www.bpmmagazine.com
jmclaine@powershift.ca
Benefits and Pensions
April 2013
Volume 23, Number 2
The Canadian Magazine Of Employee Pension Fund Investment And Benefits Plan Management
Dichotomy
Of Strategies pg 22
Psychologically
Safe Workplaces
pg 24
Advisors And
Pension Coverage
pg 30
Annual Report & Directory
Fixed Income
Managers
FOCUS
BENEFITS
& PENSIONS
LEGAL FIRMS
PM #40008000
Rising from the Ashes
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LIABILITY
INSURANCE AND
INDEMNITIES
See Page 36
www.aberdeen-asset.ca
Finding opportunities
in global fixed income
takes legwork.
So Aberdeen’s
investment teams
sometimes need to
pack a bag or two.
Given the diversity of fixed income markets, our portfolio
managers often have to travel far and wide in order to
find what we consider the best investment opportunities.
In many markets there is often little information available,
so at Aberdeen we do our own research rather than relying
on rating agencies.
By meeting policy makers and companies face-to-face,
our research gives us the conviction to make what we
believe are the best investment decisions.
So, whether you want to invest in domestic Canadian
fixed income markets or are looking slightly further afield,
come and talk to the people who go the extra mile to
research potential investments.
For more details on our fixed income capabilities,
please contact Renee Arnold in our Toronto office
at (416) 777 5570.
As experienced global investors, we have 31 offices in
23 countries, including London, New York, Singapore,
Sydney and Toronto.
www.aberdeen-asset.ca
Fixed income securities are subject to certain risks including, but not limited to interest rate risk, credit risk, prepayment and call risk. Aberdeen Asset Management
(“AAM”) is the marketing name in Canada for Aberdeen Asset Management Inc., Aberdeen Fund Distributors, LLC, and Aberdeen Asset Management Asia Ltd and
Aberdeen Asset Management Canada Limited. Aberdeen Asset Management Inc. is registered as a Portfolio Manager in the Canadian provinces of Ontario, Nova Scotia
and New Brunswick. Aberdeen Asset Management Asia Limited and Aberdeen Asset Management Canada Limited are registered as Portfolio Managers in Ontario.
Aberdeen Fund Distributors, LLC operates as an Exempt Market Dealer in all provinces and territories of Canada. Aberdeen Fund Distributors, LLC and Aberdeen
Asset Management Canada Limited are wholly owned subsidiaries of Aberdeen Asset Management Inc. Both Aberdeen Asset Management Inc. and Aberdeen Asset
Management Asia Ltd. are wholly owned by Aberdeen Asset Management PLC.
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jmclaine@powershift.ca
| CONTENTS |
APRIL 2013
FEATURES
Benefits And
Pensions Monitor
is published 8 times yearly by
Powershift Communications Inc.,
245 Fairview Mall Drive,
Suite 501,
Toronto, ON M2J 4T1
Canada.
Tel: (416) 494-1066
Fax: (416) 494-2536
email: jmclaine@powershift.ca
President
D. Brian McKerchar
Vice-Presidents
John L. McLaine
Dante Piccinin
Catherine J. McKerchar
Advertising and Editorial inquiries should be
made to the above address. Issue dates are:
February, April, May, June, August, September, October, and December. Yearly subscription rates: Canada: $135 plus GST*; U.S. and
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Directories $90 plus GST*. To order your subscription call 416-494-1066.
Benefits and Pensions Monitor assumes no
responsibility for the validity of the claims in
items reported or for the opinions expressed by
our writers. The views expressed in the articles
in Benefits and Pensions Monitor represent
the personal opinions of the authors and are
not necessarily those of the companies they
represent. All rights reserved. Contents may
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12
12
Fixed Income Managers
Annual Report & Directory
The Death Of Bonds Is
Greatly Exaggerated
Jeff Herold & Maria Berlettano
16
Statistical Report
Managers of Fixed Income
18
Directory Of
Fixed Income Managers
22
Investment
A Dichotomy Of Strategies
Claude Macorin
24 Healthcare
Standard Set For
Psychologically Safe
Workplaces
Karen Treml
26
Healthcare
Patient Assistance Programs
– Demystified
Johnny Ma & Gordon Polk
30
Advisor Insight
Advisors And Pension Reform
Joe Hornyak
32
DC Plans
Investment Options –
Does One Size Fit All?
Cam Macneish
36 Benefits & Pensions Legal
Firms Annual Report
& Directory
Liability Insurance And
Indemnities In The Benefits
World
Lorraine Allard
39
Benefits & Pensions
Legal Firms Directory
42 Conference Report
Industry Must Accept
Necessity For Change
monitor
Benefits and Pensions
24
DEPARTMENTS
4
EDITORIAL
6
PEOPLE
8
NEWS
9
Trend Spotting
10
HEALTH MATTERS
45 CONFERENCES
46 THE BACK PAGE
April 2013 | Benefits and Pensions Monitor 3
3
jhornyak@powershift.ca
| EDITORIAL |
The Financial Literacy Debate
By: Joe Hornyak, Executive Editor
W
ith any luck, Canada may have its financial literacy leader in place by November.
According to our Back Page columnist, Jim
Helik, this will be just in time for the third
annual financial literacy month.
The need for someone to spearhead financial literacy in this
country was identified in the February 2011 report of the federal
government’s Task Force on Financial Literacy. In fact, it was
the top recommendation.
In some ways, we have to applaud the government for doing
something about it, particularly in terms of pensions and retirement savings. As defined benefit plans appear to be disappearing from the private sector, the onus shifts to individuals to look
after their own savings for retirement.
Private Sector Issue
And it clearly is a private sector issue, make no mistake.
A Fraser Institute report, ‘Comparing Public and Private Sector Compensation in Canada,’ shows 88.2 per cent of Canadian
government workers were covered by a registered pension plan
in 2011 compared to 24 per cent of private sector employees.
And, as we note in the article on page 30, ‘Advisors And Pension Reform,’ pensions, particularly DB pensions, are a function
of size. The bigger the company, the more likely there is going to
be a pension plan and government is big business. However, for
about 64 per cent of Canadians, this means the chances of having
an employer sponsored pension plan are slim and none.
Some, a small but growing number, will have an employer
sponsored capital accumulation plan. Those who don’t, have
to depend on their own savings. And both of these groups are
basically in the same boat. They are expected to direct their
own savings, unlike members of DB plans who retire and wait
for the cheques to arrive.
Thus the need for financial literacy.
monitor
Benefits and Pensions
A POWERSHIFT COMMUNICATIONS INC. PUBLICATION
Volume 23, Number 2 April 2013
Editorial Director & Publisher,
John L. McLaine
Executive Editor, Joseph Hornyak
Staff Writer, Karen E. Treml
Art and Creative Designer, Keith Boa
Production, Geoffrey Dufton
Website Manager, Heather Field
Circulation & Administration,
Cathy McKerchar
Fax: 416-494-2536 Email: cathy@powershift.ca
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Telling One
But, there is another point, perhaps a more telling one. Is it
even necessary to be financially literate to save for retirement?
There is a growing movement towards professionally managed
target date and life cycle plans for members of DC plans and
those left on their own to save for retirement.
Indeed, there are two key messages that are critical to financial literacy. It is not how to invest or what to invest in. It is not
knowing your investment risk tolerance. It is simply this, save
longer and save more. That is the lesson. You don’t need to
know anything else.
And we don’t need a financial literacy leader to deliver that
message. BPM
jhornyak@powershift.ca
Editorial Advisory Board
Randy Bauslaugh, McCarthy Tétrault
Mark Newton, Heenan Blaikie
Sylvie Charest, Scotiabank
Graeme Ozburn, RBC Dexia
Bruce Curwood, Russell Investments
Ted Patterson, Humber Centre for
Rudy Dabideen, Heather Cox
Employee Benefits
Mike Gillis, Greystone
Stuart Plummer, CIBC Mellon
Greg Hurst, Greg Hurst & Associates
John Poos, George Weston
Joan Johannson, BMO GRS
Angela Vidakovich, Brookfield
Marilyn Lurz, Lynmar Associates
Robert Weston, Omers
Karen Matsubayashi, TD Bank Group
4 Benefits and Pensions Monitor | April 2013
4
However, two decades of experience with defined contribution plans tends to suggest that this is a pipe dream. How
reasonable is it to expect young Canadians, perhaps the real
target of financial literacy efforts, to understand how to invest
for retirement when most don’t realize the importance of it?
Those who realize the futility of it bandy about explanations
such as it takes years for financial professionals to qualify as
financial professionals and most of them have far from perfect
track records. Or, as Helik refers to his column, why do we go
to mechanics to get our cars fixed, yet are encouraged to learn
to manage our own investments?
Editorial advisory board members meet informally and are consulted
when appropriate to their areas of expertise, interest or jurisdiction.
The members bear no responsibility for the contents of the magazine.
�
Advertising Sales
John L. McLaine, Frank Torelli
(416) 494-1066 Fax: (416) 494-2536
Website Advertising, Heather Field
(416) 494-1066 Fax: (416) 494-2536
President & CEO, D. Brian McKerchar
Vice-President,
Administration & Circulation
Cathy McKerchar
For all subscription inquiries,
fax to Cathy McKerchar
at 416-494-2536
e-mail: cathy@powershift.ca
B&P Monitor -- European Equities - BNP Paribas Investment Partners - outlined.pdf 1 4/8/2013 1:05:41 PM
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admin@powershift.ca
| PEOPLE |
Desjardins
Dianne Verschuere is regional vicepresident, group retirement savings, western Canada, at Desjardins Insurance. She
will be responsible for leading the team
and growing its group retirement business
in the western region. Prior to joining the
firm in 2011, she provided consulting services at a major Canadian HR consulting
firm.
Great-West Life
Ken Millard (FCIA, FSA) is vicepresident, national accounts, at GreatWest Life Group Retirement Services.
He has more than 20 years of experience
with Great-West in roles within individual insurance, group benefits, and group
retirement services. In his new position,
he will lead a team that provides business development and product support
services for large-case group retirement services clients, working primarily
through relationships with consultants.
Sun Life
Eric Hafeman (FSA, FCIA) is assistant vice-president, pricing and longevity, Defined Benefit solutions, at Sun Life
Financial. He is responsible for pricing risk
transfer products for the DB solutions team
which provides customized de-risking solutions for DB pension plan sponsors.
CDIPC
Shirley Leong is executive director of
the Canadian Drug Insurance Pooling
Corporation (CDIPC), a not-for-profit
corporation established by Canada’s supplemental group health insurers. She has
extensive experience in the group insurance business in Canada having worked
in many areas of group insurance including underwriting, health and dental claim
processing, group administration, and
system development. She also operated
her own consulting company, providing
services and advice to a number of major
insurers, mutual fund companies, and
third-party benefit providers.
Dentons
Scott Sweatman is a partner and lead of
the Vancouver, BC, pensions and benefits practice at Dentons. He was co-chair
of the Alberta-British Columbia Joint
Expert Panel on Pension Standards in
6 Benefits and Pensions Monitor | April 2013
6
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tion. He also served on the Alberta and
British Columbia Joint Advisory Group,
which was established to help implement new pension standards legislation
based, in part, on the Joint Expert Panel
recommendations.
Verschuere
Hafeman
Millard
Leong
Sweatman
Wilkins
McNeill
Thompson
CC&L
Brent Wilkins is head of institutional
sales at Connor, Clark & Lunn Financial
Group (CC&L). He was, most recently,
managing director and head of SEI Canada. Bruce Shewfelt is chief executive
officer for Connor, Clark & Lunn Private
Capital. He was head of institutional
sales at CC&L Financial Group.
Segal
Cameron McNeill is senior vicepresident and retirement practice leader
at the Segal Company, Ltd. He joins
the firm after a 20-plus year career with
Buck, where, most recently, he was
retirement leader for global consulting,
and before that, CEO for Buck in Canada.
TD Asset
Tim Thompson, senior vice-president
and chief operating officer, TD Asset
Management (TDAM), will assume
responsibility for the institutional team.
He joined TD in 1990 and has spent
the majority of his career in leadership
positions within the company, including
time as senior vice-president, TD Canada Trust. Tim Wiggan is the new head
of TD Asset Management. He will transition from his current role as managing
director and co-head, institutional sales,
within TD Securities’ institutional equities business.
Presima
Peter Zabierek is chief executive officer of Presima Inc. Prior to joining the
firm, he was managing director and cohead of global real estate securities at
Urdang Capital Management. BPM
Wiggan
Zabierek
2007 and 2008, providing recommendations to both the Alberta and British
Columbia provincial governments for
fundamental reforms to pension legisla-
Submit your People items for
consideration for publication in
Benefits and Pensions Monitor to:
admin@powershift.ca
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www.bpmmagazine.com/
benefits_news.php
| NEWS |
Great West Offers
Suite Of Funds
Great-West Life Group Retirement Services is now offering a suite of multimanager asset class funds. The new Harmonized asset class funds provide more
diversification within a single fund, making investment selection easier for group
plan members. Each of the four new asset
class funds is comprised of several individual underlying funds, which are managed by different investment managers.
As a result, members have access to multiple investment managers and multiple
investment styles in a single fund.
www.cwt.ca
8 Benefits and Pensions Monitor | April 2013
8
Mandatory Enrollment
Increases Participation
Mandatory enrollment is helping to
increase CAP participation and contribution rates, says the Towers Watson
‘CAP Sponsor Survey.’ It examined
five main attributes of effective CAPs:
design, investments, fees, communication, and the use of measurable quantitative and qualitative goals. It also
found a majority of companies now
offer matching employer contributions.
Currently, 59 per cent of companies
offer only matching employer contributions and 16 per cent offer both matching and non-matching employer contributions.
Wellness Tools
Expanded
The Standard Life Assurance Company
of Canada has expanded the range of
its health and wellness consulting services and tools to support employers
who wish to implement or enhance
their health and wellness programs.
“Employees’ health has a direct impact
on a company’s bottom line. That’s why
it’s important for employers to offer
more than just group insurance plans.
Preventive measures are key to helping
employees adopt and maintain a healthy
lifestyle. They also have a positive
influence on the workplace environment and a company’s overall results,”
says Christine Potvin, vice-president,
group insurance, customer experience.
“Companies both large and small are
paying greater attention to the health of
their employees. With an aging workforce and an increase in the scarcity
of labour, this trend will become even
more prevalent in the future.” In collaboration with Homewood Human Solutions, its offerings will include a series
of online health risk evaluation tools for
employees and personalized coaching
on the telephone. BPM
For FREE Daily News Alerts, visit
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cwt.marketing@cwt.ca
Claim Submission
Goes Mobile
Industrial Alliance
Insurance and Financial Services Inc.
will offer its group
insurance plan members a point-of-sale
electronic
claim
submission service.
Scheduled to officially launch in fall
2013,
healthcare
providers – including physiotherapists, chiropractors, and
vision care providers across Canada as
well as acupuncturists, massage therapists, and naturopathic doctors in certain provinces – will have the ability to
use TELUS Health’s eClaims web portal
service to submit claims to Industrial
Alliance on behalf of patients directly
from their offices. Industrial Alliance is
deploying the online eClaims service to
reduce claims processing time and costs.
