# Defined Contribution plan - is the money really there?



## Electric (Jul 19, 2013)

The company I work for is in danger of folding. I have a DC plan administered by Sun Life, showing a balance that would take me 10 years to replace.

I am starting to wonder if that money is really "there." The DB plan that some employees are part of (not me), is substantially underfunded, and I think those employees would end up taking a haircut similar to what happened to Nortel employees. The DB plan underfunding is about two years of EBITDA.

Is it possible that the balance I get every quarter on my Sun Life DC statements is really backed by some kind of IOU from my employer? i.e. the money is not really there?


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## 0xCC (Jan 5, 2012)

You can probably call Sunlife and ask them. I would expect the funds are with Sunlife and are not available to your company but a phone call should be able to confirm that.


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## mind_business (Sep 24, 2011)

The DC Plan offered by our company is not accessible by anyone other than the employee.


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## Eclectic12 (Oct 20, 2010)

Electric said:


> ... I am starting to wonder if that money is really "there." The DB plan that some employees are part of (not me), is substantially underfunded, and I think those employees would end up taking a haircut similar to what happened to Nortel employees. The DB plan underfunding is about two years of EBITDA ...


I can understand the concern ... though a DB pension is a lot different than a DC one. 

There is no guarantee to a DC pension so the company knows exactly how much they have to contribute to the penny. As soon as that is paid, there is no readjustment in the future.

In the DB pension, the company could be on top of all their contributions but because of interest rates and investment performance - more money is needed to provide the money in the future.


Take for example investment losses due to oil shares dropping as an example. In the DC pension, the value drops and you have to live with less money. In a DB pension, the worst case is that the company has to replace the losses.


Unless there is some fraud going on ... I expect that the worst case IOU to be more a "stopped paying two months ago" situation.


Cheers


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## Electric (Jul 19, 2013)

Thanks. Yes, fully understand the difference in the employer obligation wrt DB vs. DC.

What I have noticed is that the deposits, which a few years ago came like clockwork 3 business days after payday, are now erratic. Up to 15 day delays now. Which is reassuring in a way, because it suggests that Sun Life may be faithfully reporting actual deposits rather than conspiring with the company to show fictitious ones.

I guess one of the factors that had me worried is that when I asked if I could transfer these assets to a LIRA at my bank, the answer was that I have to leave them in place at Sun Life until I quit. So I started asking myself whether the money is truly mine, and if it really exists.


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## Davis (Nov 11, 2014)

Requiring the assets to remain with the plan administrator until you leave the company is standard, was far as I know. That's the deal for getting your employer to contribute. Lots of employers don't contribute any more - they pay you and you're on your own for your retirement.

The essential point here is that the assets are held in trust for you at Sun Life. Your employer cannot raid the piggy bank to pay its creditors or fill suitcases with cash for the execs to take to the Cayman Islands. The money is in trust for you. 

The employer's contributions have been used to but mutual funds in your RRSP, haven't they? Sun Life would have demanded cash, not IOUs from the employer for that. If there is any debt from the employer, that is Sun Life's problem.

You should call Sun Life to set your mind at ease.


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## RBull (Jan 20, 2013)

Electric, I believe you are worried with no cause. However call Sun Life, using your plan member number to confirm the assets of your contributions along with your employers and answer your questions. 

I agree with others that almost certainly they are intact at SunLife in trust and are invested in whatever choices you made. This is one of the benefits of defined contribution plan with a third party trustee and plan administrator, and receiving statements that regularly show actual balances. Sunlife is not going to make investments with an IOU from your employer, and they are legally bound to hold all of your assets in trust, and operate in accordance with the plan guidelines/provincial statutes. 

I would be more concerned if I were in the DB plan.


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## Electric (Jul 19, 2013)

Davis said:


> Requiring the assets to remain with the plan administrator until you leave the company is standard, was far as I know. That's the deal for getting your employer to contribute.


So why is that, exactly? If it is the case that the employer simply makes the deposits and it is out of their hands, why can't I nominate a LIRA at any FI I want, in exactly the same way that I have my paycheque deposited to any bank I want? 



> Lots of employers don't contribute any more - they pay you and you're on your own for your retirement.


Most employers don't contribute any more, pension plans are pretty much a creature of the public sector now. I would prefer to be paid the money so I can invest it in whatever way I choose, in an account over which I have sole control.



> The essential point here is that the assets are held in trust for you at Sun Life. Your employer cannot raid the piggy bank to pay its creditors or fill suitcases with cash for the execs to take to the Cayman Islands. The money is in trust for you.


Yes, this is what Madoff told people. I have no evidence of the "cannot raid the piggy bank" part, all I have is a glossy brochure that looks exactly the same as the glossy brochure I had at Nortel. The contract my employer has with Sun Life is none of my business.



> The employer's contributions have been used to but mutual funds in your RRSP, haven't they? Sun Life would have demanded cash, not IOUs from the employer for that. If there is any debt from the employer, that is Sun Life's problem.


So, I can envision some financial engineering that goes like: Hey Sun Life, we will enter into a forward contract to buy 200 000 units of the unlisted TD Bank S&P500 fund in 2019 after the company crisis is over. We pay you $200k today, and you show the employees that they "own" the units, it will just confuse them otherwise. 

The employees can't withdraw the assets anyway. We will buy the actual units for the ones that quit, at the time that they quit.



> You should call Sun Life to set your mind at ease.


Oh, I have called the cotomer sevis line many times in the past. They don't even know how to send me a computer file containing my contributions so that I can import them to Quicken. Have escalated that one at least three times, they never follow up.


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## Electric (Jul 19, 2013)

RBull said:


> I agree with others that almost certainly they are intact at SunLife in trust and are invested in whatever choices you made. This is one of the benefits of defined contribution plan with a third party trustee and plan administrator, and receiving statements that regularly show actual balances. Sunlife is not going to make investments with an IOU from your employer, and they are legally bound to hold all of your assets in trust, and operate in accordance with the plan guidelines/provincial statutes.


Yes, this page from the OSFI website seems to confirm what you and others are saying in this thread, namely that the contributions pretty much have to be made in cash.

http://www.osfi-bsif.gc.ca/Eng/pp-rr/ppa-rra/inv-plc/Pages/contributions_in_kind.aspx



> I would be more concerned if I were in the DB plan.


Very glad I elected to go DC rather than the hybrid DC/DB plan. I am telling fellow employees in the DB plan to discount whatever annual pension amount appears in their annual statements, by the degree of the underfunding. Sadly, the underfunding is the highest of any large pension plan in the country, measured in terms of percentage of EBITDA.


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## sags (May 15, 2010)

If a DB fund is wound up, the employer must pay the underfunded amount, so the only way a DB pension plan fails to pay the full benefits is if the company goes bankrupt.

Nortel went bankrupt, so if your current employer is on the verge of bankruptcy there is a risk to full benefits. If they aren't going bankrupt there is no current risk.

Pension benefits can change in the future, but any changes cannot be retroactive. What benefits have been earned in the past are grandfathered.

Nortel is so commonly referred to as an example, because there are few other examples of failed DB pension plans. It was an anomaly and pension legislation was changed because of it.

Nortel was deemed a "too big to fail" corporation and allowed to avoid contributions to the pension fund. The government doesn't allow that anymore.

In Ontario, all registered pension plans pay insurance premiums into the Ontario Pension Guarantee Fund. It provides some protection to pension holders.

Other Provinces don't have such a pension insurance plan though.


