Plans (IFEBP). ‘Health Care Plans: Impact of the Financial Crisis’ found that 72 per cent of public employers are increasing or considering an increase in their employees' deductibles, co-insurance, or co-pays. In addition, 74 per cent are increasing or considering an increase in employee premiums. Nearly half of public employers cited the financial crisis as the reason for considering higher deductibles and higher employee premiums.
 

Mercer Offers Fiduciary Management

Mercer has launched a fiduciary management tool to manage UK pension plan investments and liabilities. The goal of its ‘Dynamic De-Risking Solution’ tool is improving funding status. With the tool, funding status is monitored and rebalancing considered daily. As funding status crosses predetermined bands – for example, reaching 75 per cent funded from 70 per cent funded – the portfolio would automatically adjust to a new set of parameters set by trustees.
 

Database Measures Wellness Programs

Connex Health has developed an online measurement database for health and wellness programs. The database provides a solution for employers to monitor and measure the impact of multiple health and wellness programs over time. With multiple data filter functions, outcomes data can be used to target future interventions by demographic group or location. As well, users of the database will also be able to benchmark their results against other employers in the database and those in their own industry.
 

CPBI Ontario Offers Benefits Stream

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Monday, June 1, 2009

CPPIB Compensation Attacked

Compensation paid to senior executives at the Canada Pension Plan Investment Board is under attack. While the compensation paid to its president and chief executive dropped 30 per cent last year, NDP Leader Jack Layton says it should have been reduced a lot more. The board’s annual report shows the president and CEO earned a salary of $490,000, a bonus of $735,000, and long-term incentives of $1.6 million. He also received $59,000 in pension contributions and $9,600 in other compensation, which included life insurance and health and dental benefits. The previous year, his salary was $475,000, his bonus was $1.2 million, and long-term incentives were just under $2.4 million, plus $57,000 in pension contributions and $8,800 in other compensation. Layton calls this outrageous considering the Canada Pension Plan fund lost 18 per cent of its value last year and he is demanding that the Conservative government step in and slash the bonuses. Liberal MP Ralph Goodale called for "moral leadership" and asked the federal finance minister to invite the Canada Pension Plan Investment Board to review its bonuses in the context of a recession that's killing the jobs of 350,000 ordinary Canadians." However, the finance minister says the government will not get involved in the operations of the CPPIB which was set up as an arm's length manager to be free from political influence. Executive pay at the CPPIB is based on investment performance over a four-year period measured both in absolute terms and relative to market benchmarks. As a result, the compensation reported for fiscal 2009 was based in part on highly positive returns in 2006 and 2007 as well as on the losses of 0.3 per cent in 2008 and 18.6 per cent in 2009.

Depressed Employees Away Longer

Employees disabled by depression are away from work significantly longer than other employees on disability leave, says research by the Integrated Benefits Institute. Employees with depression have 44 per cent more lost time than employees who had no depression treatment during their disability leave, The true lost-time costs of these cases – including disability payments and lost productivity – are 2½ times the costs of medical care and pharmacy benefits combined. Lost productivity is the largest single cost component, making up 60 per cent of total costs.

Tenure Linked To Equity Allocation

When target-date plans are classified by participants' tenure, the average equity allocation of pure target-date fund holders by age and salary shows a different pattern from target-date investors in plans classified by participants' income, says an Employee Benefit Research Institute (EBRI) study. It finds plan demographics as a whole affect individual participant contribution rates and target-date fund investment choices by participants. Those in plans dominated by participants with high incomes tend to hold target-date funds with higher equity allocations than those in the plans dominated by participants with low income.

July Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including July 2009 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:

• Commuted Values – 2009 Basis
• Commuted Values – 2005 Basis
• Commuted Values – 1993 Basis
• Marital Breakdown – CSOP 4300 (March 2003)
• Marital Breakdown – CSOP 4300 (March 2003 – ALTERNATE)
• Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
• Minimum Interest on Employee Required Contributions (including the 12 month average rates)

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