Risk Parity
Addresses Volatility
There is no right or wrong way to construct a portfolio, says Mark Blair, director of fixed income and alternative
investments at the Ontario Teachers’
Pension Plan. Speaking at the AIMA
Canada Education and Research Committee session ‘A Weighting Game –
Risk Parity and Beyond,’ he said, however, investor beliefs and how these
are expressed need to be combined
with the right building blocks to create a portfolio. Risk parity fits in with
this as it addresses volatility and correlation concerns. A risk strategy means
an investor can, for example, choose
a small number of building blocks
with low correlation or many building
blocks with higher correlations. However, adding more assets may not help
as much because this doesn’t improve
the Sharpe Ratio.
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| TREND SPOTTING |
postponing retirement. The age at which
workers expect to retire is slowly rising. In 1991, just 11 per cent of workers expected to retire after age 65. In
2013, 36 per cent of workers report they
expect to wait until after age 65 to retire
and seven per cent do not plan to retire
at all. At the same time, the percentage
of workers expecting to retire before age
65 is now half what it was two decades
ago: down from 50 per cent in 1991 to
23 per cent in 2013. In contrast, a sizable
proportion of retirees retired sooner than
they had planned (47 per cent in 2013).
Those who retire early often do so for
health problems or disabilities. (55 per
cent). However, 32 per cent retired early
because they could afford to. BPM
wayne.wilson@lincluden.net
Rules Cannot
Discourage Long-term
Financing
The European Commission is stressing
the importance of ensuring that any new
prudential rules for occupational pension
schemes “do not discourage” long-term
financing. Its ‘Green Paper on long-term
financing’ is designed to foster longterm financing and improve the system
of financial intermediation in Europe.
It says that asset classes appropriate for
long-term investment typically involve
“patient” capital requiring “intrinsic
project and implementation risk.” It also
notes that many commentators consider
that quarterly reporting creates the wrong
incentives for investors by imposing an
obligation that may push market participants to focus on very short-term results.
It therefore proposes, in the review of the
Transparency Directive, the lifting the
obligation for quarterly reporting.
www.lincluden.com
Derivatives Rules May
Increase Risk
International rules to make derivative
transactions safer may lead pension plans
to take unnecessary risks, says the UK’s
National Association of Pension Funds.
It says increasing collateral requirements could make pension funds abandon
hedging strategies, making their assets
more susceptible to moves in inflation
and interest rates. “Pension schemes use
derivatives largely to hedge liabilities
and, thereby, reduce risk. Extra costs or
processes that provide a disincentive for
pension schemes to use derivatives could,
in fact, increase the degree of risk in the
markets,” it says. Proposed rules include
pushing more transactions through clearing houses and raising collateral requirements to cut complexity and risk.
Workers Plan
To Retire Later
Twenty-two per cent of U.S. workers
say the age at which they expect to retire
has increased in the past year, says the
Employee Benefits Research Institute’s
‘2013 Retirement Confidence Survey.’ It
found workers most frequently cite the
poor economy (22 per cent), lack of faith
in Social Security or the government
(19 per cent), and the inability to afford
retirement (19 per cent) as reasons for
April 2013 | Benefits and Pensions Monitor 9
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solutions@bcsgroup.com
| HEALTH MATTERS |
Getting Back To Business ... After A Stroke
By: Caroline Tapp-McDougall
E
ach year, more than 50,000 strokes occur in Canada and recovery can be long, difficult, and frustrating for the stroke survivor, but also for their
employers and co-workers.
The Heart and Stroke Foundation of Canada
says strokes cost the Canadian economy about $3.6 billion
annually in lost wages, lowered productivity, and medical costs.
Stroke Survivors
There are about 300,000 Canadians living with the effects
of a stroke at any time. Out of 100 survivors, 10 recover completely while another 25 live with minor effects. The remaining
are left with more serious challenges.
A stroke is an abrupt loss of brain function that causes brain
cells to die. The longer the brain goes without proper blood
flow, the more extensive the damage is. Approximately 80 per
cent of strokes are ischemic, occurring when a blood clot interrupts blood flow to the brain. Hemorrhagic strokes, caused by
bleeding in the brain, account for the remaining 20 per cent.
There are also transient ischemic attacks (TIA) or mini-strokes,
often precursors to a larger event. TIA symptoms are temporary.
Paralysis, muscle weakness, difficulty balancing, coordination or movement difficulties, and having
trouble reading, thinking, understanding, talking, seeing, and remembering are all possible side effects of a stroke. Identifying a
stroke is critical because a person loses
1.9 billion brain cells for every minute that treatment is delayed.
Spot The Signs
The main signs that a stroke
is in progress are face drooping,
speech impairment, and arm weakness. Other symptoms include leg
numbness, confusion, vision problems, trouble walking, and the sudden
onset of a headache. If any of these symptoms are present, call 911 immediately.
Because all strokes are different
depending on the location, severity, and
type, some people recover completely after
a stroke with no long-term side effects,
while others can be impacted with a range
of challenges for the rest of their lives.
While recovering from a stroke, a
person may have subtle and often misunderstood neurological impairments.
He or she may not be able to do all
of the things they once could. This
may include needing assistance
10 Benefits and Pensions Monitor | April 2013
10
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with personal grooming, eating, mobility, and the processing of
instructions. Expect a loss of physical strength at first that causes
slower movement or difficulty balancing, lifting, or getting up
from a chair. This will, of course, be difficult at home, but will
also extend into the ability to meet job requirements and tasks
that were previously assigned. It’s possible that the employee
may need barrier-free modifications to their office, and specialized equipment such as a walker or a wheelchair.
Returning To Work
If one of your employees has suffered a stroke, you are bound
to hear about it. Keeping in touch with the patient and staying
abreast of their recovery and progress will make it easier when
the time comes to discuss returning to work. Depending on their
post-stroke needs and circumstances, work may need to be less
strenuous, less mentally taxing, or they may not be able to clock
as many hours. Therefore, fear of being forced to retire, losing
benefits, or facing a demotion are all reasonable concerns for
both the individual and their families.
Having an open, empathetic discussion with the employee
while offering temporary or longer-term accommodations and
support may ease a burden on an already worried employee.
Arranging an informal visit to discuss the logistics
and walking through a few scenarios before they
actually return to work can also be beneficial.
A smooth, phased-in transition can
be one of the most important factors in
deciding if the return-to-work process
is successful or not. It may require
allowing flexible work hours, time off
for rehabilitation or doctor’s appointments, changing shift patterns, allowing
work-from-home days, job sharing or
relocating tasks to someone else, and
providing adaptive equipment (and
training) to help get the job done.
Returning to work as early as possible is, however, one of the most therapeutic steps to recovery. And employer
and coworker attitudes have a direct correlation to successful return to work. BPM
Caroline Tapp-McDougall is the publisher
of Solutions: Canada’s Family Guide to Home
Health Care and Wellness and the author of
The Complete Canadian Eldercare Guide.
solutions@bcsgroup.com
�
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We think
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So we’ve stepped it up.
Desjardins group benefits plans now feature Express Scripts Canada’s active pharmacy benefit
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integrated services can help plan sponsors cut overall healthcare costs by up to 5%, while giving plan
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jherold@jzechner.com
mberlettano@jzechner.com
fixed income managers
ANNUAL Report & Directory
The Death Of Bonds Is
Greatly Exaggerated
By: Jeff Herold & Maria Berlettano
M
ark Twain, the 19th century American author
and humourist, on hearing that his obituary
had appeared in a New York newspaper,
quipped: “The reports of my death are
greatly exaggerated.” Many fixed income
managers can sympathize, having heard countless predictions
of the demise of the bond market for the last several years. It is
not just the talking head pundits of business television networks
that question the rationale of owning bonds. A wide range of
clients, from sophisticated trustees to humble individual retail
clients, are asking, with yields near all-time lows, whether it
makes sense to continue to invest in the bond market.
We believe the answer to that question should be a resounding ‘Yes!’ Even at current yield levels, there are many valid
reasons that bonds continue to be a strong investment choice
and should remain a core part of most portfolios.
12 Benefits and Pensions Monitor | April 2013
12
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www.bpmmagazine.com/
benefits_directories.html
fixed income managers
ANNUAL Report & Directory
The Total Returns Of Bonds Have Been
Higher Than Stocks And With Less Volatility
42000
40000
38000
36000
34000
32000
30000
28000
26000
24000
22000
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
Canadian Bonds
Canadian Stocks
900
850
800
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
DEX Universe Bond Total Return Index
Canadian Phenomenon
Unfortunately, theory has not played
out in the markets. Since 1980 (when the
DEX Universe Bond Index was created),
Canadian bonds have had significantly better returns, with lower volatility, than Canadian stocks. Moreover, this is not a purely
Canadian phenomenon. Recent research at
the London Business School has come to
a similar conclusion for global bond and
stock returns over a similar timeframe.1
Nor is the relatively better return from
bonds simply the result of the decline in
yields since the early 1980s. The return differential in favour of bonds since the Millennium is actually twice the differential
for the period since 1980. In other words,
bonds have beaten stocks by more since
2000, than in the prior two decades when
yields were falling from record highs.
The second reason that bonds will
continue to form a core position for
long-term portfolios is that they provide an excellent offset against longterm liabilities such as future retirement
benefits. The assured stream of a bond’s
coupon payments long into the future
can approximate the payout requirements for pension plans and RSPs far
better than the much more uncertain
stream of dividends from stocks. The
different legal structure of bonds means
that coupon interest cannot be changed
by an issuer in the same way a dividend
can be reduced or eliminated. As well,
the relatively good match between the
cash flows of long-term bonds and longterm retirement liabilities means that
their present values move roughly in
synch. As a result, a pension fund can be
indifferent to the impact of rising bond
yields. The value of the liabilities will
fall as fast, or faster, than the value of the
Chart 1
S&P/TSX Total Return Index
The first reason to hold bonds is that
they are not stocks. Diversification always
makes sense. That applies not only to
security selection, but also to asset mix.
The combination of bonds and equities
is far less volatile than equities alone and
often has as good or better returns. For
several decades, the phenomenon known
as the ‘Cult of Equities’ has led investors
to expect higher returns from stocks than
bonds. In part, that theory claimed that
the higher risks of equities would lead to
substantially better returns.
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source: PC Bond
bond portfolio backing those liabilities.
Another reason to continue to invest in
bonds is that demographics are going to
increase demand for fixed income in the
coming years. The oldest Baby Boomers
are now officially senior citizens, capable
of claiming Old Age Security. In the next
few years, increasing numbers of that outsized generation will retire and their portfolio objectives will gradually become
more conservative, morphing from growth
to income. That will mean a relative asset
mix shift from stocks to bonds that will
support Canadian fixed income prices,
reducing potential declines in bond values.
Foreign Demand
Bond values will also be supported by
foreign demand for Canadian bonds. The
European sovereign debt crisis and massive fiscal deficits in the United States
have led many international investors,
including global central banks, to seek
alternatives. Canada’s relatively benign
fiscal situation and strong financial sector have made us an attractive one. In the
last two years alone, international investors have been net buyers of more than
$110 billion of Canadian bonds. Central
banks trying to diversify their foreign
exchange reserves have been a large
component of that demand.
As well, the Canadian dollar is a
reserve currency. Demand for the Canadian dollar in global foreign exchange
reserves has led the International Monetary Fund to start tracking Canadian dollar
holdings separately. Those holdings by
global central banks need to be invested
in Canadian fixed income (central bankers don’t trust equity markets either!).
The Swiss National Bank (SNB), which
discloses its foreign exchange holdings,
provides an example of the buying power
that central banks are bringing to the Canadian bond market. In 2012, the SNB targeted four per cent of its reserves in the
Canadian dollar as it expanded its reserves
by more than $225 billion. That meant the
Swiss central bank invested more than $9
billion in the Canadian fixed income market last year. According to reports from
INSIDE
Statistical Report
16
Managers of Fixed Income
Directory Of
18
Fixed Income Managers
For complete directory information, visit
www.bpmmagazine.com/
benefits_directories.html
�
April 2013 | Benefits and Pensions Monitor 13
13
Go to page 3 CONTENTS
fixed income managers
ANNUAL Report & Directory
Final Caveat
One final caveat for investors thinking
of getting out of fixed income is that bond
yields may not actually rise substantially
for a long time. The reasons why yields
have fallen to historical lows have not
gone away. The European debt crisis
has not been resolved, global growth is
tepid and uneven, and there is a shortage
of safe assets in these uncertain times.
That is not surprising because, as Carmen M. Reinhart and Kenneth S. Rogoff
documented in their seminal study ‘This
Time is Different,’ severe financial crises
are protracted affairs. Recoveries tend to
take several years, if not decades. If you
choose to build your portfolio around the
premise of rising interest rates, you might
want to hedge that bet.
Assuming you are convinced that
bonds still make a lot of sense in a portfolio, the key consideration becomes
how bonds should be utilized. There are,
in fact, a number of ways to improve the
results of fixed income investing. First,
14 Benefits and Pensions Monitor | April 2013
14
Go to page 3 CONTENTS
Chart 2
Canadians By Age, Currently And In 5 Years
3000
■ 2012
■ 2017 StatsCan Projection
2500
Increased numbers of
older Canadians in the
coming years will mean
increased demand for
bonds.
2000
Thousands
Canadian investment dealers, many
other central banks were also large
scale buyers of Canadian bonds. Looking ahead, foreign demand for Canadian
bonds seems unlikely to abate, which
should support bond values.
Another consideration for investors
considering lower fixed income exposure
because of concerns about rising interest
rates should be what impact higher yields
will have on alternative asset types. Equity
price/earnings (P/E) ratios would likely
fall with a rise in interest rates, whether
because of dividend discount models or
simply the greater competition for investors’ funds. As well, the shares of firms
with substantial financial leverage would
probably fall as financing costs rose and
earnings fell. Real estate, as an investment
option, could potentially stumble as cap
rates are adjusted higher. Infrastructure
investments, which are really just specialized real estate projects, would face the
same problem – lower present values as the
discount rate of future cash flow increases.
Relative to these other asset classes, bonds
have the advantage that they mature and
the proceeds can then be reinvested at the
new higher rates. Other investments do not
mature. They have to be sold (at potential
losses) before reinvestment can occur.
1500
1000
500
0
4 … -9 … 14 … 19 … 24 … 29 … 34 … 39 … 44 … 49 … 54 … 59 … 64 … 69 … 74 … 79 … 84 … 89 … 0+ …
5
9
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
0-
Source: BMO and StatsCan
avoid index funds. By definition, they
cannot add value versus a benchmark
and the fee savings are relatively minimal. There are active managers that can
demonstrate a long track record of beating benchmarks without taking added
risk. More importantly, though, indexes
are not a prescription for how to invest
any portfolio. Just because an index
has, say, 27 per cent corporates, does
that make 27 per cent the appropriate
allocation for your fund? Probably not.
A skilled active manager can adjust the
allocation to take into account the current stage of the economic and market
cycle, as well as the risk/reward tradeoff in the various market sectors.
A second way to increase the efficacy
of a fund’s fixed income investments is
to use customized mandates. Rather than
using a market-based index, consider providing your fixed income manager with
a duration target based on the fund’s liabilities. If the manager has demonstrated
ability in interest rate anticipation, some
discretion to adjust duration around
the target may be worthwhile. For performance evaluation purposes, blended
indexes can be used, but it is important
to remember that indexes are constantly
lengthening in duration, while liabilities
typically are shortening. So, duration targets need to be revisited at least annually.