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## Electric (Jul 19, 2013)

sags said:


> If a DB fund is wound up, the employer must pay the underfunded amount, so the only way a DB pension plan fails to pay the full benefits is if the company goes bankrupt.


Where do the employees end up in the hierarchy of claims, though? For example, I understand from my Nortel experience (fortunately I still had a lot of human capital left and could recover) the government gets paid first (taxes), then bondholders, then suppliers, and a few more people before the employees see a dime.

In this case, there wouldn't be enough even to pay the bondholders.



> In Ontario, all registered pension plans pay insurance premiums into the Ontario Pension Guarantee Fund. It provides some protection to pension holders.


Not Ontario-registered. Even if it were, the insurance caps out way below what my peers would normally be entitled to. Like, 50%.


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## Davis (Nov 11, 2014)

I don't know why pension rules are they way they are. I can only guess that employers want to make sure that their money is going into safe investments, i.e., mutual funds, and that employees don't use that money to buy penny stocks or houses of cards (like Nortel, for example). Husband's DC plan is also with Sun Life, which frustrates me. I'd rather invest that money in dividend stocks and REITs, but I know I have to wait until he leaves the employer, which is only months away, fortunately.

I am confident, though, that Sun Life isn't going to blow its reputation on the sort of forward contract schemes you are imagining. You're not dealing with Bernie's Cut-Rate Pension Management Company here. I would think that those schemes would be prohibited by pension law (although that's outside of my area of expertise).


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## heyjude (May 16, 2009)

While this is an Ontario site, it explains the principle clearly. Basically, once vested, the money in your DC pension plan cannot be used for any purpose except to provide retirement income for you. 

https://www.fsco.gov.on.ca/en/pensi...ting-and-Locking-in-of-Pension-Benenfits.html


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## Beaver101 (Nov 14, 2011)

Electric said:


> ...
> 
> Very glad I elected to go DC rather than the hybrid DC/DB plan. *I am telling fellow employees in the DB plan to discount whatever annual pension amount appears in their annual statements, by the degree of the underfunding*. * Sadly, the underfunding is the highest of any large pension plan in the country, measured in terms of percentage of EBITDA*.


 ... is this under-funded plan on the regulator's radar? How did you find out about the % of underfunding?


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## Beaver101 (Nov 14, 2011)

sags said:


> If a DB fund is wound up, the employer must pay the underfunded amount, so the only way a DB pension plan fails to pay the full benefits is if the company goes bankrupt.
> 
> Nortel went bankrupt, so if your current employer is on the verge of bankruptcy there is a risk to full benefits. If they aren't going bankrupt there is no current risk.
> 
> ...


 ... in what way has legislation changed? To protect future pensioners of companies going bankrupt, in the private sector that is.


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## sags (May 15, 2010)

The changes involved time allowances to fund pension deficits and continual monitoring by the regulator.

There were also changes that grouped pension contributions for the year of bankruptcy with unpaid wages, which gave them a superior ranking to debt holders.

Pension underfunding still remains unsecured debt and will rank with other unsecured debt holders.

A good summary is located here.

http://advisors.td.com/public/projectfiles/8b17c2af-70cc-4758-b52c-28e30bd60778.pdf


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## james4beach (Nov 15, 2012)

The OP's question is a great one, and of course a justified concern. I'm sorry to hear you went through the Nortel experience before. It's very understandable that you are highly critical of the promises of a pension. I would be too.

Whatever statements you're getting are quite important. Read them in great detail, including all the footnotes. Get a good understanding of what exactly the statement is showing you. For example, is the statement produced by Sun Life? What assets does it show? What are the *exact* holdings? Are they mutual fund units, or what? Is there a clear indication of how many units of what you own? Do you see the number of units increase by the appropriate amount each period?

I think a critical thing here is to check that the statement is produced by Sun Life. Are you seeing Sun Life-produced statements of your _exact_ holdings? If so, I don't think you have to worry about a Madoff situation. He produced bogus statements and made up all the numbers on them. It's very unlikely that a huge company like Sun Life would be doing that.

I'd be happy to help you out with this. Feel free to send me a private message. Maybe you can show me a scan of one of the statements (erase all personal details) and I'd be happy to study it and give you feedback.

The delays in deposits appearing are probably because your company is having cashflow problems and struggles to find the cash to send out to Sun Life. So your company probably delays it as it scrambles each cycle to find enough cash to pay what it has to. I think the money is actually much safer once it gets to your trust account at Sun Life. Look for evidence in your statements that the # of shares of whatever you own actually increase as a result of incoming cash. If your company does eventually fail and default on obligations, they might fail to pay the paycheques and NEW pension contribution. However I think the existing pension, in your account, is safe at that point.


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## fraser (May 15, 2010)

Your DC plan is safe. It is yours.

The db plan funding varies with the date of valuation-usually once every two or three years. The funding level is often presented as to numbers- a plan windup number and a going concern number. My guess is that if your plan was valuated two years ago, the funding levels may have dropped slightly even if the employer had been making the requisite deposits to the plan.


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## Beaver101 (Nov 14, 2011)

fraser said:


> Your DC plan is safe. It is yours.
> 
> The db plan funding varies with the date of valuation-usually once every two or three years. The funding level is often presented as to numbers- a plan windup number and a going concern number. * My guess is that if your plan was valuated two years ago, the funding levels may have dropped slightly *even if the employer had been making the requisite deposits to the plan.


 ... still doesn't answer the question of role of regulator(s) on private pension plans when Electric can state:


> Quote Originally Posted by Electric View Post
> 
> ...
> 
> Very glad I elected to go DC rather than the hybrid DC/DB plan. I am telling fellow employees in the DB plan to discount whatever annual pension amount appears in their annual statements, by the degree of the underfunding. *Sadly, the underfunding is the highest of any large pension plan in the country, measured in terms of percentage of EBITDA*.


 ... too big to fail?


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## Beaver101 (Nov 14, 2011)

RBull said:


> Electric, I believe you are worried with no cause. However call Sun Life, using your plan member number to confirm the assets of your contributions along with your employers and answer your questions.
> 
> I agree with others that almost certainly they are intact at SunLife in trust and are invested in whatever choices you made. *This is one of the benefits of defined contribution plan with a third party trustee and plan administrator*, and receiving statements that regularly show actual balances. Sunlife is not going to make investments with an IOU from your employer, and *they are legally bound to hold all of your assets in trust, and operate in accordance with the plan guidelines/provincial statutes*. ...


 ... does this mean SunLife as a "pension plan administrator" has a fudiciary duty to answer *all of the member's pension questions* and not simply provide plan members with quarterly/annual DC mutual funds statements?


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## Eclectic12 (Oct 20, 2010)

Electric said:


> Thanks. Yes, fully understand the difference in the employer obligation wrt DB vs. DC.
> What I have noticed is that the deposits, which a few years ago came like clockwork 3 business days after payday, are now erratic.


Which I believe confirms that over-due employer payments are the source of risk of funds not being there ... the $$$ are in Sun Life products so I'd expect that once the $$$ are in the account, they are beyond the employer's reach.




Electric said:


> I guess one of the factors that had me worried is that when I asked if I could transfer these assets to a LIRA at my bank, the answer was that I have to leave them in place at Sun Life until I quit. So I started asking myself whether the money is truly mine, and if it really exists.


Part of what keeps the cost for the employer down is Sun Life knowing they will have $$$ directed to their products. Allowing money out at any time or whim would change this.




