Last summer, I was appointed as the employer nominee to a panel that mediated/arbitrated the dispute between Air Canada and the Canadian Auto Workers.
The dispute centred around the pension arrangement that was to be provided for new hires and was mainly an issue of defined-benefit versus defined-contribution plans.
I wrote an addendum to the arbitration award bemoaning the fact that federal pension standards legislation does not accommodate target-benefit plans as that would have been a more sophisticated solution to the issue of retirement-income risk allocation and sustainability that was at the heart of that dispute and is the central issue in most pension-related discussions today.
A target-benefit solution was an undertaking Air Canada offered up if and when federal legislation was able to accommodate it.
In my view, target-benefit plans offer a sensible way forward that would be in the best interests of employees and employers to explore for many of the reasons articulated in Harry Arthurs’ report if that option could be made available.
It would also preserve the considerable macroeconomic benefits associated with defined-benefit plans.
In connection with an online comment on your recent editorial (see “Where is innovative action on pensions?” Law Times, Jan. 16), I don’t think pensioner management of investment funds is an answer.
Study after study has shown that pension plan and fund success is highly correlated with two key attributes: expert and interested management. While plan members are interested, they rarely have the relevant expertise.
The same could be said of employers who are the administrators of their own plans. I think many employers would embrace joint governance or an expert intermediary with fiduciary obligations to all stakeholders if they could limit their overall risk exposure by moving to a target-benefit environment.
Jointly governed or expert-governed target benefits are precisely how many of our most successful public service plans are structured, including, essentially, the Canada Pension Plan.
Governance by independent expert fiduciaries with some employer and member representation is likely the best solution and is one that is within reach if only our politicians would act.
Most plans outside of North America are governed this way, including the Dutch plans that are among the largest and most successful in the world.
We don’t need to reinvent the wheel on this; we just need minor tinkering to adjust what is already out there. This part of addressing pension coverage and sustainability is not rocket science.
The dispute centred around the pension arrangement that was to be provided for new hires and was mainly an issue of defined-benefit versus defined-contribution plans.
I wrote an addendum to the arbitration award bemoaning the fact that federal pension standards legislation does not accommodate target-benefit plans as that would have been a more sophisticated solution to the issue of retirement-income risk allocation and sustainability that was at the heart of that dispute and is the central issue in most pension-related discussions today.
A target-benefit solution was an undertaking Air Canada offered up if and when federal legislation was able to accommodate it.
In my view, target-benefit plans offer a sensible way forward that would be in the best interests of employees and employers to explore for many of the reasons articulated in Harry Arthurs’ report if that option could be made available.
It would also preserve the considerable macroeconomic benefits associated with defined-benefit plans.
In connection with an online comment on your recent editorial (see “Where is innovative action on pensions?” Law Times, Jan. 16), I don’t think pensioner management of investment funds is an answer.
Study after study has shown that pension plan and fund success is highly correlated with two key attributes: expert and interested management. While plan members are interested, they rarely have the relevant expertise.
The same could be said of employers who are the administrators of their own plans. I think many employers would embrace joint governance or an expert intermediary with fiduciary obligations to all stakeholders if they could limit their overall risk exposure by moving to a target-benefit environment.
Jointly governed or expert-governed target benefits are precisely how many of our most successful public service plans are structured, including, essentially, the Canada Pension Plan.
Governance by independent expert fiduciaries with some employer and member representation is likely the best solution and is one that is within reach if only our politicians would act.
Most plans outside of North America are governed this way, including the Dutch plans that are among the largest and most successful in the world.
We don’t need to reinvent the wheel on this; we just need minor tinkering to adjust what is already out there. This part of addressing pension coverage and sustainability is not rocket science.
Randy Bauslaugh,
McCarthy Tétrault LLP,
Toronto
Toronto