Security Selection
Another method to improve returns
is through security selection. Not only
must the manager have strong credit
analysis capabilities, but good valuation
techniques. Size matters as well. Too
large a manager is unable to be as selective about its holdings.
The forecast demise of bonds is not
going to occur. Bonds continue to provide stability, safety, and regular cash
flows that are attractive. Demand for
bonds from conservative, savvy investBPM
ors will remain.
Jeff Herold is lead fixed
income manager at
J. Zechner Associates
Inc.
jherold@jzechner.com
�
Maria Berlettano is
a portfolio manager at
J. Zechner Associates
Inc.
mberlettano@jzechner.com
�
1 E. Dimson, P. Marsh, and M. Staunton; Credit Suisse
Global Investment Returns Yearbook 2012.
www.acpm-acarr.com
2013
Registration Is Open.
To take advantage of the Early Bird discount,
you can register online at www.acpm-acarr.com
ACPM
NAtioNAl
CoNfereNCe
The Retirement Challenge: Bridging the Generations
The ACPM National Conference is the premier
professional development and networking opportunity
for plan sponsors, administrators, trustees and service
providers. This year’s conference will highlight the
issues facing the current and future beneficiaries of the
Canadian retirement income system.
September 10 – 12, 2013
Fairmont ChÂteau Laurier
ottawa ontario
Did you know that an ACPM Membership
entitles you to a significant conference
discount in addition to year-round benefits?
Visit “Memberships” on our website and
become an ACPM Member today!
AC P M | AC A R R
acpm-acarr.com
15
Go to page 3 CONTENTS
fixed income managers
fixed income managers
Statistical Report
Statistical Report
COMPANY
All totals in C$millions as of December 31, 2013
UNIVERSE
ACM ADVISORS LTD.
ADDENDA CAPITAL INC.
AEGON CAPITAL MANAGEMENT INC.
ALLIANCEBERNSTEIN L.P.
$4,979.9M
$24.1M
$9M
AMI PARTNERS INC.
$578.4M
AURION CAPITAL
AVIVA INVESTORS
BAKER GILMORE & ASSOCIATES INC.
BARRANTAGH INVESTMENT MANAGEMENT INC.
BEUTEL, GOODMAN & COMPANY LTD.
BMO GLOBAL ASSET MANAGEMENT
BNY MELLON ASSET MANAGEMENT
BURGUNDY ASSET MANAGEMENT LTD.
CANSO INVESTMENT COUNSEL LTD.
CI INSTITUTIONAL ASSET MANAGEMENT
CIBC GLOBAL ASSET MANAGEMENT INC.
CONNOR, CLARK & LUNN INVESTMENT MANAGEMENT LTD.
CORDIANT CAPITAL INC.
FIERA CAPITAL CORPORATION
FOYSTON, GORDON & PAYNE INC.
FRANKLIN TEMPLETON INSTITUTIONAL
GLC ASSET MANAGEMENT GROUP LTD.
GREYSTONE MANAGED INVESTMENTS INC.
GUARDIAN CAPITAL LP
HORIZON 360° ET ASSOCIES INC.
INDUSTRIAL ALLIANCE
INTEGRA CAPITAL LIMITED
INVESCO LTD.
J. ZECHNER ASSOCIATES INC.
JARISLOWSKY FRASER LIMITED
LEGG MASON CANADA INC.
LINCLUDEN INVESTMENT MANAGEMENT
LORICA INVESTMENT COUNSEL INC.
MACKENZIE INSTITUTIONAL
MANULIFE ASSET MANAGEMENT
MARRET ASSET MANAGEMENT INC.
MAWER INVESTMENT MANAGEMENT LTD.
MFS MCLEAN BUDDEN
MONTRUSCO BOLTON INVESTMENTS INC.
OPTIMUM ASSET MANAGEMENT
PHILLIPS, HAGER & NORTH INVESTMENT MANAGEMENT
PIMCO CANADA CORP.
PYRAMIS GLOBAL ADVISORS (CANADA)
RUSSELL INVESTMENTS CANADA LIMITED
SCOTIA ASSET MANAGEMENT L.P. - GLOBAL INSTITUTIONAL
SEAMARK ASSET MANAGEMENT LTD.
SEI
STANDARD LIFE INVESTMENTS INC.
STATE STREET GLOBAL ADVISORS, LTD.
T. ROWE PRICE
TD ASSET MANAGEMENT INC.
WELLINGTON MANAGEMENT COMPANY, LLP
$439M
$184.4M
$600.1M
$213.8M
$8,983M
$251.8M
GLOBAL
BONDS
REAL
RETURNS
MORTGAGES
PRIVATE
DEBT
HIGH
YIELD
LONG
BONDS
US
BONDS
CORE
PLUS
CORPORATES
EM
DEBT
$1,419M
$26M
$1,304M
$2.5M
$580.9M
8
$904.5M
$204.1M
$1,325.6M
$99.4M
$12,488M
$1,243.3M
$50M
$471.6M
3
2
14
2
158
9
1
24
33
32
41
64
4
148
$52.8M
$2,091M
$10,322M
$1,822M
$7,129M
$1,258M
$75,672M
$466.9M
$13,184M
$4.7M
$354.1M
$814.7M
$2,030.6M
$32.7M
$158.4M
$7,909M
$1,258M
$184M
$3,157.9M
$4,369M
$153.8M
$447M
$888.1M
$161.7M
$185M
$450M
~$3,200M
$141.4M
$1,010M
$598.7M
$167.5M
$239.7M
$747.6M
$81M
36
59
3
12
$465.5M
$543.3M
$142.2M
$332M
$252M
$82M
$3.2M
$1,755.8M
$670.7M
$3,852.6M
$247.4M
$492.4M
$16.8M
$104.3M
$2,651.1M
$1,674.2M
$1,181M
$6M
$2,154M
$32M
$346M
$77.7M
$23M
$416.6M
$297.6M
$76.6M
US$208.2M
$322.1M
$4.8M
$245.5M
$32.9M
$411.4M
$228.1M
$165.5M
$913.5M
$7,467.7M
$4,251.8M
$180M
$11,994M
$200M
$326M
$6,296.7M
$6,458.4M
$1,291.8M
$447M
$1,476.6M
$883.6M
$142M
$88.4M
$30,107.9M
$14.4M
$20M
~$1M
$97M
$6M
$147,233M
$237.9M
$470.4M
$30M
US$162.3M
$3,183M
$450M
~$50M
$500M
$1,000M
~$3,251M
$815.4M
$1,284M
$692M
$167.5M
$723M
$995M
$14.3M
$7,269.4M
$120M
$2,853M
$34,407.3M
$8,973M
$1,182.8M
$591.3M
$538.7M
$104M
$1,824.9M
$8,889.2M
$8,893.9M
$29.8M
$28M
$116M
$44.1M
$164M
$276.3M
$995M
$14.3M
$3,018.2M
$1,536.6M
$1,717M
$10,601.2M
$1,887M
$773.7M
$591.3M
$235.8M
$104M
$950.1M
$2,189.3M
$4,441.2M
$9,985M
$1,026.7M
$49.7M
$77.9M
$26M
$7.9M
$974M
$14M
$227M
$29.1M
$23M
$196.3M
$71.1M
$727M
$4,649M
$2,877M
$108.6M
$2,138M
$28.2M
$39.2M
$23,373M
$207M
$1,136M
$8,614.6M
$4,810M
$117.2M
$123.9M
$544.4M
$620.4M
$2,175.1M
$1,845M
$12,188M
$1,236M
$6,697M
$233.5M
$376.8M
$744M
$7.7M
$272.1M
$19,585M
$26,254M
$393M
$754M
CANADIAN
CLIENTS
$1,236M
$9,545.3M
$771.7M
$2,678M
$3,945.6M
$1,194M
TOTAL*
$4,333M
$578M
20
62
16
6
2,870
53
6
32
~250
18
7
7
6
4
4
3
72
21
21
131
37
30
21
13
1
43
68
$13,541M
$105M
$29,265M
$1,968M
192
10
*Other assets reported can be found at www.bpmmagazine.com
16 Benefits and Pensions Monitor | April
Monitor | February
20132013
16 & 17
Go to page 3 CONTENTS
April 2013 | Benefits and Pensions Monitor 17
fixed income managers
ANNUAL Directory
AVIVA INVESTORS Doug MacDonald, President –
Aviva Investors Canada; 121 King St. W., Ste. 1400,
Toronto, ON M5H 3T9 PH: 416-360-2766 FAX: 416361-2815 eMail: doug.macdonald@avivainvestors.com
Web: www.avivainvestors.com
ABERDEEN ASSET MANAGEMENT INC. Renee
Arnold, Head of Business Development – Canada;
161 Bay St., 44th Floor, Toronto, ON M5J 2S1 PH:
416-777-5571 FAX: 866-290-9322 eMail: renee.
arnold@aberdeen-asset.com Web: www.aberdeenasset.com
ACM ADVISORS LTD. Chad Mallow, President; 210
– 1140 Homer St., Vancouver, BC V6B 2X6 PH: 604661-0671 FAX: 604-682-3265 eMail: cmallow@acma.
ca Web: www.acma.ca
ADDENDA CAPITAL INC. Michel Jalbert, Senior
Vice-president, Business Development & Client Partnerships; 800 Rene-Levesque Blvd. W., Ste. 2750,
Montreal, QC H3B 1X9 PH: 514-287-7373 FAX:
514-287-7200 eMail: m.jalbert@addenda-capital.com
Web: www.addenda-capital.com
Baker Gilmore & Associates Inc. Brent
Wilkins, Head of Institutional Sales – Connor,
Clark & Lunn Financial Group (Canada); 1002
Sherbrooke St. W., Ste. 2620, Montreal, QC
H3A 3L6 PH: 416-862-2020 FAX: 416-363-2089
eMail: bwilkins@cclgroup.com Web: www.cclinvest.com
CANSO INVESTMENT COUNSEL LTD. Heather Mason-Wood, Vice-president; 100 York Blvd., Ste. 550,
Richmond Hill, ON L4B 1J8 PH: 905-881-8853 FAX:
905-881-1466 eMail: heathermw@cansofunds.com
Web: www.cansofunds.com
BARRANTAGH INVESTMENT MANAGEMENT INC.
Robert Cruickshank, Vice-president, Marketing & Client Service; 100 Yonge St., Ste. 1700, Toronto, ON
M5C 2W1 PH: 416-868-6295 FAX: 416-868-6593
eMail: cruickshank@barrantagh.com Web: www.barrantagh.com
BEUTEL, GOODMAN & COMPANY LTD. Peter D.
Clarke, Managing Director, Client Service & Marketing; 20 Eglinton Ave. W., Ste. 2000, Toronto, ON
M4R 1K8 PH: 416-485-1010 FAX: 416-485-1799
eMail: asokolova@beutelgoodman.com Web: www.
beutelgoodman.com
CI INSTITUTIONAL ASSET MANAGEMENT Dustin
Hunt, Head of Institutional; 2 Queen St. E., 19th Floor,
Toronto, ON M5C 3G7 PH: 416-681-6679 FAX: 416-6818849 eMail: dhunt@ci.com Web: www.ciinstitutional.com
BMO GLOBAL ASSET MANAGEMENT Marija
Finney, Senior Vice-president, Head of Institutional
Sales & Service; 77 King St. W., Ste. 4200, Toronto,
ON M5K 1J5 PH: 416-359-5003 FAX: 416-359-5950
eMail: marija.finney@bmo.com Web: www.bmoglobalassetmanagement.com
CIBC GLOBAL ASSET MANAGEMENT INC. Taras Klymenko, Vice-president, Institutional Business Development; 161 Bay St., Ste. 2320, Toronto, ON M2J 2S8
PH: 416-214-8338 FAX: 416-364-4472 eMail: taras.
klymenko@cibc.ca Web: www.cibcam.com
AEGON CAPITAL MANAGEMENT INC. James Kelly,
Senior Vice-president, Institutional Sales; 8th Floor
- 5000 Yonge St., Toronto, ON M2N 7J8 PH: 416883-5797 FAX: 416-883-5790 eMail: melanie.delrio@
aegoncapital.ca or andrew.berwick@aegoncapital.ca
Web: www.aegoncapital.ca
ALLIANCEBERNSTEIN L.P. Wendy Brodkin, Managing Director; Brookfield Place, 161 Bay St., 27th
Floor, Toronto, ON M5J 2S1 PH: 416-572-2534 FAX:
212-756-4405 eMail: wendy.brodkin@alliancebernstein.com Web: www.alliancebernstein.com/institutional
AMI PARTNERS INC. Craig Labbett, Partner; 26 Wellington St. E., Ste. 800, Toronto, ON M5E 1S2 PH:
416-865-0731 FAX: 416-865-9241 eMail: clabbett@
amipartners.com Web: www.amipartners.com
BNP PARIBAS INVESTMENT PARTNERS CANADA LTD. Simon Segall, CEO; 155 Wellington St.
W., Ste. 3110, RBC Centre - Box 149, Toronto, ON
M5V 3H1 PH: 416-365-3983 FAX: 416-365-3987
Web: www.bnpparibas-ip.com
BNY MELLON ASSET MANAGEMENT Rich Terres,
Managing Director; 320 Bay St., Toronto, ON M5H
4A6 PH: 416-643-6354 FAX: 416-643-5786 eMail:
richard.terres@bnymellon.com Web: www.bnymellon.
com
Connor, Clark & Lunn Investment Management Ltd. Brent Wilkins, Head of Institutional
Sales - Connor, Clark & Lunn Financial Group (Canada); 2200-1111 West Georgia St., Vancouver, BC V6E
4M3 PH: 416-862-2020 FAX: 416-363-2089 eMail:
bwilkins@cclgroup.com Web: www.cclinvest.com
CORDIANT CAPITAL INC. David G. Creighton, President
& CEO; #2400 – 1010 Sherbrooke St. W., Montreal, QC
H3A 2R7 PH: 514-286-1142 FAX: 514-286-4203 eMail:
info@cordiantcap.com Web: www.cordiantcap.com
BRANDES INVESTMENT PARTNERS Michael Parsons, Director, Institutional Group; 20 Bay St., Ste.
400, Toronto, ON M5J 2N8 PH: 416-306-5653 FAX:
416-306-5750 eMail: michael.parsons@brandes.com
Web: www.brandes.com
AURION CAPITAL Gregory Plant, Director, Client
Service & Marketing; 120 Adelaide St. W., Ste. 2205,
Toronto, ON M5H 1T1 PH: 416-866-2441 FAX: 416363-6206 eMail: gplant@aurion.ca Web: www.aurion.
ca
18 Benefits and Pensions Monitor | April 2013
18
Go to page 3 CONTENTS
BURGUNDY ASSET MANAGEMENT LTD. Shihab
Zubair, Vice-president; 181 Bay St., Ste. 4510, Brookfield Place, Bay Wellington Tower, Toronto, ON M5J
2T3 PH: 416-869-3222 FAX: 416-869-9036 eMail:
szubair@burgundyasset.com Web: www.burgundyasset.com
FIERA CAPITAL CORPORATION David Pennycook,
Vice-chairman & Executive Vice-president, Institutional
Markets; 1501 McGill College Ave., Ste. 800, Montreal,
QC H3A 3M8 or 1 Adelaide St. E., Ste. 600, Toronto,
ON M5C 2W5 PH: 514-954-3300 or 416-364-3711
FAX: 514-954-3325 or 416-955-4877 eMail: dpennycook@fieracapital.com Web: www.fieracapital.com
fixed income managers
ANNUAL Directory
FOYSTON, GORDON & PAYNE INC. David Adkins, Senior Vice-president; 1 Adelaide St. E., Toronto, ON M5C
2V9 PH: 416-362-4725 FAX: 416-387-1183 eMail: mciafardoni@foyston.com Web: www.foyston.com
FRANKLIN TEMPLETON INSTITUTIONAL Duane
Green, Head of Institutional – Canada; 200 King St.