Electric said:


> So why is that, exactly? If it is the case that the employer simply makes the deposits and it is out of their hands, why can't I nominate a LIRA at any FI I want, in exactly the same way that I have my paycheque deposited to any bank I want?


From a company and Sun Life perspective ... allowing transfers at a whim cuts down on the economy of scale and profits.




Electric said:


> Most employers don't contribute any more, pension plans are pretty much a creature of the public sector now. I would prefer to be paid the money so I can invest it in whatever way I choose, in an account over which I have sole control.


This is not true ... in fact, a poster here outlined his wife's pension at a bank where there only employer contributions with zero employee contributions. I don't know if some of the other posters who have mentioned this type of plan have confirmed if the plan is still running.

From talking to the people still working for at minimum two companies I used to work at, the employer is contributing.

Then too, I can recall an article (I'll post the link if I find it again) where a pension consultant was shaking his head about the voluntary contribution pensions where employees were missing out on the employer matching contributions. It was a Canadian article where I can find the US number pegged at $24 billion.

The pension landscape has definitely changed ... but it is a long way off from "Most employers don't contribute ... ".




Electric said:


> I have no evidence of the "cannot raid the piggy bank" part, all I have is a glossy brochure that looks exactly the same as the glossy brochure I had at Nortel. The contract my employer has with Sun Life is none of my business.





> Overview
> all pension plans in the province must be registered with the Superintendent
> a plan must have an administrator
> the administrator has a statutory duty to exercise care, diligence and skill
> the plan may be either defined benefit or defined contribution, and appropriate rules are in place to protect the benefits that have accordingly accrued to each member


https://en.wikipedia.org/wiki/Pension_regulation_in_Canada

The question is what province or Federal legislation is the pension under and what are the DC rules.

SunLife is administrator for many different companies where each has to be registered with the appropriate gov't authority. Unless it is some rogue employee at SunLife that their systems don't catch, I don't see why they would risk the regulator takes away the rest of their pension business by financial monkey business.




Electric said:


> So, I can envision some financial engineering that goes like: Hey Sun Life, we will enter into a forward contract to buy 200 000 units of the unlisted TD Bank S&P500 fund in 2019 after the company crisis is over ...
> The employees can't withdraw the assets anyway ...


Employees can't ... former employees can, which in most companies ... happen all the time. If the company is in as much trouble as you think, the rate of employee departure might be accelerating.




Electric said:


> Oh, I have called the cotomer sevis line many times in the past. They don't even know how to send me a computer file containing my contributions so that I can import them to Quicken. Have escalated that one at least three times, they never follow up.


LOL ... you really think SunLife back office computers are geared towards writing everything out in Quicken format?

The mid-sized Canadian insurer I worked for was always looking to keep costs down. The data transfer one part of the company's systems to another was to write a tape in digital equipment format on the IBM machine then mount it on the digital tape system to read (and visa versa).

The new CEO's commitment to changing this stopped dead when after the proof of concept was accepted, the "phase one" costs for conversion were estimated at a bit over double the yearly profits.

Once the system is there, inertia and cost stop a lot of changes.


Cheers


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## Eclectic12 (Oct 20, 2010)

Electric said:


> Where do the employees end up in the hierarchy of claims, though?


As the few DB pensions of bankrupt companies have indicated ... if not last in line, not much before last in line.


Cheers


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... still doesn't answer the question of role of regulator(s) on private pension plans when Electric can state:
> 
> 
> > Sadly, the underfunding is the highest of any large pension plan in the country, measured in terms of percentage of EBITDA.


There's not enough detail to figure out much of anything, including whether this DB pension has made the regulator's radar. Nor is it clear what the source is.

On hand, the statement is 


> The DB plan underfunding is about two years of EBITDA.


On the other hand, the Canadian-owned ratings agency DBRS did a report that said:



> ... *only 12 Canadian funds were below 70 per cent funding, and none fell below 55 per cent * ...
> At the top of the worst-funded list was Ontario Power Generation, which has a pension deficit of $3.3 billion, followed by Air Canada, which has a deficit of $3.2 billion.


http://www.cbc.ca/news/business/many-pension-plans-dangerously-underfunded-report-claims-1.1406105

It would appear that based on relatively recent history, for the statement that the "underfunding is the *highest of any large pension plan in the country *" to be true, the EBITDA has to be on the order of $2 Billion a year. 

Keep in mind ... the under funding is not set in stone either. The article itself says 


> Wideman admits that given climbing interest rates in the past few weeks, pension plans are looking much better.
> "If we were to do our study again for June 30th, most of the companies would probably have 6 to 8 per cent higher [solvency] percentages."


It is not clear Air Canada is the winner today as according to this article, the Jan 2014 valuation was coming in that the estimated $3.7 billion shortfall of 2013 had been wiped out.
http://www.cbc.ca/news/business/air-canada-3-7b-pension-deficit-eliminated-1.2506476


Cheers


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> As the few DB pensions of bankrupt companies have indicated ... if not last in line, not much before last in line.
> 
> 
> Cheers


 ... i.e. no DB plan is "guaranteed".


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> ...
> Keep in mind ... the under funding is not set in stone either. The article itself says
> 
> 
> ...


 ... pretty amazing, a 360 degrees turnaround in one year ... in a low interest rate environment or was the stock market that bullish on AC's pension investments? Who verifies these things anyways?


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## peterk (May 16, 2010)

This is one of those "can't do anything about anyways" situation Electric.

I agree that the delayed contributions is good evidence from your own eyes that the money is actually there. Although quirky evidence. If your company and Sunlife had an alternate arrangement where the funding was not provided up front, then this wouldn't be happening.

Really, who are you going to phone to get an answer that satisfies you? Certainly not the Sunlife rep, or his boss or his or his... Maybe the VP? or CEO?

If I were paranoid level concerned, I would get chummy with your company's procurement/account payable workers and get them to show you how the company pays it's bills.

Of course they won't do that.

I think you're only real hope for closure is to scheme for a transfer from your current position to the accounting department, work your way up there for many years to find out all the workings and secrets, and eventually become the person at your company who is in direct control of the fund transfers and communications to Sunlife. Then you can finally be at peace.

edit: I'm just ribbing you a bit... skepticism of every and anything in this day and age is justified, IMO.


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## Electric (Jul 19, 2013)

Eclectic12 said:


> There's not enough detail to figure out much of anything, including whether this DB pension has made the regulator's radar. Nor is it clear what the source is.


The source for the EBITDA is the audited financial statement from year end 2014, and the latest documentation received from the pension administrator, for the funding deficit.

The funding deficit, based on the most current information, is 2.88 years of EBITDA. 

It is not too important where that ranks in terms of companies, and I'd encourage you not to focus on that. What is important is that the underfunding is multiples of EBITDA and that is an excellent reason for a DB plan participant to be worried.


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... i.e. no DB plan is "guaranteed".


Sure ... with all the press, one would think DB pensions were bankrupting companies like flies. Yet I seem to recall an article saying that in the '70's, only 37% of private workers had a DB pension where at the article's date - this had dropped to 12%.

Definitely an issue but far short of the implied "100% to 12%" that some articles imply.





Beaver101 said:


> ... pretty amazing, a 360 degrees turnaround in one year [for the Air Canada DB pension] ... in a low interest rate environment or was the stock market that bullish on AC's pension investments?


You might want to read paragraph 2 of the article ... one of the other factors was cutting the benefits to be paid.

Then too, 


> The airline estimated that every 10-basis-point increase in the discount rate decreases the pension plan's liabilities by about $150 million.





