The Association of Canadian Pension Management (ACPM) has released a discussion paper, which argues for a new funding regime to preserve Defined Benefit (DB) pension plans.
In recent years, there has been a trend by corporate plan sponsors to move away from DB plans, particularly for single employer DB plans in the private sector, which have faced significant funding challenges.
The ACPM says that, “Funding rules established decades ago in a significantly different economic environment have resulted in extreme contribution levels that have put additional pressure on these plans. Temporary solvency relief measures have been implemented by governments to relieve this pressure but have not addressed the underlying issues.”
The ACPM paper explains why funding requirements for private sector single employer DB pension plans should be changed, why solvency funding no longer works and why a new funding model is needed.
Ensuring that DB pension plans continue as viable options for coverage is one of the tenets of the ACPM Five Point Plan that outlines the steps to providing universal access to retirement income coverage in Canada.
Without these changes, ACPM believes the prevalence of DB pension plans will continue to decline — a development that will be a significant loss to Canada’s retirement income system.
“We believe this paper will open the door to discussions about the important changes that are required to ensure the continuation of single employer DB pension plans in the private sector,” said Andrew Harrison, chairman of the ACPM board of directors, in a release.
ACPM is expecting to release other papers in the near future including one on principles for mandatory public pension plans and a supplement to its 2012 ACPM Target Benefit Plan paper.
The ACPM is a national, non-profit organization and the voice of plan sponsors, administrators and their service providers. Its membership represents over 400 companies and retirement income plans that cover more than three million plan members, with assets under management in excess of $330 billion.