W., Toronto, ON M5H 3T4 PH: 416-957-6000 FAX:
416-364-6643 eMail: dgreen2@franklintempleton.ca
Web: www.franklintempletoninstitutional.ca
GLC ASSET MANAGEMENT GROUP LTD. Craig
Christie and Rick Lewis, Vice-presidents, Institutional
Investment Counselling; 100 Osborne St. N., Winnipeg,
MB R3C 3A5 PH: 204-946-7988 eMail: glcinstitutional@glc-amgroup.com Web: www.glc-amgroup.com
GREYSTONE MANAGED INVESTMENTS INC. Louis
R. Martel, Managing Director & Chief Client Strategist;
300 Park Centre, 1230 Blackfoot Dr., Regina, SK S4S
7G4 PH: 800-213-4286 FAX: 306-585-1570 eMail:
louis.martel@greystone.ca Web: www.greystone.ca
1H0 PH: 450-458-0930 FAX: 450-458-7562 eMail:
horizon1@videotron.ca
Jarislowsky Fraser Limited Peter Godec, Partner; 20 Queen St. W., Ste. 3000, Toronto, ON M5H
3R3 PH: 416-363-7417 FAX: 416-363-8079 eMail:
pgodec@jfl.ca Web: www.jfl.ca
INDUSTRIAL ALLIANCE Renee Laflamme, Vicepresident, Group Saving & Retirement; 1080 Grande
Allee W., Quebec City, QC G1K 7M3 PH: 418-6845252 FAX: 418-684-5187 eMail: renee.laflamme@
inalco.com Web: www.inalco.com
INTEGRA CAPITAL LIMITED Charles Swanepoel,
Co-chief Investment Officer & Portfolio Manager;
2020 Winston Park Dr., Oakville, ON L6H 6X7 PH:
905-829-1131 FAX: 905-829-2726 eMail: contactus@integra.com Web: www.integra.com
INVESCO LTD. Joe Di Massimo, Senior Vice-president;
120 Bloor St. E., Ste. 700, Toronto, ON M4W 1B7 PH:
416-324-7442 FAX: 416-590-7742 eMail: joe.dimassimo@invesco.com Web: www.institutional.invesco.ca
ciinstitutional@ci.com
19
Go to page 3 CONTENTS
Legg Mason Canada Inc. David Gregoire, Managing Director, Head of Distribution; 220 Bay St., 4th
Floor, Toronto, ON M5J 2W4 PH: 416-594-2979 FAX:
416-860-0628 eMail: ddgregoire@leggmason.com
Web: www.leggmasoncanada.com
Lincluden Investment Management Wayne
Wilson, Vice-president; 1275 North Service Rd. W.,
Ste. 607, Oakville, ON L6M 3G4 PH: 905-825-3543
FAX: 905-825-9525 eMail: wayne.wilson@lincluden.
net Web: www.lincluden.com
LORICA INVESTMENT COUNSEL INC. Joanne Nahibuan, Office Manager; 119 Spadina Ave., Ste. 203,
Toronto, ON M5V 2L1 PH: 647-776-8107 FAX: 416850-5393 eMail: joanne.nahibuan@loricaic.com Web:
www.loricaic.com
GUARDIAN CAPITAL LP Robert Broley, Senior Vicepresident; 199 Bay St., Commerce Court W., Ste.
3100, Toronto, ON M5L 1E8 PH: 416-947-4086 FAX:
416-364-9634 eMail: rbroley@guardiancapital.com
Web: www.guardiancapital.com
HORIZON 360° ET ASSOCIES INC. Francoys Viau,
President; 61 Cameron, Ste. 250, Hudson, QC J0P
com Web: www.jzechner.com
J. Zechner Associates Inc. David Cohen, President; 200 Bay St., Toronto, ON M5J 2J2 PH: 416-8678649 FAX: 416-867-8705 eMail: dcohen@jzechner.
MACKENZIE INSTITUTIONAL* Gary Wing, Executive Vice-president; 180 Queen St. W., Toronto, ON
M5V 3K1 PH: 416-967-2080 FAX: 416-922-3435
eMail: gwing@mackenzieinstitutional.com Web: www.
mackenzieinstitutional.com
*Division of Mackenzie Financial Corporation
www.bpmmagazine.com/
benefits_directories.html
fixed income managers
ANNUAL Directory
9367 FAX: 902-423-1518 eMail: rroger@seamark.ca
Web: www.seamark.ca
SEI Michael Chwalka, Head of Institutional Sales; 70
York St., Ste. 1600, Toronto, ON M5J 1S9 PH: 416847-6370 FAX: 416-777-9093 eMail: mchwalka@
seic.com Web: www.seic.com
MANULIFE ASSET MANAGEMENT Adam Neal,
Head of Canadian Sales & Relationship Management; NT6 - 200 Bloor St. E., Toronto, ON M4W
1E5 PH: 416-852-7498 FAX: 416-926-5700 eMail:
adam_neal@manulifeam.com Web: www.manulifeam.
com
PHILLIPS, HAGER & NORTH INVESTMENT MANAGEMENT* John Skeans, Vice-president; 20th Floor
- 200 Burrard St., Vancouver, BC V6C 3N5 PH: 604408-6000 FAX: 604-685-5712 eMail: info@phn.com
Web: www.phn.com
MARRET ASSET MANAGEMENT INC. Kathleen
Cooney, Head of Operations; 200 King St. W., Ste.
1902, Toronto, ON M5H 3T4 PH: 416-214-5800 FAX:
647-439-6471 eMail: info@marret.com Web: www.
marret.com
PIMCO CANADA CORP. Andrew Forsyth, Senior
Vice-president; 199 Bay St., Ste. 2050, Commerce
Court Station, Box 363, Toronto, ON M5L 1G2 PH:
416-368-3349 FAX: 416-368-3576 eMail: andrew.
forsyth@pimco.com Web: www.pimco.ca
Standard Life Investments Inc. Jay Waters,
Vice-president, Central Canada; 121 King St. W., Ste.
810, Toronto, ON M5H 3T9 PH: 416-367-2049 eMail:
jay.waters@standardlife.ca Web: www.sli.ca
PYRAMIS GLOBAL ADVISORS (CANADA)* Michael Barnett, Executive Vice-president, Institutional
Distribution; 483 Bay St., Toronto, ON M5G 2N7 PH:
416-217-7773 FAX: 416-307-5349 eMail: michael.
barnett.pyr@pyramis.com Web: www.pyramis.ca
STATE STREET GLOBAL ADVISORS, LTD. Randy
Oswald, Vice-president; 30 Adelaide St. E., Ste. 500E,
Toronto, ON M5C 3G6 PH: 647-775-7789 FAX:
647-775-7264 eMail: randy_oswald@ssga.com Web:
www.ssga.com/canada
*Operating division within RBC Global Asset Management Inc.
MAWER INVESTMENT MANAGEMENT LTD.
Jamie Hyndman, Director of Strategic Business
Development; 900, 603 7th Ave. S.W., Calgary,
AB T2P 2T5 PH: 403-267-1974 or 800-889-6248
eMail: jhyndman@mawer.com Web: www.mawer.
com
*A Fidelity Investments Company
MFS MCLEAN BUDDEN Christine Girvan, Managing Director, Sales, Canada; 77 King St. W.,
35th Floor, Toronto, ON M5K 1B7 PH: 416-3617273 FAX: 416-862-0167 eMail: cgirvan@mfsmb.
com Web: www.mcleanbudden.com or www.mfs.
com
MONTRUSCO BOLTON INVESTMENTS INC. Richard Guay, Senior Vice-president; McGill College,
Montreal, QC H3A 3M8 PH: 514-282-5465 FAX:
514-282-2516 eMail: guayr@montruscobolton.com
Web: www.montruscobolton.com
NORTHERN TRUST David Lester, Vice-president;
1910-145 King St. W., Toronto, ON M5H 1J8 PH:
416-775-2215 eMail: david.lester@ntrs.com Web:
www.northerntrust.com
OPTIMUM ASSET MANAGEMENT Patrick Lamontagne, Senior Vice-president, Development; 425 de
Maisonneuve Blvd. W., Montreal, QC H3A 3G5 PH:
514-288-7545 FAX: 514-288-4280 eMail: plamontagne@optimumasset.com Web: www.optimumasset.
com
RUSSELL INVESTMENTS CANADA LIMITED Dexton Blackstock, Director, Head of Institutional Business Development; 100 King St. W., Ste. 5900,
Toronto, ON M5X 1E4 PH: 416-640-6202 FAX:
416-362-4494 eMail: dblackstock@russell.com Web:
www.russell.com/ca
SCOTIA ASSET MANAGEMENT L.P. – GLOBAL
INSTITUTIONAL Ron Smith, Head & Vice-president,
Institutional Sales; 40 King St. W., Ste. 5200, Toronto,
ON M5H 1H1 PH: 416-933-0685 FAX: 416-933-7490
eMail: ron_smith@scotiaam.com Web: www.scotiabank.com/ca/en/0..6153.00.html
SEAMARK ASSET MANAGEMENT LTD. Remi
Roger, Vice-president & Head of Fixed Income; 1801
Hollis St., Ste. 310, Halifax, NS B3J 3N4 PH: 902-423-
T. Rowe Price Bruce Winch, Director, Business Development, T. Rowe Price (Canada), Inc.; 161 Bay St.,
Ste. 2700, Toronto, ON M5J 2S1 PH: 416-572-2582
FAX: 416-572-4085 eMail: bruce_winch@troweprice.
com Web: www.troweprice.com
TD ASSET MANAGEMENT INC.* Tim Thompson,
Chief Operating Officer; 161 Bay St., 33rd Floor,
TD Canada Trust Tower, Toronto, ON M5J 2T2 PH:
416-982-6346 eMail: timothym.thompson@tdam.com
Web: www.tdaminstitutional.com
* Wholly-owned subsidiary of the Toronto-Dominion Bank
For complete directory information, visit
www.bpmmagazine.com/benefits_directories.html
20 Benefits and Pensions Monitor | April 2013
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�
WELLINGTON MANAGEMENT COMPANY, LLP
Susan M. Pozer, Vice-president; 280 Congress St.,
Boston, MA 02210 PH: 617-951-5000 FAX: 617263-4100 eMail: mig@wellington.com or smpozer@
wellington.com Web: www.wellington.com BPM
www.tdaminstitutional.com
timothym.thompson@tdam.com
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416 982 6346
am.com
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1 888 834 6339 | www.tdaminstitutional.com
1
Based on simulated and live returns of 23 years of Canadian equity history and 15 years of global equity history ending December 31, 2012.
Actual returns may vary. 2Retail and institutional assets combined as of February 28, 2013
TD Asset Management Inc. (TDAM) is a wholly-owned subsidiary of The Toronto-Dominion Bank (TD Bank).
®/ The TD logo and other trade-marks are the property of The Toronto Dominion Bank or a wholly-owned subsidiary, in Canada and/or other countries.
21
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www.macorcapital.com
| investment |
A Dichotomy Of Strategies
By: Claude Macorin
T
he post-financial crisis period has not been kind to
trustees and their investment committees. Difficult financial markets have increased pressure
to improve performance and reduce risk – a
difficult task at the best of times. How does an
organization make gains in the face of historically low interest rates and stubbornly high liabilities? Pension plans, endowments, and foundations all have varying degrees of financial
commitments and discussion around the asset mix and the number one driver of performance remains a dominant topic.
The focus of this article is on defined benefit plans, but the
challenges relate to any investment organization that is contemplating a strategic shift in its asset mix, particularly as it relates
to fixed income and illiquid alternatives.
Challenging Environment
The challenging environment has given rise to a dichotomy
of strategies. On the one hand, we have witnessed a gradual
increase in the allocation to fixed income and a lengthening of
the duration, often referred to as a liability friendly, de-risking
22 Benefits and Pensions Monitor | April 2013
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strategy. On the other hand, there is a more venturesome, higher
risk shift toward illiquid alternative investments in search of
better returns. On the surface, it might appear counter-intuitive
to pursue both strategies simultaneously, but each has a unique
purpose and a distinctly different risk/return profile.
The early adopters of de-risking strategies benefited significantly from the decline in interest rates that ran parallel with
lacklustre equity markets. With full knowledge that ‘performance’ is not typically part of the nomenclature that we associate with de-risking, it has nonetheless been an attractive and
welcome benefit.
Today we find ourselves in a different economic environment and investors who opt to pursue de-risking would be wise
to proceed with caution. This is because de-risking strategies
are not without their own risks. With interest rates at historical
lows, the bond market has run out of steam and is entering a
new phase. The stellar performance, which has come principally from capital gains, will be virtually impossible to duplicate. There is far more risk in the bond market today than at any
other time in recent memory. It is difficult to predict when rates
| investment |
will rise, but in our view it is more likely
that the bond market will experience
negative returns in the coming years.
A dynamic approach to de-risking
offers a better process with respect to
timing the shift in allocation toward
fixed income, but does not eliminate the
inherent risk of the strategy. Most investment practitioners would agree that it is
more effective to de-risk when a plan is
closer to meeting its funded ratio. The
challenge, however, is that investors
get caught up in the moment and are
unduly influenced by the recent past as
was the case in the late 1990s, a period
when equity markets were strong and
most pension plans were fully funded.
In retrospect, this would have been an
excellent opportunity to de-risk, but derisking was not part of the consultant’s
arsenal at the time. In fact, investors
were being encouraged to increase their
equity allocation in light of the ‘new
paradigm.’ Times have indeed changed.
Balanced Manner
Given the circumstances, it appears
that the benefits from increasing fixed
income and extending duration won`t
be as effective going forward. This is
not to say that fixed income should not
continue to play an important role in the
asset mix, but we believe that it should
be applied in a balanced manner, recognizing where we are in the economic
cycle. In an organization where there are
other monetary considerations, such as
benefits, contributions, and, in the case
of endowments and foundations, spending requirements, it would be unwise
to overlook the equity risk premium as
an important tool in helping investors
meet their objectives. The fact that this
premium has not been as prevalent over
the past several years should not be a
deterrent. One could argue that the lack
of an equity risk premium makes it more
likely to be prevalent going forward; a
reversion to the mean. Market reversions
usually play out over long cycles interspersed with rapid movements as we
witnessed with the recent run-up in the
U.S. equity market.
There are, however, situations where
a liability driven investment framework
is preferred. This could include, for
example, a corporation where managing the balance sheet and volatility of
returns is the singular and predominant
risk or a pension plan that is very mature
or closed. These are situations where an
organization has overriding objectives
and regulatory issues that need to be
addressed.