Beaver101 said:


> ... Who verifies these things anyways?


If it is on cycle, I'd expect an actuary to be involved (things like mortality rates etc. play into the future liabilities). If it's off cycle, they might have hired the actuary anyway (if they expect someone to question it).


Cheers


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## Electric (Jul 19, 2013)

peterk said:


> This is one of those "can't do anything about anyways" situation Electric.


Actually I have an end-of-the-world retirement planning spreadsheet where the DC assets are heavily discounted.



> If I were paranoid level concerned,


I'd expect my paranoia is a product of my experience with Nortel. I know people who are experiencing retirements that are not anything like what they had planned them to be. 



> edit: I'm just ribbing you a bit... skepticism of every and anything in this day and age is justified, IMO.


I was going to note that the EBITDA number I got from the annual report was audited. In exactly the same way that Enron's annual reports were audited.  The truth is out there.


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## Beaver101 (Nov 14, 2011)

Electric said:


> ...
> 
> I'd expect my paranoia is a product of my experience with Nortel. I know people who are experiencing retirements that are not anything like what they had planned them to be.
> 
> I was going to note that the EBITDA number I got from the annual report was audited. In exactly the same way that Enron's annual reports were audited.  *The truth is out there*.


 ... +1. (Short of being accused of being a conspiracy theorist).


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> Sure ... with all the press, one would think DB pensions were bankrupting companies like flies. Yet I seem to recall an article saying that in the '70's, only 37% of private workers had a DB pension where at the article's date - this had dropped to 12%.
> 
> Definitely an issue but far short of the implied "100% to 12%" that some articles imply.
> 
> ...


 ... how about reading from the Auditor General (Ontario)'s office?

http://www.auditor.on.ca/en/reports_en/en14/303en14.pdf



> .. *Summary
> *The growing level of underfunding in definedbenefit pension plans in Ontario is a significant concern (underfunded plans are those that would have insufficient funds to pay full pensions to their 2.8 million members if they were wound up
> immediately). * As of December 31, 2013, 92% of Ontario’s defined-benefit plans were underfunded, compared to 74% as of December 31, 2005. Over the same eight-year period, the total amount of underfunding of these plans grew from $22 billion to $75 billion*. ...





> ... The information provided by plan administrators and made public by FSCO would be of little use to plan members for assessing and comparing the performance and administration of their pension plans with other plans or relevant benchmarks; nor would members find it of value in assessing whether FSCO had adequately protected their interests.* Although the trend in claims has improved, it is uncertain whether the province’s Pension Benefits Guarantee Fund (PBGF), designed to protect members and beneficiaries of single-employer definedbenefit plans in the event of employer insolvency, is itself sustainable. *The PBGF was intended to be self-financing through annual premiums charged to pension plans; since the plan’s inception in 1980, however, the government has provided a total of $855 million in loans and a grant to help cover claims payouts of $1.4 billion. *The PBGF has no legal obligation to pay claims in excess of its available assets.
> *
> A $500-million grant in 2010, along with increases in premium rates introduced in 2012, have helped the PBGF’s financial position; it had a $375-million surplus as of March 31, 2014. *However, in the event of another economic downturn, this surplus would be quickly exhausted given that the cumulative deficits of pension plans covered by the PBGF as of March 31, 2014, were almost $28.9 billion. This represents an increase of more than 400% since 2008—even though the number of pension plans covered actually dropped by 19%.* ...


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## Eclectic12 (Oct 20, 2010)

Electric said:


> The source for the EBITDA is the audited financial statement from year end 2014, and the latest documentation received from the pension administrator, for the funding deficit.
> 
> The funding deficit, based on the most current information, is 2.88 years of EBITDA.


So is it you that is making the translation?
Or is there company material, publishing this info?

Any DB pension that I've had access to has reported deficits that the employer needs to top up has used a dollar amount. I'd have to check the details again but what I recall from 2008 was "$10 million needed, doing it as three payments as the markets could recover" and when all was said/done, $6 million is what was contributed by the employer, nothing since.




Electric said:


> It is not too important where that ranks in terms of companies, and I'd encourage you not to focus on that.


Then why muddy the waters by throwing out the claim "... _the underfunding is the highest of any large pension plan in the country, measured in terms of percentage of EBITDA_"?

Surely this is a situation where understanding the sources, what is being done and how likely the plan will work are far more important.




Electric said:


> ... What is important is that the underfunding is multiples of EBITDA and that is an excellent reason for a DB plan participant to be worried.


Absolutely ... but as indicated above, today's $10 million top up "needed" may end up being the future's experience of $6 million needed. Without knowing a lot more details, one can easily jump to conclusions where looking in the rear view mirror shows a significantly different story. 

As a case in point ... my dad's employer in the mid 80's was making blanket statements that the DB pension was going bankrupt where it could only last another ten years. When the employees balked and the real numbers came out, the "deficit" was smoke and mirrors for the company redirecting funds elsewhere. He collected for something like fifteen years until his death and mom is approaching collecting for longer than he did.

If the employees had not kept their wits about them to notice discrepancies ... blindly following the company would have meant no DB pension.


Then too, from what I recall, the employer contributions as well as top ups to provide the benefits are an expense that reduces the income (and income tax to be paid) for the employer.


Bottom line is that it is a complicated situation where I'd want to be sure of the details.


Cheers


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... how about reading from the Auditor General (Ontario)'s office?


Will do ... but I believe those administering DB pensions reported for the same time frame that their clients as of December 31, 2013 had improvements in the solvency ratios by 24% or so from the previous year. I'm sure with the current slide in equities, there is a drop right now but clearly the % of funding is volatile. 

I will have to find the article again but I seem to recall the "more than fully funded" DB pension category as having a 20+% jump.


Though I thought you were looking for the deals of how Air Canada's DB pension could have such a large swing ... which several factors are included in the article.


Cheers


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## RBull (Jan 20, 2013)

Beaver101 said:


> ... does this mean SunLife as a "pension plan administrator" has a fudiciary duty to answer *all of the member's pension questions* and not simply provide plan members with quarterly/annual DC mutual funds statements?


You'll have to research that yourself. 

In my experience plan members are encouraged to contact the plan administrator are encouraged to contact them to answer their questions.


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> ...
> 
> *Though I thought you were looking for the deals of how Air Canada's DB pension could have such a large swing ... which several factors are included in the article.
> *
> ...


 ... will have another read at that article but for funding to change from a deficit to surplus in a year seems pretty ... hard to believe.


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## Beaver101 (Nov 14, 2011)

RBull said:


> You'll have to research that yourself.
> 
> In my experience plan members are encouraged to contact the plan administrator are encouraged to contact them to answer their questions.


 ... huh???.. why bother contacting the plan administrator when I have to research for the answers to the questions?


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... will have another read at that article but for funding to change from a deficit to surplus in a year seems pretty ... hard to believe.


Paragraph two starts ...


> The airline says several factors contributed to the turnaround, including ...


More likely it's info their pension administrator/consultants provided.


Cheers


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## sags (May 15, 2010)

_The PBGF has no legal obligation to pay claims in excess of its available assets._

I think this statement is a little misleading.

As I remember, when GM was declaring bankruptcy and the pension fund was underfunded the immediate reaction from the McGuinty government was there was no legal obligation to pay the pensions which would have exceeded the funds in the PBGF.

