OTTAWA, June 15, 2015 (GLOBE NEWSWIRE) -- Target benefit pension plans (TBPs) are a viable alternative design that should be made more readily available to Canada's pension industry, the Canadian Institute of Actuaries (CIA) said today.
The call for action came in a report from a CIA task force established in response to increasing interest from the public and regulatory agencies in TBPs.
Task force chair Barbara Sanders said the report probes an emerging trend in pensions and examines it from the perspective of balancing risks and rewards. "The CIA is committed to upholding its duty to the public. For this report we wanted to look at TBPs with the goal of serving all stakeholders by contributing our unique expertise as risk professionals. Our hope is the report encourages informed discussion and decision-making around pension design and regulation."
Ms. Sanders added: "A challenging investment environment and dwindling corporate pension guarantees are forcing pension organizations around the world to respond and adapt. We support TBPs as a viable pension plan alternative because they can effectively and efficiently meet the needs of the Canadian public with respect to generating lifetime retirement income."
Other recommendations in the report include encouraging stakeholders to consider a wider spectrum of TBP designs, stressing the need to understand the impact of intergenerational risk sharing, and developing a regulatory approach that recognizes the plans' unique risk-sharing nature.
It also suggests that the conversion of a defined benefit pension plan to a TBP be allowed. However, the required security level of the converted benefits should be inversely related to the degree of consent of plan members—including retirees—to the conversion.
The report is the result of discussions with industry experts, particularly those who have been involved for years in the design, administration, and funding of TBPs and similar plans.