Parallel with the pursuit of de-risking
strategies has been a growing interest
in illiquid alternative investments as a
means to improve performance. These
alternative strategies are often recommended in the context of providing a
low correlation to marketable securities
and with the potential to improve the
portfolio’s risk adjusted returns. The
“The spreads between
first and fourth
quartile are extremely
wide and, therefore,
getting it wrong is
a very painful
experience given
the illiquidity and
long time horizon”
reality, however, is that many of these
investments have attributes that make it
difficult for the average organization to
access economically and add value. This
is due to a number of factors including high fees, complexity, and a lack
of required skills to name a few. The
spreads between first and fourth quartile
are extremely wide and, therefore, getting it wrong is a very painful experience
given the illiquidity and long time horizon.
It is possible, given recent trends,
to have a scenario where an organization finds itself with a larger allocation
to fixed income and duration product as
well as an increased allocation to illiquid
alternatives. In this situation, if interest
rates rise and the alternatives don’t pan
out as anticipated; such an organization
will have effectively gone out the frying
pan and into the fire.
Practical Approach
We believe that a successful investment program requires a comprehensive
and practical approach and well-reasoned
strategies that reflect an investor’s unique
objectives and tolerance for risk. For the
vast majority of small and mid-sized institutional investors, a global, multi-asset
portfolio diversified across a range of
equity, fixed income, and, in some cases,
marketable alternatives continues to be the
most effective strategy. How these exposures are achieved will vary among clients
and influence risk adjusted performance.
In closing, I don’t want to leave the
readers with the misconception that I
am not in favor of investing in illiquid
alternatives when, in fact, I have worked
on a variety of investments in this area.
The challenge is that this segment of the
market is very complex and a variety of
factors – such as accessing deal flow, the
quality and experience of the leadership,
fees, carried interest and the structure of
the agreements, to name a few – all play
an important role in determining the outcome. And, as I mentioned earlier, the
spreads between first and fourth quartile
are extremely wide. It is an area that
is better left to the larger, more sophisticated institutional investors that have
commensurate resources. Partnering
with an organization that has an excellent reputation and access to attractive
deal flow is an alternative. The question
that one needs to ask is what will the
results look like in 10 years, net of fees?
Another alternative that an investor may
consider is to piggyback or co-invest
with a larger, like-minded investor who
has the resources and where there are
common objectives.
Independent thinking is essential to
creating value and following the crowd
leads to mediocrity at best.
BPM
Claude Macorin is the
founder and president of
Macor Capital Management, a boutique investment consulting firm
focused on providing
customized investment services
to endowments, foundations
and pension plans.
www.macorcapital.com
�
April 2013 | Benefits and Pensions Monitor 23
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karen@powershift.ca
| Healthcare |
Standard Set For
Psychologically Safe Workplaces
By: Karen Treml
In January of this year, a new CSA standard was introduced
in Canada. ‘Psychological health and safety in the workplace –
Prevention, promotion, and guidance to staged implementation’
is a 71-page document that outlines the purpose, applicability,
and guiding principles to make workplaces in Canada psychologically safe.
In the first of a two-part series, Karen Treml, Benefits and
Pensions Monitor’s staff writer, provides an overview of the
standard and what it means for employers.
C
u u u u
anadian workplaces now have a documented
and systematic approach to develop and sustain
a psychologically healthy and safe workplace.
‘Psychological health and safety in the workplace – Prevention, promotion, and guidance
to staged implementation’ was commissioned by the Mental
Health Commission of Canada (MHCC) and approved by the
Standards Council of Canada. It was supported through funding
by Human Resources and Skills Development Canada, Health
Canada, the Public Health Agency of Canada, Bell Canada, and
the Great-West Life Centre for Mental Health in the Workplace.
This standard is intended to align with other relevant standards and with recognized management system standards. It
incorporates five key elements:
policy, commitment, and engagement
planning
implementation
evaluation and corrective action
management review and continual improvement
Mary Ann Baynton, chair of the technical committee on
psychological health and safety in the workplace says that this
standard is more detailed, more in depth, and includes more
resources than what is typical of standards and that it was very
definite and purposeful to add more. Due to the nature of the
standard and its importance to each and every person in the
workplace, the intention was to help employers who feel they
do not have the expertise. Therefore, there is detailed information that addresses organizational processes, policies, strategies, and practices.
Serves As A Blueprint
While guidelines for occupational health have always
included psychological health, the psychological standard is
specifically intended to bring attention to psychological health,
24 Benefits and Pensions Monitor | April 2013
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she says. It is also intended to serve as a blueprint for organizations to assess hazards, form policies, and put into practice
those things which will not only work toward minimizing the
risk of psychological injury in the workplace, but that will
also promote psychological health. It is not about assessing
individual employee health anymore than you would assess
individual employee health for an occupational health and
safety approach, she says. “When we talk occupational health
and safety, we talk place and how it impacts health and safety.
This is the same with this standard. We are talking about the
workplace, not individual health.” While those employees
who suffer from mental illnesses will certainly benefit from
a psychologically safe and healthy workplace, the standard
intends to preserve and protect the psychological health of
all employees and to foster a culture and an environment that
| Healthcare |
promotes optimal psychological health
across the board.
The standard reflects the shift in
thinking that has been in motion for
more than 15 years. Early work on the
standard began with the forming of a
roundtable in 1998. Headed by Bill
Wilkerson, co-founder of the Global
Business and Economic Roundtable
on Addiction and Mental Health, that
group set out to develop a business
plan to defeat depression. It called for
many of the features that the standard
now embodies and over the years was
reworked to include very detailed recommendations and ideas for employers to use in dealing with prevention
of stress injuries, as well as guidelines
on how to understand the difference
between dealing with depression and a
more typical physical injury disability.
A Quick Look At
The Business Case
Undoubtedly, a psychologically safe
and healthy workplace includes many
positives for the employer. Stressors
such as harassment, bullying, unrealistic expectations, extreme working hours
or conditions, and difficult bosses and
co-workers play directly into rates of
absenteeism, presenteeism, and turnover
which, in turn, plays into the bottom line
of an organization. While these are some
of the considerations of a psychologically safe and healthy workplace, Sue
Brown, principal, health and productivity at Mercer Investment Consulting,
says that to stay competitive, organizations are really going to have to embrace
the standard. “With the war for talent, all
people are going to want to be in healthy
workplaces. They are not going to want
to be in an unsafe or unhealthy workplace culture.”
The standard is voluntary. From a
purely legal standpoint the standard
in and of itself is not required in the
workplace. However, it does introduce
due duty and due diligence and reflects
existing case law. So while it has no real
legal standing, it will become a guideline
the courts use to determine the outcome
of cases involving mental health in the
workplace.
The standard is based on mental
injury which can be defined as harm
to mental health that results from conduct, says Dr. Martin Shain, a member of the technical committee on
psychological health and safety in the
workplace and founder and principal
of the Neighbour at Work Centre, a
consulting agency in the area of workplace mental health and safety. He says
“between 25 per cent and 33 per cent
of total loss attributed to mental health
is attributable to mental injury. I did
something to you or did something I
should not have done that foreseeably
led to damage to your mental health.”
The obvious causes of that in the past
have been incidents such as harassment, bullying, and discrimination.
What has happened over the last 10 to
12 years, says Shain, is that the bar has
been lowered to the point where even
what some people would characterize as
careless behaviour is leading to legal liability. It is actually in the law now and is
referred to as negligent behaviour. As the
law has become less and less tolerant of
certain types of conduct, the criteria for
admitting claims for mental injury have
been loosening and becoming wider so
it is much easier for an employer to get
themselves into trouble. Not only that,
individual supervisors and employees
can get themselves into hot water. However, it goes up as well because now
there is a shadow that is being cast over
the boardroom. Are directors liable too?
This is the coming wave, says Shain.
Employers are being held responsible
and the standard, in essence, reflects best
practices and adds support and guidance
to be able to do due diligence.
At the end of the day, following
‘Psychological health and safety in the
workplace – Prevention, promotion,
and guidance to staged implementation’ and effecting policies and procedures in line with the standard will go a
long way to providing a psychologically safe and healthy workplace, while
providing the tools that will bode well
when legal claims arise. The standard
provides an outline and a guideline for
identifying the gaps and assessing the
risks within a workplace. It provides
the jumping off point for the discussions that need to occur in order to
work toward the most psychologically
safe and healthy workplace. It delivers impetus for greater focus on ensuring awareness and providing training
within the workplace that maximizes
awareness on the part of management
and employees.
The included and available resources
provide for employers to effect changes
immediately, without big costs. While
there certainly is some time and effort
involved, the move toward a psychologically safe and healthy workplace can
be put into motion in both large and small
companies with relatively little cost.
Whether a company is profitable or is
psychologically healthier and safer is not
an either or proposition, says Baynton.
“What the standard says is, you should
be able to have both. The research and
the evidence from places that are out
there and a lot of the evidence in the
annexes of the standard prove that workplaces that are psychologically healthy
and safe on average actually have a better
bottomline.”
BPM
Karen Treml is Benefits and
Pensions Monitor’s staff writer
karen@powershift.ca
�
April 2013 | Benefits and Pensions Monitor 25
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| healthcare |
Patient Assistance Programs –
Demystified
By: Johnny Ma & Gordon Polk
P
harmaceutical products represent a significant cost
component of an employer’s health benefits plan.
For plan sponsors, that may not be a bad thing,
particularly if plan members can remain on the
job and perform effectively. However, plan sponsors often want to ensure that good value is being received for
the benefits dollars being spent. One of the less visible valueadds that come with some prescribed drugs is the support from
patient assistance programs.
With origins in the pharmaceutical industry, patient assistance programs provide support that goes beyond just drug
therapy. In the broadest terms, they support patients by removing barriers to help them achieve the best possible outcomes
from their interaction with the healthcare system. This can be
achieved by helping patients receive necessary treatments and
navigate the healthcare system. Team members who administer a patient assistance program may include registered nurses,
26 Benefits and Pensions Monitor | April 2013
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registered practical nurses, foreign trained physicians, other
healthcare professionals, and social/health counselors. Nonclinical team members may include reimbursement specialists,
PPOC (primary point of contact) co-ordinators, data administrators, and account managers.
Patient assistance programs can help patients in each of the
health condition phases.
Readily Available
By providing access to a healthcare professional over the
phone, patient assistance programs take away the reliance on
internet information that has not been substantiated or filtered
properly when patients don’t have anywhere else to get answers.
In situations where answers may not be readily available,
patient assistance programs can direct patients to reliable health
information resources that may be specific to the patient’s medical condition. Explanations on different treatment options can
| healthcare |
Sometimes there are still questions
after the patient has received treatment.
These may be related to:
Setting of future appointments; logistics support (locating clinic); product
supplies related to treatment (bandages, syringes, tourniquets, etc.)
Follow up reminders to ensure adherence to therapy; answer questions on
side effects; and report adverse events
or product complaints
Processing paperwork for claims to
insurers and/or government
Co-ordination of benefits coverage
Through ongoing communications
with patients, there is greater education,
awareness, and management of the conditions treated. Outcomes are improved
as problems can be identified and
addressed earlier which results in better
value for the benefits dollars spent.
Terminology Demystified
Some programs are offered before
the drug may be available commercially.
For example, before a new pharmaceutical drug is available commercially on
the market, the federal government may
allow a pharmaceutical manufacturer to
provide an unapproved drug to patients
with serious or life-threatening conditions on a compassionate or emergency
basis when conventional therapies have
failed, are unsuitable, or are unavailable.
This scenario should not be confused
with clinical research trials whereby
drugs are provided at no cost. Further,
drugs given to patients through the special access program may be distributed
through physicians as opposed to pharmacies.
Programs may also be used to reduce
drug wastage. This can occur anytime
after a drug is commercially available
on the market. In some cases, rather
than receiving a sample sized package
of the product from the doctor, a patient
may be given a wallet card at the same
time that a physician writes a prescription. When the patient takes the card to
the pharmacy, a commercial sized package of the drug is given to the patient.
In most cases, the pharmaceutical manufacturer covers the full cost of this prescription as it is viewed as a ‘sample’ or
trial treatment.
www.bpmmagazine.com
nora@powershift.ca
be relayed through conversation with
a nurse or other medical professional.
Many programs offer multi-lingual support that is not available elsewhere.
In some cases, treatment regimens
may not be as simple as taking an oral
drug once a day. Drug treatments are
becoming more and more complex and
sometimes involve patients self-injecting or receiving treatment at specialized
facilities. Given the vast array of treatment issues, patients will have questions
at all stages. Patient assistance programs
have been developed to address concerns such as:
Drug information (side effects; proper
administration)
Interpreting and understanding physician instructions
Interpreting and understanding of
pharmacy instructions
Interpreting and understanding of
insurance coverage issues and criteria
Directions as to how to submit a drug
claim to an insurer and/or pharmacy
Directions as to where treatments can
be obtained such as the location of an
infusion clinic
April 2013 | Benefits and Pensions Monitor 27
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| healthcare |
Brand pharmaceutical manufacturer
programs allow patients the choice of
staying on therapy with a brand medication instead of switching to a generic
alternative. In this scenario, a patient
product choice program allows the
patient to stay with the brand drug without paying any more cost compared to
a generic alternative. At the same time,
plan sponsors do not have to pay any
more for having a plan member stay on
the brand medicine. A patient product
choice program can be very important
for certain therapies which are difficult
to treat and where patient intolerance or
preference may occur between the brand
and generic drugs.
Generic Alternative
As an example, in 2010 a generic
alternative to the prescription drug
CONCERTA became available on the
Canadian market. It is used primarily for
Attention Deficit Hyperactivity Disorder (ADHD) in children. The release of
the medication in the human body is the
determinant of efficacy and outcomes
for ADHD patients. The rate of release
of the drug and the concentrations in
the body have been demonstrated to be
very different between the brand and
the generic. Patients, caregivers, and
physicians have spoken to the differences between the brand and the generic
including adverse events and different
clinical effects. In this case, the use of
a patient product choice program in the
marketplace has helped patients to stay
on their established therapy while having no financial disadvantage as the plan
sponsor pays only for the cost of the
generic drug alternative.
In some cases, the practice of providing financial assistance may come into
play as a component of patient assistance programs. This element would
most likely apply for high cost drugs
such as biologics or other treatments
such as cancer products. This financial
assistance helps to ensure that patients
do not discontinue treatment as a result
of financial hardship. It should be kept in
mind that financial assistance is income
means-tested and it is provided in the
context of what other programs (such
as government coverage) may be available in a given province. In short, not
all patients would qualify for financial
assistance if it was available.
These programs are sponsored by
pharmaceutical manufacturers, some of
whom provide services through thirdparty suppliers, while others operate
their own in-house programs using internal staff and resources. By far, most programs are offered as a voluntary service
by the drug manufacturer.
Customized Therapies
Some patients may require customized therapies. As an example, cancer
treatments are never straightforward.
A treatment regimen involves so many
players that most patients need help
to navigate through all the steps and
requirements that constitute therapy.
How does one get through the process?
Who is out there to answer the multitude
of questions that arise day-to-day?
Patient assistance programs can help
patients access credible information and
live support when needed. They can help
remove barriers to care which reduces
stress on patients, allowing them to
cope better with their health concerns.
An increased awareness of their condition leads to improved compliance with
therapy and better health outcomes.
These programs can facilitate treatment
appointment times that are convenient
for the patient (evenings and weekends),
help minimize delays in treatment, and
help with co-ordination of benefits and
paperwork (insurance forms and travel
letters). Some programs even have a
24-hour international call centre so
patients can receive help at all times.