Subsequently, after being informed a lawsuit would be filed, (GM had paid 25 years worth of insurance premiums into the insurance fund) the government consulted their lawyers and were told that Ontario couldn't arbitrarily decide they wouldn't pay the benefits and would have to declare bankruptcy to avoid further funding of the PBGF.

Faced with the prospect of having to pay pension payments to tens of thousands of retirees for decades, and receiving nothing back..........the Ontario government sought a more palatable solution.

The compromise was the Ontario/Federal governments provided repayable loans and bought shares in the new GM to avoid an inevitable lawsuit. The money was specifically directed towards the pension fund.

As part of the "bailout" agreement, the GM pension fund agreed to further exclusion from the PBGF, and it remains excluded today in specific legislation that was enacted.

Unless the law was changed since that time, it would appear the auditor general is using a play on words. 

The PBGF had no obligation beyond it's fund proceeds, but the Ontario government did have the obligation to inject sufficient capital into the PBGF so that it could pay the liabilities.

_The Pension Benefits Guarantee Fund (PBGF) was established in 1980 under the Pension Benefits Act and provides protection, subject to specific maximums and exclusions, to Ontario members and beneficiaries of single-employer-sponsored defined-benefit pension plans in the event the plan sponsor becomes insolvent. 

The PBGF does not cover certain types of small plans (for example,“individual pension plans,” which include plans of up to three members); all multi-employer and jointly-sponsored defined-benefit plans; or large
plans listed in the regulations to the Pension Benefits Act sponsored by named private or government employers, including the Ontario government, several municipalities, General Motors of Canada Ltd., and certain plans of Essar Steel Algoma Inc.; or any defined-contribution pension plans._


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## james4beach (Nov 15, 2012)

Can someone remind me, does a DC pension amount to more or less the same thing as having an RRSP with employer matching contributions?

I understand they are different structures, I just wonder if the net benefit to the employee (what you get out of it long term) is more or less just as good with an RRSP +matching, as the DC plan?

I've only ever experienced the RRSP/401k-plus-employer-match, and I'm wondering if I'm missing out on DCs.


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## Eclectic12 (Oct 20, 2010)

I haven't investigated ... but I believe the key difference is that the DC pension employer contributions + growth have to go into a LIRA. I am not sure this is the case with the RRSP with employer matching contributions.

Otherwise ... the DC pension, like most Group RRSPs I've had access two - force the employee to use the contracted administrator (ex. only SunLife funds where a sub-set has been contracted for). Worst case for DC pension restrictions was one I was offered with four choices.


AFAICT ... the net benefit depends on contribution rates and what is available for choices as well as expenses. I don't believe there is a big difference in terms of net benefit based on structure. In both cases, whether everything tanks or is middle of the road or has fantastic growth ... what one has is what one has.


Cheers

*PS*

From a quick bit of searching, another difference is that employer RRSP matching - it seems that the employer contributions are subject to payroll tax. Where it is a DC pension, the employer contributions are not subject to payroll tax.


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## Beaver101 (Nov 14, 2011)

> *Eclectic12:* I haven't investigated ... but I believe the key difference is that the DC pension employer contributions + growth have to go into a LIRA. I am not sure this is the case with the RRSP with employer matching contributions.
> 
> Otherwise ... the DC pension, like most Group RRSPs I've had access two - force the employee to use the contracted administrator (ex. only SunLife funds where a sub-set has been contracted for). Worst case for DC pension restrictions was one I was offered with four choices.
> 
> ...


 ... more flexibility (control) and choices in type of investments (eg. individual stocks, ETFs, market-linked GIC, HISA) wtih an individual RRSP versus a group RRSP vs a DC plan. The latter 2 are severely limited on investment choices (limited to mainly mutual funds) available to/from the plan sponsor (your employer).


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## sags (May 15, 2010)

In the news today..........Sun Life has taken over two pension plans and combined them. They were paid by the companies for the longevity risk, and will pay the company who will pay the retirees.

It would appear that Sun Life is heavily involved and interested in administering pensions.

The second bit of news is that the ORPP will start on January 1, 2017 for big employers and then roll out for a number of years to smaller employers.

One of the statements were that alternate pension plans would have to be "substantial" (whatever that means) to avoid the requirement of being included in the ORPP.

I would guess that a company that gives it's employees a $1000 a year GIC isn't going to be considered substantial.

The ORPP will start with a 1.9% employee and 1.9% employer contribution level. The fund will be administered by a third party. The fund will have spousal benefits and have a target replacement of 15% up to $90,000 income. (almost twice as much as the CPP to limit). Retiree benefits will be indexed to inflation.


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## Beaver101 (Nov 14, 2011)

sags said:


> The second bit of news is that the ORPP will start on January 1, 2017 for big employers and then roll out for a number of years *to smaller employers. ...
> *
> The ORPP will start with a 1.9% employee and 1.9% employer contribution level. The fund will be administered by a third party. The fund will have spousal benefits and have a target replacement of 15% up to $90,000 income. (*almost twice as much as the CPP to limit). *Retiree benefits will be indexed to inflation.


 ... it remains to be seen if this new ambitious provincial pension scheme is going to be sustainable for smaller employers, provided they're still in business.


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## naysmitj (Sep 16, 2014)

Survival will require a reduction of all employees wages by 1.9%, as the money will still be theirs. That way, everyone wins.


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## Beaver101 (Nov 14, 2011)

naysmitj said:


> *Survival will require a reduction of all employees wages by 1.9*%, as the money will still be theirs. That way,* everyone wins*.


 ... before or after "minimum wage" with the smaller employers? The only winners are for those who came up with the scheme and keeping it afloat.


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... more flexibility (control) and choices in type of investments (eg. individual stocks, ETFs, market-linked GIC, HISA) wtih an individual RRSP versus a group RRSP vs a DC plan.


The choice of what RRSP is setup may expand the flexibility ... or not. 

The types who want the wide choice likely will choose appropriately, those in a hurry or following the advice of a financial institution rep may be more limited. The examples can range from the small end (GICs/HISA/four MFs), the mid-range (a couple of hundred MFs) to what you are describing, the top end (GICs/Bonds/stocks/traded HISAs/ETFs/1000's+ MFs). 




Beaver101 said:


> ... The latter 2 are severely limited on investment choices (limited to mainly mutual funds) available to/from the plan sponsor (your employer).


Usually the plan sponsor (employer) contracts with a financial institution where depending on what the employer wants to spend, the choices can be as broad as whatever the financial institution offers or be a sub-set (ex. pick from these four where the financial institution offers hundreds).


Where the employee benefits includes a DC pension and Group RRSP, most of the time that I've seen the offerings - they are pretty much the same. Once I did see the Group RRSP offer more choice than the DC pension.


Bottom line is that YMMV in terms of choices. In terms of "what do I get at retirement" - they are the same in that whatever the funds are worth when one needs to start withdrawing is what one will have.


Cheers


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> ...
> 
> Usually the plan sponsor (employer) contracts with a financial institution where depending on *what the employer wants to spend*, the choices can be as broad as whatever the financial institution offers or be a sub-set (ex. pick from these four where the financial institution offers hundreds).


 ... the range of investment choices is not dependent on what the employer wants to spend since the DC or group RRSP investment monies are funded mostly by the employee. Perhaps only the administration costs for the basket of investments available from the contracted financial institution would be beared by the employer and these would be just operational costs anyways. 



> Where the employee benefits includes a DC pension and Group RRSP, *most of the time that I've seen the offerings - they are pretty much the same*. Once I did see the Group RRSP offer more choice than the DC pension.


