The Canadian Institute of Actuaries has released a 10-point action plan designed to help governments and regulators combat the erosion in Canada’s pension system and to safeguard the financial security of millions of Canadians when they retire.

“Large funding deficits have emerged in a number of plans and pensioners and workers with firms that are facing bankruptcy are coping with having their pension benefits being reduced. The Canadian pension system needs to be retooled, and now,” says the Institute’s president, Robert Howard.

“Our plan contains measures that help balance the concerns of pensioners, plan sponsors, politicians and others who are concerned with overhauling a system in need of major repairs.”

Howard unveiled the Institute’s 10-point position during a speech to the Economic Club of Canada on Tuesday.

The document observes that Canada’s patchwork of regulations, legal decisions, tax rules, changes to accounting standards and other factors have all contributed to today’s grim pension environment. Layer on these the impact of the current economic crisis on pensioners, plan sponsors and those planning for their retirement, and the case for governments implementing fundamental change becomes abundantly clear, the Institute says.

The plan calls for the following measures:

1. Putting pensions on the national agenda with the goal of creating a new environment that leads to maintaining and strengthening pension plans.

2. Regulators should develop a principles-based approach to the supervision and monitoring of pension plans.

3. Disincentives to working past a fixed age in our current retirement system should be examined and rectified. Canadians should be able to continue to work part-time past retirement while collecting partial retirement benefits.

4. Canadians need better information, at an earlier age, to help them understand the risk factors associated with retirement and how to manage those risks effectively.

5. Pass legislation to allow employers to set up 100 percent employer-funded Pension Security Trusts that would be separate from, but complementary to, regular defined benefit pension plan funds.

6. Pass legislation to require each defined benefit plan to build up a Target Solvency Margin.

7. Establish a task force, with representation from the profession and pension regulators, to develop guidance on appropriate levels of solvency margins.

8. Change the tax rules to allow plan sponsors to develop larger surpluses.

9. Pass legislation to protect underfunded pension benefits by according them treatment similar to that of unpaid salaries in bankruptcy and restructuring proceedings.

On a going-forward basis, legislation should be modified to better handle the determination of benefits when the unfunded plan of a bankrupt employer is wound up.

IE