They also reduce the administrative
workload required of physicians for the
purpose of co-ordination of coverage on
behalf of their patients. This work can
include completing medical insurance
forms, addressing denials and/or appeals
for patients who may not be granted coverage, and facilitating coverage renewals when needed to ensure continuity of
care. Physicians receive updates on how
their patients are doing as well as reports
of adverse events or complaints which
may arise. Patient assistance programs
can also supplement the information
given by physicians and clarify questions that may arise after the physician
appointment.
Administrative Workload
Administrative workload can also
be reduced at the pharmacy. Patient
28 Benefits and Pensions Monitor | April 2013
28
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assistance programs can liaise between
physicians, pharmacy, and plan administrators/ adjudicators on co-ordination
of coverage issues. This gives pharmacists more time to deal with the clinical
aspects of drug treatment to improve
patient outcomes.
Insurers can benefit from these programs too. Patient assistance programs
can be integrated with insurer claims/
case management processes so that continuity of care is improved. This can
lead to a reduction of unnecessary back
and forth steps that may occur if medical forms are not completed correctly by
patients and/or physicians. This streamlining of administrative practices will
also help drive down costs associated
with administering the plan.
Last but not least, patient assistance
programs can help maximize the value
of the drug benefits program to plan
sponsors by actively engaging patients in
their treatment and helping them return
to health as soon as possible which can
lead to a reduction in absenteeism. A
more streamlined approach to treatment
also minimizes employee time away
from work for medical appointments,
testing, and treatments.
When employees or their dependents
are sick, they become patients that need
to rely upon a combination of public and
private healthcare services. Within Canada, the integration of public and private
services is often poorly co-ordinated
because the coverage and reimbursement
models are separate. Depending upon
the disease or illness, navigating the
healthcare system can be complicated
for patients. The existence of Patient
Assistance Programs may not be noticeable to anybody until such time that they
become ill, at which point these programs help to fill gaps in our healthcare
system. The value of these programs can
be very high for employers who benefit
when employees attain the best possible
health outcomes.
BPM
Johnny Ma and Gordon Polk are
with Mapol Inc.
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jhornyak@powershift.ca
| Advisor Insight |
Advisors And Pension Reform
By: Joe Hornyak
A
midst all the talk of pension
reform to improve pension
coverage in the private sector and retirement savings
by Canadians, a solution
to these already exists in the Canadian
marketplace.
Statistics Canada’s ‘Survey of Employment, Payrolls and Hours (SEPH)’ showed
in 2007, just over 5.1 million employees, or
48 per cent of the total private sector labour
force, worked for small enterprises (those
with fewer than 100 employees). More
than 1.7 million, or 16 per cent, worked for
medium-sized enterprises (those with 100 to
499 employees). In total, therefore, SMEs
employed just over 6.8 million, or 64 per
cent, of private sector employees.
And employer size is a function of pension coverage. Office of the Superintendent
of Financial Institutions Canada numbers
for 2005 show the increase of RPP coverage
rises dramatically with employer size, from
three per cent of employers in companies
with less than 50 employees to 82 per cent in companies with
more than 500 employees.
Retirement Savings
The issue then is how to reach those employers and get them to
offer retirement savings programs as part of their benefits package.
This may need to start with changing the attitudes of Canadians who may be relying solely on the Canada Pension Plan
for their retirement income, says Jeff Aarssen, vice-president,
group retirement services sales and marketing, at Great-West
Life. “What is needed is a greater awareness that social programs may not fully meet the requirements of a lot of employees to replace income at retirement. That discussion just is not
as natural as it might be for prescription drugs and hospital
coverage and dental. An employer will automatically put something in place for these. When it comes to retirement savings,
however, you almost have to start a whole new discussion.”
This discussion is taking place between the national group
insurers and the agents, brokers, and advisors who have served
the SME benefits market for close to two decades.
John Hamilton, president and CEO, Financial Horizons
Group, says back in the ’90s, the national insurers dealt directly
with their clients, often from their own branch offices. Then, in
the mid to late ’90s, the major life companies decided they did
not want to have bricks and mortar operations anymore to deal
with benefits plans. One entity stepping into that role was managing general agencies. Hamilton, for example, started Finan30 Benefits and Pensions Monitor | April 2013
30
Go to page 3 CONTENTS
cial Horizons to meet that need and today he has more than
6,000 broker, advisor, and insurance agent clients.
And what we are seeing today, says Aarssen, is a “heightened awareness” of the potential to work with all types of advisors to provide solutions for SME group retirement plans. This is
probably a result of the pension reform dialogue that has been
going on since the economic crisis in ’08/’09. “This is creating
more of an impetus for these advisors to reach out to the small
businesses and for the recordkeepers to reach out and turn to
those advisors because this is a natural market. You have a natural majority of companies that just do not have any coverage.
And advisors and brokers have always dominated the ability to
provide solutions to these businesses,” he says.
Added Work
Brett Marchand, vice-president distribution, Manulife Financial
Group Retirement, also sees this as an area of potential. “When
you’re already serving the client, there’s a business relationship
with the advisor and a line of revenue. In most cases, the additional
effort required to address group retirement for the client is minimal
and it gets the client to a fuller solution.”
However, SMEs too are showing more interest in providing
retirement savings to their employees, says Rob Campbell, of
the Leslie Group. “After the 2008 global economic problems,
employers without a group retirement plan were not even interested because there were too many other corporate priorities.
However, in the last 12 months, we have seen more employers
February 2013 | Benefits and Pensions Monitor 31
| Advisor Insight |
willing to talk about putting something
in place for their employees. The economy has improved and companies have
had a couple of fiscal years where they
have made some money from the harsh
decisions they were forced to make in
2008/2009. Now it is time to invest back
in the employees.”
And a business case can be made for
advisors, agents, and brokers to expand
their offerings to include group retirement. “Having both sides of the business
puts a fence up around the client – making the client ‘sticky’ so to speak. In this
case, the advisor’s ability to maintain the
relationship and business with that client
increases, probably exponentially,” says
Marchand. “The revenue that advisors are
earning from group benefits business is
something they want to protect. By forming an additional group retirement relationship, advisors can protect the group
benefit revenue more effectively as well.”
Still, convincing the brokers is one of
the challenges, says Marchand. “Even
brokers who know group benefits well
may view retirement options as complex,
so they don’t want the added administration or perceived risk of operating
a group retirement plan. Our account
executives have resources specifically
designed to support these needs. They
focus on breaking down the seeming
barriers to help brokers meet the clients’
needs confidently and efficiently.”
For group insurers trying to increase
their presence in the SME market, a key
player is the managing agency. Hamilton describes his business as the back
office to the independent insurance
agent. “If you want to sell life insurance, segregated funds, and investment plans in Canada, you either do it
through an MGA, a managing general
agency, or you deal direct with the life
companies,” he says. “The life companies share us, if you want to use that
term, to process the business. We do
all the recruiting, all the training, all
the monitoring of business, and all the
supervision of the advisors, just what
the life companies used to do.”
The MGA channel is the largest distributor of life products in Canada. Now,
he says, the large insurers are looking
at the group retirement side and saying
“maybe we have some synergies here.
They have the economies of scale, they
can centralize it. We can process it.”
Using these agencies to reach insurance agents, brokers, and advisors makes
a great deal of sense. Hamilton’s company
has 6,000 advisors. Most advisors probably represent less than 10 groups. “So if
I am a national insurer on the group retirement side, I want access to these people
because there is a lot of potential there.”
Campbell says the typical process if
a client plan sponsor wants to offer a
retirement savings plan to their employees, is to approach a consulting firm to
obtain proposals from the marketplace
and recommend the optimal provider for
the client. “We would then work with the
insurer provider to co-ordinate the plan
set-up including all program provisions,
plan management, member enrolment,
communication, and regular education
updates
Hands-on Approach
He prefers a hands on approach
because “if you rely on the client to just
work directly with the insurer, or vice
versa, we sense everybody is so busy
these days that things will fall off the
rails.” With the governance, fiduciary,
and compliance requirements for capital
accumulation plans, he tries to “ensure
there are member update sessions and the
program stays current.”
However, most advisors new to the
market are unaware of what is available,
particularly seamless, turnkey solutions,
says Marchand. “The secret, and it is not a
secret at all in the industry, is you need to
be easy to do business with. Advisors are
looking to minimize the amount of time
and headache that goes into the implementation of a small business plan.”
This means the advisors need to be
educated to make sure they know the
group insurance company has the resources to help members enrol into the plan
and make wise selections in terms of their
asset allocation. “We tend to do a lot of
supporting to make sure that the sponsor
is looking at performance and the overall
operations of the plan, really making sure
that members are getting a good level of
support and access to financial education
specialists to help grow core financial
literacy skills and make wise decisions
within the plan,” he says.
Aarssen believes with SMEs the
advisor plays an integral part. “Once
they choose a certain provider, we work
in strong partnership with that advisor.
The advisor is there to provide education,
advice, recommendations on the plan
design, and to discuss with the employer
the type of plan they want to put in place.”
Significant Number
How much of this market is actually
willing to implement a new plan? Marchand says it is a significant number; however, it is not nearly significant enough
given the lack of coverage in the market.
“There are a lot of small to medium sized
businesses across the country that really
don’t feel it is their responsibility to offer
a group retirement plan. They say they
pay their employees from a total compensation perspective. Employers may let
employees join an RRSP, but the employers aren’t looking to invest company time
to provide support for this.”
These employers may, however, be
ignoring a significant benefit of offering
a retirement savings plan. While there is
some debate over the attraction and retention benefits of having a retirement plan,
particularly amidst predictions of labour
shortages, an overlooked benefit for the
employer is linked to the abolishment of
mandatory retirement, says Campbell. If
an employee wants to stay on, yet can no
longer perform the duties of their job at
an acceptable level, perhaps blocking the
advancement of a younger employee, the
employer is faced with the severing the
employee which can be quite costly That
is a hidden cost a lot of employers are
not necessarily aware of or want to face
the realities of. “A pension plan allows
for a systematic retirement of staff when
they get to their desired retirement age,”
he says.
Clearly, a combined effort from group
insurers, MGAs, insurance agents, brokers, and advisors may help solve Canada’s
retirement saving issues. And SMEs may
be even more motivated with the spectre
of pooled registered pensions plans looming over them. If they act now to bring in
a plan that matches their business model,
they can avoid the certain government
intervention that will follow if PRPPs do
proceed, says Campbell.
BPM
Joe Hornyak is executive editor of
Benefits and Pensions Monitor
jhornyak@powershift.ca
�
April 2013 | Benefits and Pensions Monitor 31
31
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cmacneish@corpben.com
| DC Plans |
Investment Options –
Does One Size Fit All?
By: Cam Macneish
W
hen organizations are implementing a
new employee retirement savings plan or
improving their existing one, today’s plan
design and investing environment can be
more complex than one might originally
think. The mere fact that a defined contribution pension plan
(DC) or group registered retirement savings plan (GRRSP)
assigns a contribution rate, processes a deposit, and periodically generates a member statement does not necessarily imply
simplicity.
Although there are many plan sponsors who embrace a new
DC or GRRSP or welcome the transition from a defined benefit
plan to a DC or GRRSP, there are many aspects to this change.
Plan design considerations, such as mandatory versus optional
participation, contribution rate commitment, default fund selection, and allowing in-service withdrawals within GRRSPs, are
all important elements to implementing or maintaining a DC
for employees. However, it can be argued that selecting and
maintaining an optimal set of investment fund choices for participating employees is clearly the most intimidating element of
diligent plan management.
Exhibit 1
Target Risk Funds
(Sample Asset Class Mix)
Conservative
Moderate
Balanced
Growth
100%
80%
60%
40%
20%
■ Fixed Income ■ Equities
32 Benefits and Pensions Monitor | April 2013
32
Go to page 3 CONTENTS
Aggessive
dan.carpick@gwl.ca
john.stevenson@gwl.ca
anthony.cardone@gwl.ca
Your Group Is Like No Other.
So Are Our Group Retirement Services.
W
hatever kind of group you have, they expect a lot of you.
Fortunately, Great-West Life is completely committed to
accountability and providing superior, reliable group retirement
services. What’s more, our regional experts work with you to
provide strong local support. So we’re truly the ideal partner.
After all, you’d never want to disappoint a group as unique as yours.
Contact your group retirement team.
Retirement solutions that never stop working
Great-West Life, the key design and “Retirement solutions that never stop working” are trademarks of The Great-West Life Assurance Company.
Western region
Dan Carpick
204-926-8331
dan.carpick@gwl.ca
33
Go to page 3 CONTENTS
Central region
John Stevenson
416-359-3304
john.stevenson@gwl.ca
Eastern region
Anthony Cardone
514-350-4664
anthony.cardone@gwl.ca
| DC Plans |
Investment Options
The retirement savings industry continues to accept the Capital
Accumulation Plan Guidelines as a
tool to help plan sponsors effectively
manage their employee retirement
plans where employees are offered
various investment options. The number of choices should be reasonable
and diverse in style and objectives.
However, plan sponsors have access
to thousands of institutional and retail
investment options to make available
to their employees.
So the question typically posed by
a plan sponsor is: ‘Given our need to
attract and retain valuable talent and
given the unique nature of our employees, what range and number of investment options should we offer?’ This
question extends to another question:
‘Does one investment fund or set of
investment funds meet the needs of our
employees?’ Before a list of investment
choices is selected, understanding the
following list of characteristics may help
a company better define the nature of its
employees as investors:
Investor knowledge and experience
Within today’s academic, business, and consumer environments,
investors gather and apply investment
knowledge and experience from many
sources. Employers are often challenged
to accurately assess the comfort level
their employees have with investing
and selecting funds from a platform of
choices. The most common means of
gauging investor sophistication is through
a customized employee survey.
age their savings. For existing DC plans
and GRRSPs that are delivered through
service provider platforms, web and
IVR utilization statistics may provide
some insights into the level of member
engagement.
Investor income
It is not always the case, but an
employee group with an average earnings notably above the Average Industrial Wage, say $50,000, will likely be
more financially literate than a group
with lower earnings.
Corporate HR philosophy
Whether intended or not, companies demonstrate a willingness to either
provide customized employee workplace or benefit solutions or to deliver
minimal customized solutions to their
employees under a broad based HR
strategy. If a company recognizes the
value in providing a unique approach
to various employee segments, by location, labour group, employee class, age
demographic, etc., then the company
will likely develop a platform of investment options to practically support those
groups.
Investor age
It may not necessarily be so, but older
investors are likely to be more knowledgeable about investing than younger
investors. However, the increasing use
of social media tools and other technologies used by younger investors may be
changing this situation.
Investor apathy
Understanding the level of interest and engagement within a group of
employees is a rather subjective exercise.
Apathy is difficult to measure, but those
employers who are better connected to
employee behaviours will obtain a better sense of the extent employees man34 Benefits and Pensions Monitor | April 2013
34
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Personal Versus Target
The development of personal investment portfolios stems from applying
Modern Portfolio Theory to an investor’s unique risk/return expectations. It
attempts to maximize anticipated portfolio return for a given amount of portfolio risk. Specially crafted personal risk
utility questionnaires and other techniques commonly help assess an investor’s outlook on risk versus return and
support the building and maintenance of
an investor’s personal portfolio. Thus,
the outcome is unique to the investor.