 ... true, only mutual funds and GICs. 



> Bottom line is that YMMV in terms of choices. In terms of *"what do I get at retirement" - they are the same in that whatever the funds are worth when one needs to start withdrawing is what one will have.
> *
> Cheers


 .. true too, with DC and group RRSPs, the amount you get in your retirement from these plans are soley dependent on the performance of these "investments" ... if XYZ fund's performance had been +10% in the past 10 years, great but if XYZ fund's performance had been -10% in the past 10 years, not so great. One can't exactly move it out of XYZ's fund and invest in say, APPL, (or Nortel) or XIC... ie. no flexibility in investment choices under DC and group RRSPs, perhaps for a reason of so-called fudiciary duty(?) of the plan sponsor for these plans, if not a derisking mechanism?


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## naysmitj (Sep 16, 2014)

Beaver101 said:


> ... before or after "minimum wage" with the smaller employers? The only winners are for those who came up with the scheme and keeping it afloat.


If the employees are at minimum wage, survival will require decreasing head count.


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... the range of investment choices is not dependent on what the employer wants to spend since the DC or group RRSP investment monies are funded mostly by the employee. Perhaps only the administration costs for the basket of investments available from the contracted financial institution would be beared by the employer and these would be just operational costs anyways.


So my employer who contributes nothing to the Group RRSP and possibly the administrator, decided on a whim that where the administrator had six hundred plus (probably in the thousands) of MFs to go with thirty or so?

Moving along to the DC pension, the Canadian arm of a top multi-national plus the administrator similarly decided *four* MFs (one MM, one Canadian equity, one US equity and one Canadian bond) was the way to go? 

BTW, the documentation clearly outlined that the DC pension was 1% of my income from me and 1% from the company, for that DC pension.


It seems a flimsy reason to risk a lawsuit.




Beaver101 said:


> ... true, {in Group RRSPs or DC pensions} only mutual funds and GICs.


I don't recall any GICs being available in the DC pensions. The Group RRSP is a possibility ... I stopped using the Group RRSP when I figured out that I could avoid the limitations and get pretty much the same benefit from contributing to my individual RRSP where a "T1213 Request to Reduce Tax Deductions at Source" was filed.




Beaver101 said:


> ... true too, with DC and group RRSPs, the amount you get in your retirement from these plans are soley dependent on the performance of these "investments" ...
> One can't exactly move it out of XYZ's fund and invest in say, APPL, (or Nortel) or XIC... ie. no flexibility in investment choices under DC and group RRSPs ...


For the Group RRSP ... while in the Group RRSP, the choices for switching are limited (hence the concern about limited number of funds). Where one is willing to pay the transfer fee, I've always had the choice of moving the investment or it's proceeds to my individual RRSP. I've never had employer matching at the Group RRSP level.

For the DC pension, YMMV. I have never personally had the choice of transferring anything out of a DC pension but others have posted on CMF that their DC pension has a holding period then their contributions can be sent to their individual RRSP.


Like a lot of other financial products such as a mortgage, YMMV.


Cheers


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## fraser (May 15, 2010)

Our DC and group RSP's at Sun Life provided us with about eight investment fund options. I saw the stats at one point. It was surprising at how few people actually made changes to their investment allocations after they were originally selected.

WHen I retired I was given about two years to move the funds from the group management (lower admin cost) to an individual account. I chose to move them all away from Sun Life and consolidate with another management firm.


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## Beaver101 (Nov 14, 2011)

naysmitj said:


> If the employees are at minimum wage, survival will require decreasing head count.


 ... so who wins? employees or employer? neither to me.


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## Beaver101 (Nov 14, 2011)

fraser said:


> Our DC and group RSP's at Sun Life provided us with about eight investment fund options. I saw the stats at one point. *It was surprising at how few people actually made changes to their investment allocations after they were originally selected.
> *


 ... maybe it's because 1. the administrator do "charge" for switches, and 2.employees are told not to look at short-term performance or rather the funds needed 10 years to work their "magic" (eg. 20% ROR). 




> WHen I retired I was *given about two years *to move the funds from the group management (lower admin cost) to an individual account. I chose to move them all away from Sun Life and consolidate with another management firm.


 ... were you given a choice just to leave the funds there? or were 2 years the max before the boot?


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## Eclectic12 (Oct 20, 2010)

Retirement seems like an optimal time to pay any penalties to transfer all the assets (or proceeds) to be 100% under one's own control with as wide a choice range as possible.

In my case for the Group RRSP funds, I waited for a while but as my conclusion was I did not like the limitations, I gritted my teeth while paying the transfer out fee. It's pretty dumb as every six months I receive a letter that confirms I have $0 with articles/write ups aimed at getting me to put money in.

The worse one was the broker for my mom who send letters for something just under or over a decade saying she has $1.76 left in the account. 


Cheers


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... maybe it's because 1. the administrator do "charge" for switches ...


YMMV ... from what I recall of the MFs in the DC pensions I was offered - a long as one met the holding period (30 days for MM, 90 days for anything else), there was no "admin switch fee".

I have no details for fraser's situation so I leave any clarification to those that know.




Beaver101 said:


> ... were you given a choice just to leave the funds there?


Interesting idea ... I thought the "two years to decide" implied the boot was coming.


Cheers


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> ...
> The worse one was the broker for my mom *who send letters for something just under or over a decade *saying she has $1.76 left in the account.
> 
> Cheers


 ... IMO, that's a good broker - he's doing his job.


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## Eclectic12 (Oct 20, 2010)

That works out to a fairly big expense for essentially a dormant account. I am also not sure quarterly letters are needed.


Cheers


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> That works out to a *fairly big expense for essentially a dormant account*. I am also not sure quarterly letters are needed.
> 
> 
> Cheers


 ... so it's part of doing business - the broker gets to expense it. So what happens to your mom's dormant account if the broker hadn't sent those statements/reminders to her? You need to keep in my she still has $1.76 in her account. 

Or take your case, where "... It's pretty dumb as every six months I receive a letter that confirms I have $0 with articles/write ups aimed at getting me to put money in." ... did you tell your broker "hey dumbsh1t, why are you wasting money sending me writeups when there's $0 in my account or I don't have any business with you anymore"?


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## fraser (May 15, 2010)

No, there were no charges for changing allocations in our program. Issue is very straightforward. Many people are very cavalier, lazy, whatever about their pension funds. Heck, something like 30 percent of employees will not even join their company DC plan and thus not only walk away from a retirement program but also walk away from the company match-often as much as 5, 7 or more percent. I could never understand this. As a manager, I would encourage DB participants to sign up for the optional DC component which included a small company match. Free money. Many did not participate.

In my case I could have left the funds with Sun Life. But, I would have paid a higher management fee on the funds. It was a small amount since the DC plan was an optional add on to our DB plan. It made sense for me to move it.


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## sags (May 15, 2010)

My son and his fellow workers have already gained, as their employer decided to start their own pension fund so they don't have to participate in the ORPP.

The employer is paying their share and giving the employees a raise to cover the combined 8% contribution rate. The plan cost the employee $0 extra, so they can still save their own money.

Instead of complaining, maybe the CFIB should advise their members to consider starting their own fund.


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## Beaver101 (Nov 14, 2011)

fraser said:


> No, there were no charges for changing allocations in our program. Issue is very straightforward. * Many people are very cavalier, lazy, whatever about their pension funds*. Heck, *something like 30 percent of employees will not even join their company DC plan and thus not only walk away from a retirement program but also walk away from the company match-often as much as 5, 7 or more percent. I could never understand this.* .


