The proportion of chief financial officers who believe Canadian pension plans are facing a crisis has more than doubled in the past year, according to a new survey from the Conference Board of Canada and Watson Wyatt Worldwide.

Last year, 20% of CFOs responding to the survey said they believed there is a pension plan crisis in Canada. That has more than doubled to 43% in the current survey. Another 23% agree there are serious problems, but believe they are largely cyclical and that the current crisis is unlikely to become permanent-down from 39% in 2004. These findings are consistent across all plan sizes, the survey reports.

The number of CFOs who believe there are only a few isolated serious problems in relatively few organizations has also declined, from 29% in 2004 to 25% this year.

“Talk about earlier declines in pension fund returns (which are still working their way into actuarial balance sheets), combined with the effect of low bond yields on actuarial liabilities, continues almost unabated from last year,” the survey notes. “This talk has now been joined by discussions about the implications of recent court decisions on pension plan surpluses and mergers. Heavy cash flows are being diverted from other business activities into pension funds, and the management of pension risks remains at or near the top of the agenda of many CFOs.”

The survey says CFOs note that they continue to face many challenges in their organizations’ pension plans. These challenges, many of which are systemic, include: complying with fiduciary and governance responsibilities and disclosure guidelines; securing the current pension promise on a solvency basis and also ensuring the affordability of the future pension promise; addressing surplus ownership issues, particularly in light of the Monsanto decision; and complying with the pension accounting rules adopted by the Canadian Institute of Chartered Accountants.

In addition, survey respondents identified a number of challenges relating to their employees and plan members. These include: addressing the costs and impact of an aging workforce; effectively communicating pension plan costs and benefits to members; ensuring that defined contribution plan members receive adequate investment education; and, managing the risk of class action lawsuits regarding pension and benefit issues.

The report notes that CFOs consider the greatest threats to the defined benefit system to be volatility and a perceived inequity in the sharing of plan surpluses and deficits between DB plan sponsors and members.

77 CFOs responded to the survey, 64 of them from the private sector. The asset information available for 55 of the private sector respondents reveals that their pension plans represent roughly 15% of Canadian private sector pension assets. The pension plans of the 13 public sector respondents represent roughly 15% of Canadian public sector pension assets. Nearly 43% of respondents are making solvency or going-concern special payments toward unfunded liabilities, or both, while only about 13% are taking a contribution holiday. 64% of the survey respondents’ pension plans are defined benefit, 23% are defined contribution, and 13% are combination plans.