Following developments within the
investment industry in the United States,
pre-built diversified portfolios that are
constructed with established asset class
allocations and complimentary manager styles have now settled into the
Canadian retirement savings landscape.
These portfolios have taken the form
of target risk and target date funds and
their asset allocation mixes are in place
to meet a common need across a specific
group of investors.
Employers and service providers
have aggressively developed and applied
this pre-built ‘target’ portfolio model in
order to deliver a more simplistic plat
Exhibit 2
Target Risk And Target Date Fund
Participation Trends
FUND
Target
Risk
Only
Target
Date
Only
No Target
Date or
Target Risk
AGE
2010
2011
2012
<35
6%
7%
8%
35 to 50
5%
5%
5%
50+
4%
4%
4%
<35
9%
13%
20%
35 to 50
6%
9%
13%
50+
6%
8%
11%
<35
70%
63%
54%
35 to 50
74%
70%
63%
50+
77%
73%
68%
Source: Sun Life Financial CAP member database – December 31 for each calendar year.
Base data: 1.1 million plan members in Sun Life group block.
| DC Plans |
same period. Also, this data suggests that
younger (under 35 years of age) investors are participating in target date funds
more than older (over 50 years) investors. This data also suggests that those
investors over age 50 choose to invest
outside target date and target risk funds,
that is, invest according to a personalized asset allocation mix.
‘One-Size Fits All’
Although it may be premature to conclude that all Canadian group retirement
plan sponsors and members will eventually accept an investment platform
that only offers target risk or target date
funds, there appears to be an increasing
acceptance that a ‘one fund’ solution
is an acceptable alternative. It can be
argued that offering a ‘one-size fits all’
portfolio is akin to offering a DB plan
whereby the plan sponsor or administrator takes on the entire responsibility for
delivering a retirement benefit through
a single investing solution, the target
portfolio. Assuming a plan sponsor or
administrator is willing to take on that
risk, this model does offer simplicity.
However, does this single solution
preclude offering other investment fund
choices that more sophisticated investors
find suitable for their personal investing
needs? While this target portfolio model
is now embedded within the Canadian
group savings environment, there still
seems to be an appetite for other specialty institutional fund choices. The
CAP Guidelines, which are an accepted
set of best practices, coupled with a
continued focus on personal financial
literacy, education, and engagement
within the Canadian retirement savings
industry continues to support diversity
and choice.
After all, isn’t that a key principle of
investing? BPM
Cam Macneish is vicepresident, group pension
and retirement savings
at Corporate Benefit
Analysts Inc.
cmacneish@corpben.com
�
desjardinslifeinsurance.com
form of investment choices to employees with common investing characteristics under a corporate HR philosophy.
However, do target risk and target
date funds adequately address the needs
of a group of employees and their personal investing needs?
Target risk funds, often referred to
as asset allocation funds, have been in
place in Canada for more than 15 years.
They are investment funds that expose
the investor to a targeted degree of risk,
largely dictated by the mix of equities
and fixed income securities contained
in the funds. A sample set of target risk
funds are presented in Exhibit 1.
The key feature of this portfolio
model is the application of the assumption that the investors will periodically
validate their personal risk profile by
completing their risk profile questionnaire. If the investor does not complete
the questionnaire, there is a strong likelihood that, as time passes, they may be
invested in a target risk fund that is no
longer appropriate for their individual
utility of risk.
Target date funds, often referred to
as life cycle funds, were more recently
introduced in Canada and are gaining
momentum within group retirement savings programs. These funds have been
designed to automatically reduce the
risk within the fund as the target investor
reaches the target date; typically the
anticipated retirement date or date the
participant will commence receiving
income from the invested assets. Each
target date fund, typically established
in five-year increments, will over time,
migrate from a strong equity weighting
to a strong fixed income position.
There is no need for the on-going
completion of an investor risk profile
questionnaire because the investor’s
birth date typically determines which
target fund applies, unless the investor
makes a personal decision to participate
in a particular target date fund. Therefore, the key underlying premise is that
an investor’s outlook on risk and return
is driven by a conventional age-based
asset mix.
Based on data provided by Sun Life
Financial, Exhibit 2 illustrates how
participation in target risk funds have
remained constant over the past three
years, while participation in target date
funds has increased notably over the
April 2013 | Benefits and Pensions Monitor 35
35
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www.bpmmagazine.com/
benefits_directories.html
Benefits & Pensions Legal Firms
ANNUAL Report & Directory
Liability Insurance And
Indemnities In The Benefits World
By: Lorraine Allard
I
t is generally recognized that directors and officers of
a corporation are exposed to substantial personal legal
risks. As a result, directors and officers (D&O) liability insurance and corporate indemnities are commonly
provided to directors and officers to protect them from
such risk. But is this enough to protect them from all the risks
of their position, such as legal liability for the administration of
pension and other benefit plans? Can corporate or pension plan
assets be used to pay for protection against personal liability for
failure to properly administer pension and other benefit plans?
The short answer to these questions is that usual D&O liability
policies and indemnities may not respond in whole or in part to
many benefits related claims and it may not
be possible to use plan resources to pay for
such protection. The purpose of this article
is to provide an overview of the main issues
to help risk managers and those responsible
for benefit plan administration to identify
and address the relevant concerns.
Personal Protection
Corporate business statutes make
specific provision for the use of corporate or plan assets to pay for personal
protection. For example, section 124 of
the Canada Business Corporations Act
provides that a corporation may purchase
liability insurance for officers and directors and may indemnify a director or officer against costs, charges, and expenses,
including amounts paid to settle or satisfy
judgments in other proceedings in which
the individual is involved because of that
association with the corporation or other
entity unless the director or officer has not
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36 32 Benefits and Pensions Monitor | April 2013
36
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acted in good faith with a view to the corporation’s best interest. The Canada Revenue Agency has a long held position that
no taxable benefit is generated either by the payment of D&O
insurance premiums, the payment of D&O insurance proceeds,
or amounts paid to an officer or director pursuant to an indemnification that complies with section 124.
Many so-called D&O policies do not cover claims arising
out of the administration of pension and other benefit plans.
This is because the nature of the legal risks associated with
benefit plan administration, and the legal matrix from which
it arises, is different from risks associated with the function of
director or officer. In addition, D&O liability insurance may not
Benefits & Pensions Legal Firms
ANNUAL Report & Directory
protect anyone who is not a director or
officer. As a result, separate insurance or
indemnities for benefit plan administration will be necessary.
In most instances, the obligation for
benefit plan administration will arise
out of an individual’s association with
the corporation. Indemnities and insurance can, therefore, be provided by the
employer corporation. However, in some
cases, employers or benefit plan administrators may wish to provide indemnities or purchase insurance coverage from
funds held under a benefit plan. This
might be the case, for example, where
the officer of an employer corporation
is appointed to the board of trustees of
a multi-employer plan. But it can also
arise where the officer is responsible for
benefit plans provided by the employer.
Generally, officers or directors who act
as administrators will have a right to be
indemnified from plan assets, but this
right can be impaired by the terms of the
plan or by actions taken by the administrator that fall outside of the scope of
the duties the administrator has as set out
in the benefit plan. Accordingly, anyone
relying on coverage from a benefit plan
will want to be certain the plan actually
does provide for that coverage and that
the coverage provided is sufficient.
Anyone who has discretionary authority over any aspect of the administration
of benefit plans is potentially exposed to
personal liability. Among employers and
other sponsors of such plans, this includes
anyone who makes decisions concerning
benefit plans or benefit plan assets, such
as directors (who are the directing mind
of the corporation), and anyone to whom
discretionary authority is delegated.
Sources Of Risk
The most obvious type of legal
risk arises from claims that the terms
of a benefit plan have been breached,
resulting in the denial, miscommunication, and/or miscalculation of benefits.
One example of this is the failure to
properly advise pension plan members
of a plan amendment. Another type of
legal risk stems from claims that a standard of care, whether imposed by statute as is the case for pension plans, or
as may be imposed by common law, has
not been met.
The matrix of these types of risk is
very different from D&O liability since
directors and officers are required to act in
the best interest of the corporation. Benefits administrators, however, are required
to act in the best interest of the members
of the benefit plan. This means that directors and officers who are benefits administrators have two loyalties which may
not always be reconcilable. Directors and
officers cannot lose sight of whose interest they are required to take into account
(i.e., the corporation or benefit plan members) when making any given decision.
The Ontario Court of Appeal’s decision
in Slater Steel (a summary of which is
appended) is instructive of this difference,
as is the Supreme Court of Canada’s decision in the Indalex case.
Benefits administrators need to look
into whether they are protected against
legal risk arising from their activities
as benefits administrators. If a liability
policy is in place, they must pay particular attention to the terms of the policy.
Employee benefit liability (EBL)
insurance is usually an add-on to commercial general liability policies. It covers
claims against the employer for administrative errors and omissions such as handling records, enrolling and terminating
employees, and interpreting benefits. This
insurance would provide protection, for
example, where a deceased employee’s
beneficiaries sue for group life insurance
benefits, where the employer overlooked
enrolling an eligible employee and the
employee dies.
Fiduciary liability insurance overlaps
with the EBL coverage to some extent,
but adds to EBL coverage by protecting
individual management employees
against personal liability for breaches of
fiduciary duty. Fiduciary liability insurance covers mistakes of a strategic or
financial management nature made by
an administrator in the administration
of benefit plans. One way to think about
it is that it provides protection against
wrongful acts, not just mere oversights,
and generally requires the insured to
be sued, or to have received a written
demand for damages, before it kicks in.
Fiduciary liability insurance responds to
protect not only the business, but also
the personal liability of the fiduciary,
including legal defence costs. It is simi-
lar to D&O liability insurance in that it
protects against defence costs and losses
associated with civil, criminal, or administrative or regulatory proceedings. Even
if an officer is blameless, defending
against fiduciary claims can be very
expensive and almost any claim relating
to pension funding (e.g., surplus use or
withdrawal) or investment of pension
assets, either in a defined contribution
or defined benefit context, will include a
claim for breach of fiduciary duty.
Fiduciary Insurance
Fiduciary insurance protects the
insured from claims that the insured
breached fiduciary obligations towards
benefit plan members, or otherwise
failed to properly administer the plan.
D&O insurance protects the insured
from claims that the insured breached
obligations towards the company.
When a benefit plan sponsor is looking into acquiring a fiduciary liability insurance policy, it must be careful
that the policy really does cover what it
should. Since fiduciary liability insurance is more prevalent in the United
States, fiduciary liability insurance policies are often drafted with U.S. plans and
fiduciaries in mind. This will do little for
individuals dealing with benefit plans
subject to Canadian law.
Something else to keep in mind
when negotiating fiduciary liability
insurance coverage are those things a
policy may not typically cover. As noted
above, fiduciary liability insurance will
not usually cover amounts due under a
benefit plan. That is what EBL coverage is for. But there are gray areas such
as, for example, claims made to retrieve
amounts withdrawn from a pension plan
as surplus or not contributed to a pension
plan due to a contribution holiday. The
conversion of a defined benefit pension
plan to a defined contribution pension
plan would not normally be covered by
an EBL policy, but could be covered by
fiduciary liability insurance.
In addition to fiduciary liability and
errors and omissions insurance, the benefit plan sponsor may indemnify benefits
administrators much like it indemnifies
directors and officers. In fact, the fiduciary liability policy may be drafted as
presuming that the sponsor will pro-
April 2013 | Benefits and Pensions Monitor 37
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Benefits & Pensions Legal Firms
ANNUAL Report & Directory
The Slater Steel Story
S
later Steel, which sponsored two registered pension plans,
had been granted protection under the Companies’ Creditors
Arrangement Act (CCAA). In the CCAA court’s initial order,
a charge was made to indemnify Slater directors and officers
for claims that might be asserted against them. A related claims
bar order provided that they would be released from all claims for which
they were liable and for which no claims notice had been filed by a stated
deadline (the claims bar process). The Superintendent of Financial Services
of Ontario filed a claim (the FSCO claim), alleging that there were improprieties in the asset valuation methods used in actuarial reports prepared by
the actuary.
Slater did not restructure and instead sold off its assets and the CCAA
proceedings terminated pursuant to a termination order which allowed the
claims bar process to continue for claims already underway. The termination
order released Slater’s directors and officers from all claims except those
where they “actively and knowingly participated in the breach of any related
fiduciary duties or [had] been grossly negligent or guilty of wilful misconduct.” The FSCO claim was settled and the settlement approved by order.
The settlement order required that the payment by Slater of $100,000 to the
Financial Services Commission of Ontario (FSCO) and the lesser of $18.3
million and the pension plan deficiencies by unsecured judgment.
The successor administrator of the pension plans, appointed by FSCO,
then initiated a claim against Slater’s actuary. In response, the actuary sought
to institute third-party claims against Slater personnel in their capacity as
agents or employees of the administrator of the pension plans (the proposed
third-party claims), alleging that the Slater personnel knew or ought to have
known that Slater was near insolvency and followed a deliberate strategy
to minimize pension plan contributions, including instructing the actuary to
prepare an actuarial valuation using a ‘smoothing’ method in order to inflate
the value of the pension plans assets.
The Slater personnel sought to strike the proposed third-party claims as
disclosing no reasonable cause of action, but the court of appeal ruled that
the proposed third-party claims did disclose a reasonable cause of action
and that they were not barred by the claims bar order and termination order.
The court noted that the proposed third-party claims were being brought
against the directors and officers, not in their capacity as such, but rather in
their capacity as employees and agents of the administrators of the pension
plans. In comparing the different roles and the importance of distinguishing
between them, the court stated that:
‘However, when the audit committee made decisions on the quantum of
Slater’s contribution to the plans, it did so in order to fulfill Slater’s obligation as administrator of the plans. An administrator owes a fiduciary duty to
the members of the plans. The audit committee ‘stood in the shoes’ of Slater
qua administrator when making decisions; therefore, it owed a fiduciary duty
to the plans’ members. Fulfillment of that duty would have led to maximizing the contributions that Slater would make to the plans as that would best
protect the plan members’ pensions. In light of Slater’s precarious financial
position – a fact that was known or ought to have been known by the Slater
personnel – this duty was heightened because the need for solvency funding
should have been apparent.
“Therefore, the directors and officers continued to be exposed to risks
associated with the pension plan administration.”
BPM
38 Benefits and Pensions Monitor | April 2013
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vide such indemnity as permitted by law
(which is also common in D&O insurance
policies). In this case, the fiduciary liability insurance policy provides first dollar
protection to the benefits administrators if
the benefit plan sponsor is unable to do
so, and where the indemnity is available,
the insurance would provide reimbursement of indemnified amounts to the plan
Although an indemnity agreement to
cover directors and officers may serve as
a starting basis when drafting an indemnity agreement for benefits administrators, the drafter will have to keep in mind
the difference in the standards of care and
the persons to whom the duty is owed.
Not Well Known
Fiduciary liability insurance and
indemnities are not well known. How to
properly integrate EBL insurance, D&O
insurance, fiduciary liability insurance,
and indemnities requires expert advice.
Given the legal risks associated with
the administration of benefit plans and
the complex legal environment in which
these plans operate, a benefit plan sponsor would be well advised to contact
specialized brokers and advisers when
looking into fiduciary liability insurance.