 ... maybe these folks are living from paycheque to paycheque, paying off student loans, or SUV or whatever big ticket toy or a second mortgage for the cottage or multiple RESPs?



> As a manager, I would encourage DB participants to sign up for the optional DC component which included a small company match. Free money. Many did not participate.


 ... you did your job but looks like your HR didn't (or were you in HR)?



> In my case I could have left the funds with Sun Life. *But, I would have paid a higher management fee on the funds.* It was a small amount since the DC plan was an optional add on to our DB plan. It made sense for me to move it.


 ... so it wasn't a boot. Agree your reasons here makes sense for the move.


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## Beaver101 (Nov 14, 2011)

sags said:


> My son and his fellow workers have already gained, as their employer decided to start their own pension fund so they don't have to participate in the ORPP.
> 
> *The employer is paying their share and giving the employees a raise to cover the combined 8% contribution rate. The plan cost the employee $0 extra, so they can still save their own money.*
> 
> Instead of complaining, maybe the CFIB should advise their members to consider starting their own fund.


 ... this would work nicely when the employer is in a high demand industry (eg housing, construction) but when there is a downturn in the sector, it will be interesting to see how smaller employers upkeep the funding of their pension plan. I think a viable solution is to allow RRSPs be topped up.


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## Eclectic12 (Oct 20, 2010)

On one hand, you have employees *today* who all they need to do to collect employer contributions *doubling* their money to a % of their income is to signup/"just do it". The employer experience is that these people *do not participate* unless forced to, losing out on significant retirement funds.

On the other hand ... RRSP contributions will be a solution?


Somehow, I'm doubting it will fix much.


Cheers


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## Beaver101 (Nov 14, 2011)

Eclectic12 said:


> On one hand, you have employees *today* who all they need to do to collect employer contributions *doubling* their money to a % of their income is to signup/"just do it". *The employer experience is that these people *do not participate* unless forced to, losing out on significant retirement funds.*
> 
> On the other hand ... RRSP contributions will be a solution?
> 
> ...


 ... so you think mandatory contributions to an ORPP is truly going to benefit employees of small businesses? Or that the provincial government really care about the financial health of the small businesses' sector or their employees for that matter?


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## Eclectic12 (Oct 20, 2010)

IMHO ... being critical of a solution as only some employers can afford it then touting as "viable" a solution that few people use despite lucrative incentives to do is short sighted at best.

It misses that AFAICT the problem will be the same, only the wrinkles will change ... regardless of any guesswork or assumptions.


Cheers

*PS*

Where US DC pensions were changed to require the employee to opt out of contributions, the contribution rate went up. Running education sessions highlighting that by contributing, one would double their retirement stash did nothing to change the contribution rates.

Regardless of the account or plan ... making it voluntary is a recipe for less people using the program.


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## Electric (Jul 19, 2013)

Eclectic12 said:


> This is not true ... in fact, a poster here outlined his wife's pension at a bank where there only employer contributions with zero employee contributions. I don't know if some of the other posters who have mentioned this type of plan have confirmed if the plan is still running.
> 
> From talking to the people still working for at minimum two companies I used to work at, the employer is contributing.


You are entitled to your opinions, but you are not entitled to your own facts. As of 2006, the statistics were:

All employees, both sectors: 15 043 000

of which, Public sector: 3 262 000
of which, having DB plan, 2 551 000 (78%)
of which, DC, 132 000 (4%)

Private sector: 11 781 000
of which, DB, 2 031 000 (17%)
of which, DC, 767 000 (7%)

Note that about four out of five employees in the public sector are covered by a DB plan. The corresponding figure for the private sector is one in six.

Also, you can see that 82% of public sector employees had a pension plan at the time, whereas only 24% of private sector workers did.

I would be shocked if the private sector situation had not deteriorated over the past ten years.

It is an irrefutable fact that pension plans are largely a creature of the public sector today.


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## fraser (May 15, 2010)

I had a hybrid plan. It was a DB plan with an optional DC component.

The company funded. 100 percent of the DB plan. Full pension payout at 62. No employee contributions whatsoever. The other usual bridge benefits depending on age/service.

The optional DC component allowed us to place up to 3 percent of our salary into a DC plan. The company match was 50 percent of whatever we contributed. The monies could only be used to purchase enhancements to the DB plan such as indexing,etc.

The plan was discontinued in 2010. Pensions will be paid but as of that date people were moved to the DC plan. The plan had been closed to new hires since 2001. Employer made significant catch up payments over the past few years to ensure 95-101 percent funding.

My sister was a teacher in BC. In her final years she was paying slightly less than 12 percent of her salary into their DB pension plan. A significant amount.


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## RBull (Jan 20, 2013)

Beaver101 said:


> ... huh???.. why bother contacting the plan administrator when I have to research for the answers to the questions?


You missed the point. I cannot answer your question about the fiduciary duty, although I doubt that very much. You'll have to research that yourself. 

To repeat: In my experience plan members are encouraged to contact the plan administrator to answer their questions. We even had numerous seminars conducted by the administrator.


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## fraser (May 15, 2010)

My experience is that you cannot depend entirely on your pension plan administrator to give you good data.

In my case pension plan administration was outsourced to a well know third party pension administrator. Not certain what level of service my employer contracted this outsourcer for but I do know that the records made available to them for pension purposes was inadequate. 

I had a significant dispute which drove me to obtain a copy of the pension plan. I read and reread it in order to determine the meaning of some items in plain English. The dispute was simple...was annual bonus, a key component of my remuneration, to be considered in earnings for pension purposes. It took 18 months but the difference to me was an ultimate increase in my pension entitlement of 42 percent. 

The dispute was ultimately resolved by going past the pension plan administration and dealing with the company VP Legal who was the executive responsible for the plan. At that point my issue was resolved in two weeks. No one was trying to cheat me. It was simply an issue of the so called administrators having less than adequate training and knowledge of the particular DB plan.

My advice....truly understand your pension plan and do your own math calculations to determine if they agree with what the pension administration team is quoting you.


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## Electric (Jul 19, 2013)

fraser said:


> It took 18 months but the difference to me was an ultimate increase in my pension entitlement of 42 percent.


Nice.

My experience is similar to yours when dealing with Sun Life.

"What are the top 5 holdings in this fund that you have constructed specifically for my DC plan?" "Dunno, but don't worry it is professionally managed by professional professionals." 

"Okay, can you tell me the yield to maturity on this company-specific bond fund?" "Sir, no idea what that means. Let me put you on a short hold for 5 minutes. And by 5 minutes, I mean half an hour because I am hoping you will hang up."


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## Beaver101 (Nov 14, 2011)

Electric said:


> ...
> 
> "What are the top 5 holdings in this fund that you have constructed specifically for my DC plan?" "*Dunno, but don't worry it is professionally managed by professional professionals*."
> 
> "Okay, can you tell me the yield to maturity on this company-specific bond fund?" "Sir, no idea what that means. Let me put you on a short hold for 5 minutes. *And by 5 minutes, I mean half an hour because I am hoping you will hang up*."


 ... LOL! Don't mean to laugh but wouldn't be surprised of the kind of pension administration expertise found there, but going to cut these frontline (more like CSR) employees some slack. 

OTOH, no slack for actual ineptness of professional "expert" pension administrators from the consulting houses.


