April 3, 2014
The recent report issued by the Ontario Chamber of Commerce and the Certified General Accountants of Ontario, “An Employer Perspective on Fixing Ontario’s Pension Problems,” highlights lack of political consensus for expanding our public pension systems in Canada due to the often conflicting objectives between employers and employees. Employers need cost certainty; employees need future financial security. However, less than 25 percent of private sector Ontario employees have access to a workplace vehicle for the pooling of investment, interest rate, and longevity risk. Is the best solution the Pooled Registered Pension Plan (PRPP), as the report suggests, or another alternative?
We think that a superior private sector solution is a de-risked defined benefit pension plan alone or in combination with a Target Benefit pension plan. A single-employer Target Benefit pension plan, based on a multi-employer model, de-couples risk pooling from costly employer guarantees – and with the advantage that risk pooling mechanisms similar to Canada’s limited public systems are retained. The Segal Group helped pioneer these kinds of plans in the 1950s, and these plans continue to successfully enable the financial security of tens of millions of North American workers while also achieving employer cost certainty.