During the course of the Committee’s hearings, witnesses provided comments about a number of other issues, including defined contribution and hybrid pension plans and investment risk, multi-jurisdictional plans and the harmonization of pension rules, and health and welfare trusts.

DEFINED CONTRIBUTION PLANS AND INVESTMENT RISK

According to Mr. Rock Lefebvre, of the Certified General Accountants Association of Canada, there were 8,000 defined contribution plans with 0.8 million members and an estimated $50 billion in assets in 2008. Moreover, Mr. Dean Connor, of the Canadian Life and Health Insurance Association, indicated that approximately 1.3 million Canadians were covered by employer-sponsored defined contribution plans in 2009. He told the Committee that employers are shifting from defined benefit plans to defined contribution plans in order to experience lower funding costs, risk and pension plan complexity.

Mr. Connor suggested that legislation should allow multi-employer defined contribution plans (DC-MEPPs), whereby a regulated financial institution could act as both the plan sponsor and administrator, and any employer would be able to join. According to the model proposed by Mr. Connor, employers would benefit from reduced administrative costs and compliance burdens as well as economies of scale; employees would be automatically enrolled with the option to opt out, contributions would be made by employees and/or employers, and contributions would automatically increase until a desired target level of contributions was reached. Furthermore, he stressed the importance of locking in employer contributions to group RRSPs until retirement so that retirement planning goals are met. However, Mr. Ken Georgetti, of the Canadian Labour Congress, and Mr. Réjean Bellemare, of the Fédération des travailleurs et travailleuses du Québec, favoured defined benefit plans rather than defined contribution plans because of greater certainty and less investment risk for employees. Mr. Bellemare argued that individual defined contribution accounts are costly to administer. Mr. Terry Campbell, of the Canadian Bankers Association, commented that the employee has all of the investment risk in a defined contribution plan; in his view, investment advice is essential in ensuring adequate returns. Open Access Limited referred to defined benefit plans as the current “gold standard.”

Mr. Pierlot, a pension lawyer who appeared on his own behalf, suggested that all individuals should have the same lifetime pension contribution limit, regardless of whether retirement saving occurs in a defined benefit plan, a defined contribution plan or private savings vehicles. Mr. Pierlot also noted that such an approach would allow people to make contributions when they experience investment losses.

HYBRID PLANS AND INVESTMENT RISK

Mr. Scott Perkin, of the Association of Canadian Pension Management, urged changes to pension and tax legislation to allow the creation of multi-employer defined contribution plans that allow both a defined benefit in accordance with a specified formula and a benefit that is based on investment returns. This type of plan would, in some sense, involve the sharing of some risk between the employer and plan members. Ms. Jennifer Brown, of the Ontario Municipal Employees Retirement System, commented that multi-employer models pool costs as well as investment risks.

Mr. Pierlot and Mr. Campbell advocated pension plans that are not linked to employment, so that individuals who are self-employed or who own a small business may become a member of a larger plan or may create their own plan.

Both Mr. Perkin, as well as Mr. Renaud Gagné of the Communications, Energy and Paperworkers Union of Canada, proposed that pension and tax legislation should be amended to allow multi-employer defined benefit pension plans. According to their proposal, actuarial surpluses in one or more plans could offset actuarial deficits in other plans, and current Income Tax Act limitations in respect of the size of an actuarial surplus for an individual plan should not apply. Mr. Gagné also proposed a member-funded pension plan model where employer contributions would be fixed in percentage terms, while employee contributions would be variable; contribution rates could also be different for each employer of the plan. Additionally, with this model, employers would not be responsible for pension plan deficits.

MULTI-JURISDICTIONAL PLANS AND THE HARMONIZATION OF PENSION RULES

On the issue of regulation of multi-jurisdictional plans, or employers with employees regulated at both the federal and provincial level, the Office of the Superintendent of Financial Institutions’ Ms. Judy Cameron stated that harmonization of pension rules is required in order to reduce complexity in administering pension plans regulated at both levels. Regarding defined contribution plans, Ms. Shirley-Ann George, of the Canadian Chamber of Commerce, advocated harmonization and simplification of pension legislation throughout Canada in order to make defined contribution plans less costly and easier for small and medium-sized businesses to offer. While a number of witnesses agreed that the current trend is a shift away from employer-sponsored defined benefit plans to defined contribution plans, the Canadian Banker Association’s Mr. Terry Campbell suggested that the lack of harmonized rules across Canada may hinder the growth of defined benefit plans, since the lack of harmonization increases the administration costs for non-federally regulated employers with employees in more than one province/territory.

HEALTH AND WELFARE TRUSTS

The Committee heard from a number of witnesses that either represented current and former Nortel employees or who were themselves former Nortel employees. Mr. Donald Sproule, of the Nortel Retirees’ and Former Employees’ Protection Committee, commented that there are approximately 11,000 pensioners currently receiving health plan benefits through the Nortel Health and Welfare Trust. Ms. Diane Urquhart, an independent financial analyst who appeared on her own behalf, shared her view that—during Nortel’s corporate restructuring—$100 million is missing from the Health and Welfare Trust created by Nortel for employee disability and health benefits and for the payment of employee life insurance premiums; as a result, 400 former and current employees with a long-term disability have been affected. She also suggested that Nortel did not disclose the self-insured status of the Health and Welfare Trust to employees until 2005. Mr. Lee Lockwood, who appeared on his own behalf, indicated that medical and dental benefits offered by the Health and Welfare Trust were self-insured by Nortel. Ms. Arlene Borenstein, of the Rights For Nortel Disabled Employees, stated that employers use self-insured schemes to reduce costs and to retain more of their profits; in her opinion, employers that self-insure save approximately 10 to 20% of the cost of traditional group disability insurance.

Ms. Urquhart and Mr. Lockwood advocated higher priority, during bankruptcy proceedings, for health and welfare trusts as well as for benefits for the long-term disabled; they also supported separate representation for disabled employees from other employees during corporate restructurings under the Companies' Creditors Arrangement Act. Another idea supported by Ms. Urquhart was an amendment to the Bankruptcy and Insolvency Act that would require bondholders of a bankrupt employer to be financially responsible for the deficit in a health and welfare trust so that employees could be compensated; this responsibility would exist for a five-year period post-bankruptcy. Mr. Lockwood argued for legislation that would require employers to obtain third-party insurance for long-term disabled wage replacement income and medical benefits.