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## Electric (Jul 19, 2013)

These call centers exist to take your call (duh) and delay, complicate and restrict access to the people who can actually help you so that the financial institution can claim proudly that they have an effective support arm but at the same time render it ineffectual. So they can make more money. Because, as it is so often, it’s all about the money.


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## Beaver101 (Nov 14, 2011)

Electric said:


> These call centers exist to take your call (duh) and delay, complicate and restrict access to the people who can actually help you so that the financial institution can claim proudly that they have an effective support arm but at the same time render it ineffectual. So they can make more money. Because, as it is so often, *it’s all about the money*.


 ... yes, it is but they fail to realize that money belongs to someone who could be his/her father, mother, brother, etc. who is relying on it for their retirement. 

What fraser has described above is realistically how much pension expertise are out there serving the private sector.


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## fraser (May 15, 2010)

I experienced a very good level of service from Sun Life whenever I called. Their duty was purely fiduciary. They did not know anything about my pension plan. They managed from the point the money was deposited in trust for me.

It was all about the management of the money, not the pension plan itself. I thought that their on line account management and allocation services were very good. 

There is such a difference between call centres. Last month we called TD Visa on an issue. We waited less than three minutes. The CSR was excellent. The same day we called CIBC to report a fraud. charge on our Visa. We were on hold for 30 minutes, then the CSR wanted me to hold again to speak with the fraud dept. I declined saying that this was their risk, not mine. He took care of my issue. Same thing when I called a week later. More than 30 minutes on hold.


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## Eclectic12 (Oct 20, 2010)

Beaver101 said:


> ... so it's part of doing business - the broker gets to expense it. So what happens to your mom's dormant account if the broker hadn't sent those statements/reminders to her? You need to keep in my she still has $1.76 in her account.


LOL ... not sure how anyone could go after them (unless there's some sort of regulation) for sending a yearly update instead of quarterly. Though if I recall correctly, they did cut back from monthly to quarterly so there was a some savings for them.




Beaver101 said:


> ...Or take your case, where "... It's pretty dumb as every six months I receive a letter that confirms I have $0 with articles/write ups aimed at getting me to put money in." ... did you tell your broker "hey dumbsh1t, why are you wasting money sending me writeups when there's $0 in my account or I don't have any business with you anymore"?


What broker? 
It's a group RRSP so it is an insurance / mutual fund company.

I might decide to spend the time on it at some point but again, they have a few years of a paltry amount then a transfer out then nothing.


Cheers


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## Eclectic12 (Oct 20, 2010)

Electric said:


> You are entitled to your opinions, but you are not entitled to your own facts ...
> Note that about four out of five employees in the public sector are covered by a DB plan. The corresponding figure for the private sector is one in six.


Yes ... I looked at the membership being close in each case plus that DC pensions require employer contributions and overlooked the %.




Electric said:


> I would be shocked if the private sector situation had not deteriorated over the past ten years.


Interesting you'd say that ... if I recall correctly, this and other CMF threads have talked about the 90's as a great time for jobs. 
Presumably one would expect it would also be a great time for pensions. 

Yet Stats Canada says that from 1998 to 2013, the number of employees with a pension has dropped by 2.7%, where the 37.9% is the 2013 number.
With all the articles talking about disappearing pensions, I would have expected that over the fifteen years, there would be far more of a drop.




Electric said:


> It is an irrefutable fact that pension plans are largely a creature of the public sector today.


It does not seem to be that simple a situation.

The 2010 to 2014 pension numbers say overall pension membership grew 2.67% where 40% of the growth was in private sector plans.
In the same time frame, the number of pension plans in general dropped 7% where the number of public sector pension plans dropped as did the private sector pension plan numbers.


I'm trying to figure out how to access Stats Canada numbers from the 80's and 70's as it could be that the disparity between public and private sectors has been wide for a long time instead of a recent change. Or the dropping of pension plans in the private sector started a lot earlier than the alleged good job 90's.


In any case ... the DB pension that was employer only contributions mentioned earlier I was able to confirm that it was started in 2009. Add in that most of the DB pensions I have heard of being closed to new employees had a DC pension for the new hires ... which makes the sixteen years with a small difference in the percentage covered possibly make more sense.


Cheers


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## Eclectic12 (Oct 20, 2010)

For recent info from Stats Canada I found this interesting ....



> Membership in registered pension plans (RPPs) in Canada reached 6,185,000 in 2012, up 70,300 or 1.2% from the same date a year earlier.
> Membership in public sector pension plans rose 0.6% to 3,179,300, while the number of members in private sector plans increased 1.7% to 3,005,700.


http://www.statcan.gc.ca/daily-quotidien/140828/dq140828d-eng.htm

Interesting that while the public sector still holds the lead over private industry for members, the year or year growth for the private sector was just under triple that of the public sector.

It is one year so it can be an aberration or special situation ...


Cheers


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## fraser (May 15, 2010)

Not everyone wants a DB plan. There are financial disadvantages to those who change employers every few years. I was fortunate-I put in 25 years with the same employer and had a DB plan. Many of the people I worked with only did four-five years and then switched employers. For them, a good DC plan was far better since the CV they would realize by quiting at a younger age with much less service would be small. The benefits of a DB plan really kick in when your service and age start to climb. I worked with many people who very much preferred a DC plan because of the portablilty and the ownership.

The workforce today is extremely mobile-and there is a move to contract employment. DB plans do not mirror these requirements. Perhaps we need to look at components of the Australian model.


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## Eclectic12 (Oct 20, 2010)

YMMV ... while I did say for something like nine years - the first pension plan was collecting far more than they needed for the benefits. 

The end result was that in addition to the employer's contributions doubling the money, the $$$ CV included from what I can recall, a substantial sum which could be taken as cash (as long as one was willing to take the income hit) or transfer directly to my individual RRSP.

From what I recall of the later employers CV payouts ... the total payout was equal to the LIRA portion of the first one.

As I've said before ... IMO a lot depends on having a good DC plan. The "DB to DC" transfer I was mistakenly offered meant me having to come up with an additional 5+% to be putting the same contribution levels in. Then too, I found it amazing that for another employer, such a large company would offer the underwhelming choices of four MFs.


Cheers


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## Eclectic12 (Oct 20, 2010)

Electric said:


> ... I would be shocked if the private sector situation had not deteriorated over the past ten years.
> It is an irrefutable fact that pension plans are largely a creature of the public sector today.


Odd ... this graph says that the bulk of the drop of employees covered by pension plans was from 1996 through about 2005 (drop from 1996's 42.5% to about 2005's 38+%).
http://nupge.ca/content/3274/pension-plan-coverage-canada-remains-38-percent

On the overall scale, from 2005 through 2008 is a small gain. The bad news if one is male is that men in pension plans had given up the small gains by 2008 to be even lower than 2005 but the women covered grew in this period.


I need to find more details but it would not surprise me that the drop in private pensions is not recent. The public sector may have *always* had a higher % coverage where the decimation of private pensions was happening decades ago instead of what looks like modest losses over the last couple of decades.
http://nupge.ca/content/3274/pension-plan-coverage-canada-remains-38-percent


As I say, it is not a simple situation as I can find an article by a guy who claims to have argued against overblown CPP expansion rhetoric who is asking those against public sector pensions to do the same.
http://www.benefitscanada.com/pensi...b-pension-tension-campaign-is-all-wrong-20008

What also makes the waters muddy is that where one would expect the DB pensions to have had a bad 2015, positive returns are what is being reported.
http://www.benefitscanada.com/uncat...nished-2015-with-5-4-return-rate-report-77122


Cheers


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