It should also seek legal assistance
in drafting indemnity agreements and
making sure that the fiduciary liability
insurance policy and indemnity agreements do what they should be doing
– protecting the benefit plans and the
benefits administrators from such risks.
They can assist in determining if the
cost of such coverage can be paid from
a benefits plan or not. A lawyer can also
help in taking a big picture approach to
risk management and assist, not only in
reviewing and revising a fiduciary liability insurance policy and drafting fiduciary liability indemnity agreements, but
also in reviewing limitations on liability
in agreements.
BPM
Lorraine Allard is a
partner in the pensions
and benefits practice at
McCarthy Tetrault, LLP.
The author would like to
thank Randy Bauslaugh,
of McCarthy Tetrault, and Murn
Meyrick, of Grey Swan Advisory
Benefits & Pensions Legal Firms
Directory
AIKINS, MACAULAY & THORVALDSON LLP J.J. Burnell, Partner; 30th Floor,
360 Main St., Winnipeg, MB R3C 4G1
PH: 204-957-4663 Fax: 204-957-4285
eMail: jjbb@aikins.com Web: aikins.com
ANDERSON PENSION LAW CONSULTING Thomas G. Anderson, Principal; 1205
– 444 Lonsdale Ave., North Vancouver, BC
V7M 3H5 PH: 604-987-6001 eMail: andersontg@shaw.ca Web: http://andersonpensionlaw.shawwebspace.ca Benefits and/or
Pensions Practice at Firm Since: 1997
BENNETT JONES LLP Susan G. Seller,
Partner; 3400 One First Canadian Place,
Box 130, Toronto, ON M5X 1A4 PH: 416777-5638 Fax: 416-863-1716 eMail:
sellersg@bennettjones.com Web: www.
bennettjones.com Canadian Cities with
Offices: Calgary, Edmonton, Ottawa
Benefits and/or Pensions Practice at Firm
Since: 2000
CALEYWRAY LABOUR/EMPLOYMENT
LAWYERS Michele Backa, Office Manager; 1600 – 65 Queen St. W., Toronto,
ON M5H 2M5 PH: 416-366-3763 Fax:
416-366-3293 eMail: backam@caleywray.
com Web: www.caleywray.com Benefits
and/or Pensions Practice at Firm Since:
1980
CASSELS BROCK LLP John McGowan;
Ste. 2100, Scotia Plaza, 40 King St. W.,
Toronto, ON M5H 3C2 PH: 416-869-5780
Fax: 416-350-6931 eMail: jmcgowan@
casselsbrock.com Web: www.casselsbrock.com
BORDEN LADNER GERVAIS LLP
Andrew Harrison, National Leader, Pension & Benefits Group; Scotia Plaza,
40 King St. W., Toronto, ON M5H 3Y4
PH: 416-367-6046 Fax: 416-361-2789
eMail: aharrison@blg.com Web: www.
blg.com Canadian Cities with Offices:
Calgary, Montreal, Ottawa, Vancouver,
Waterloo Benefits and/or Pensions Practice at Firm Since: Before 1985
BULL HOUSSER & TUPPER LLP Margaret H. Mason, Partner; 3000 – 1055 West
Georgia St., Box 11130, Vancouver, BC
V6E 3R3 PH: 604-641-4905 Fax: 604646-2662 eMail: mhm@bht.com Web:
www.bht.com
FASKEN MARTINEAU DUMOULIN LLP
Peggy McCallum, Partner; 333 Bay St.,
Ste. 2400, Bay Adelaide Centre, Toronto,
ON M5H 2T6 PH: 416-865-4372 Fax:
416-364-7813 eMail: pmccallum@fasken.
com Web: www.fasken.com Canadian Cities with Offices: Vancouver, Calgary, Montreal, Ottawa, Quebec City Benefits and/
or Pensions Practice at Firm Since: 1985
FILLMORE RILEY LLP Jody S. Langhan,
Partner & Chair of Pension & Benefits
Group; 1700-360 Main St., Winnipeg,
MB R3C 3Z3 PH: 204-957-8311 Fax: 204954-0311 eMail: jslanghan@fillmoreriley.
com Web: www.fillmoreriley.com
CAVALLUZZO SHILTON MCINTYRE
CORNISH LLP Hugh O’Reilly, Head, Pension, Benefits and Governance Group;
Ste. 300, 474 Bathurst St., Toronto, ON
M5T 2S6 PH: 416-964-5514 Fax: 416964-5895 eMail: horeilly@cavalluzzo.com
Web: cavalluzzo.com Benefits and/or Pensions Practice at Firm Since: 1983
BLAKE, CASSELS & GRAYDON LLP
Kathryn M. Bush, Partner; 199 Bay St.,
Toronto, ON M5L 1A9 PH: 416-8632633 Fax: 416-863-2419 eMail: kathryn.
bush@blakes.com Web: www.blakes.com
Canadian Cities with Offices: Montreal,
Ottawa, Calgary, Vancouver Benefits
and/or Pensions Practice at Firm Since:
1984
416-863-4592
eMail:
mary.picard@
dentons.com Web: www.dentons.com
Canadian Cities with Offices: Montreal,
Ottawa, Calgary, Edmonton, Vancouver
DAVIES WARD PHILLIPS & VINEBERG
Natasha vandenHoven, Partner; 155 Wellington St. W., Toronto, ON M5V 3J7 PH:
416-863-5521 Fax: 416-863-0871 eMail:
nvandenhoven@dwpv.com Web: www.
dwpv.com Canadian Cities with Offices:
Montreal Benefits and/or Pensions Practice at Firm Since: 2007
FOGLER, RUBINOFF LLP Priscilla H.
Healy, Consultant; 77 King St. W., Ste.
3000, Box 95, TD Centre, Toronto, ON
M5K 1G8 PH: 416-864-7607 Fax: 416941-8852 eMail: phealy@foglers.com
Web: www.foglers.com Canadian Cities
with Offices: Ottawa Benefits and/or Pensions Practice at Firm Since: 1989
GOODMANS LLP Jana Steele, Partner &
Head of Goodmans’ Pension, Benefits &
Compensation Group; Bay Adelaide Centre, 333 Bay St., Ste. 3400, Toronto, ON
M5H 2S7 PH: 416-597-6274 Fax: 416979-1234 eMail: jsteele@goodmans.ca
Web: www.goodmans.ca Canadian Cities
with Offices: Vancouver Benefits and/or
Pensions Practice at Firm Since: 1985
DAVIS LLP David Stratton, Partner; PH:
780-426-5330 Fax: 780-428-1066 eMail
dstratton@davis.ca Web: www.davis.ca
Canadian Cities with Offices: Vancouver,
Edmonton, Toronto, Calgary, Montreal,
Yellowknife, Whitehorse Benefits and/or
Pensions Practice at Firm Since: 1967
Report and Directory
Real Estate and Alternative
Investment Managers
DENTONS CANADA LLP Mary Picard,
Partner; 77 King St. W., Ste. 400, Toronto,
ON M5K 0A1 PH: 416-863-4511 Fax:
jmclaine@powershift.ca
Coming in May 2013
Call John L. McLaine
416-494-1066
��
April 2013 | Benefits and Pensions Monitor 39
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Benefits & Pensions Legal Firms
Directory
GOWLING LAFLEUR HENDERSON LLP
Clifton Prophet, Partner; 100 King St. W.,
Ste. 1600, Toronto, ON M5X 1G5 PH:
416-862-3509 Fax: 416-863-3509 eMail:
clifton.prophet@gowlings.com Web: www.
gowlings.com
HARRIS & COMPANY LLP Claude
Marchessault, Associate Counsel; 14th
Floor – 550 Burrard St., Vancouver, BC
V6C 2B5 PH: 604-684-6633 Fax: 604684-6632 eMail: cmarchessault@harrisco.
com Web: www.harrisco.com Benefits and/
or Pensions Practice at Firm Since: 1996
www.hicksmorley.com
HEENAN BLAIKIE LLP Mark Newton, Partner; 333 Bay St., Ste. 2900, Toronto, ON
M5J 2T4 PH: 416-643-6855 Fax: 866-2999567 eMail: mnewton@heenan.ca Web:
heenanblaikie.com Canadian Cities with
Offices: Montreal, Vancouver, Quebec City,
Calgary, Sherbrooke, Ottawa, Trois-Riveres,
Victoria, Paris, Singapore Benefits and/or
Pensions Practice at Firm Since: 1989
HICKS MORLEY HAMILTON STEWART
STORIE LLP Elizabeth M. Brown, Partner &
Chair of the Pension, Benefits and Executive
Compensation Practice Group; 77 King St.
W., 39th Floor, Box 371, TD Centre, Toronto,
ON M5K 1K8 PH: 416-864-7210 Fax:
416-362-3680 eMail: elizabeth-brown@
hicksmorley.com Web: hicksmorley.com
Canadian Cities with Offices: Waterloo,
London, Kingston, Ottawa Benefits and/or
Pensions Practice at Firm Since: 1995
KOSKIE MINSKY LLP Michael Mazzuca, Partner & Practice Co-ordinator; 20
Queen St. W., Ste. 900, Toronto, ON M5H
3R3 PH: 416-595-2101 Fax: 416-2042881 eMail: mmazzuca@kmlaw.ca Web:
www.kmlaw.ca Benefits and/or Pensions
Practice at Firm Since: 1981
40 Benefits and Pensions Monitor | April 2013
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LAVERY Josee Dumoulin and Francois
Parent, Partners; 1 Place Ville Marie, Ste.
4000, Montreal, QC H3B 4M4 PH: 514871-1522 Fax: 514-871-8977 eMail:
jdumoulin@lavery.ca or fparent@lavery.
ca Web: lavery.ca Canadian Cities with
Offices: Quebec City, Ottawa Benefits and/
or Pensions Practice at Firm Since: 1975
LAWSON LUNDELL LLP Ken Burns, Partner; 1600 – 925 West Georgia St., Vancouver, BC V6C 3L2 PH: 604-685-3456
Fax: 604-669-1620 eMail: kburns@lawsonlundell.com Web: www.lawsonlundell.
com Canadian Cities with Offices: Calgary, Yellowknife Benefits and/or Pensions Practice at Firm Since: 1990
MCCARTHY TETRAULT LLP Randy Bauslaugh, National Practice Leader, Pensions,
Benefits & Executive Compensation; 66
Wellington St. W., Ste. 5300, Toronto
Dominion Bank Tower, Toronto, ON M5K
1E6 PH: 416-601-7695 Fax: 416-8680673 eMail: rbauslaugh@mccarthy.ca
Web: www.mccarthy.ca Canadian Cities
with Offices: Vancouver, Calgary, Montreal, Quebec City Benefits and/or Pensions Practice at Firm Since: 1990
MCINNES COOPER Hugh Wright, Partner;
1300-1969 Upper Water St., Halifax, NS
B3J 2V1 PH: 902-425-6500 Fax: 902-4256350 eMail: hugh.wright@mcinnescooper.
com Web: www.mcinnescooper.com Canadian Cities with Offices: Charlottetown,
Summerside, Fredericton, Moncton, Saint
John, St. John’s Benefits and/or Pensions
Practice at Firm Since: 1993
MCMILLAN LLP Mark Rowbotham, Partner; Ste. 4400, 181 Bay St., Toronto, ON
M5J 2T3 PH: 416-865-7135 Fax: 416-8657048 eMail: mark.rowbotham@mcmillan.ca
Benefits & Pensions Legal Firms
Directory
Web: www.mcmillan.ca Canadian Cities
with Offices: Vancouver, Calgary, Ottawa,
Montreal Benefits and/or Pensions Practice at Firm Since: 1987
Floor, Halifax, NS B3J 1V4 PH: 902-4237777 Fax: 902-423-9588 eMail: rpink@
pinklarkin.com Web: www.pinklarkin.
com
MILLER THOMSON LLP Rosanne T. Rocchi; Scotia Plaza, 40 King St. W., Ste.
5800, Toronto, ON M5H 3S1 PH: 416595-8532 Fax: 416-595-8695 eMail:
rrocchi@millerthomson.com Web: www.
millerthomson.com
SPECTRUM HR LAW LLP Christopher
A. Brown or Michael Wolpert; Ste.
1200, 444-5th Ave. S.W., Calgary, AB
T2P 2T8 PH: 403-444-8100 Fax: 403444-8101 eMail: cbrown@spectrumhrlaw.com Web: www.spectrumhrlaw.com
Benefits and/or Pensions Practice at
Firm Since: 2010
NORTON ROSE CANADA LLP Martin
Rochette, Senior Partner; 1 Place VilleMarie, Ste. 2500, Montretal, QC H3B 1R1
PH: 514-847-4430 Fax: 514-286-5474
eMail:
martin.rochette@nortonrose.com
Web: www.nortonrose.com/ca Canadian
Cities with Offices: Quebec City, Ottawa,
Toronto, Calgary Benefits and/or Pensions
Practice at Firm Since: 1991
OSLER, HOSKIN & HARCOURT LLP
Paul Litner, Partner; Box 50, 1 First
Canadian Place, Toronto, ON M5X 1B8;
PH: 416-862-4730 Fax: 416-862-6666;
eMail: plitner@osler.com; Web: www.
osler.com; Canadian Cities with offices:
Montreal, Ottawa, Calgary Benefits
and/or Pensions Practice at Firm Since:
1962
STEIN MONAST L.L.P. Martin Roy, Partner; 70 Dalhousie St., Office 300, Quebec City, QC G1K 4B2 PH: 418-529-6531
Fax: 418-523-5391 eMail: martin.roy@
steinmonast.ca Web: www.steinmonast.ca
Benefits and/or Pensions Practice at Firm
Since: 1988
STEWART MCKELVEY Peter McLellan, Partner; Ste. 900 – 1959 Upper
Water St., Box 997, Halifax, NS B3J 2X2
PH: 902-420-3200 Fax: 902-420-1417
eMail:
pmclellan@stewartmckelvey.com
Web: www.stewartmckelvey.com Canadian Cities with Offices: Fredericton,
Moncton, Saint John, Charlottetown, St.
John’s Benefits and/or Pensions Practice
at Firm Since: 1990
STIKEMAN ELLIOTT LLP Andrea Boctor,
Partner; 199 Bay St., 5300 Commerce
Court W., Toronto, ON M5L 1B9 PH:
416-869-5500 Fax: 416-947-0866 eMail:
aboctor@stikeman.com Web: www.stikeman.com Canadian Cities with Offices:
Vancouver, Calgary, Ottawa, Montreal
Benefits and/or Pensions Practice at Firm
For: 26 years
www.osler.com
PINK LARKIN Ronald A. Pink, Chief
Managing Partner; 1583 Hollis St., 4th
TORYS LLP Mitch Frazer, Partner,
Head of Pension & Employment Group;
3000-79 Wellington St. W., Toronto,
ON M5K 1N2 PH: 416-865-8220 Fax:
416-865-7380 eMail: mfrazer@torys.
com Web: www.torys.com Canadian
Cities with Offices: Calgary, Montreal
Benefits and/or Pensions Practice at
BPM
Firm Since: 1987
April 2013 | Benefits and Pensions Monitor 41
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jhornyak@powershift.ca
| Conference Report |
Pension Reform
Industry Must Accept Necessity For Change
By: Joe Hornyak
T
he challenge facing the
pension industry today is
how to accept the necessity for change as “our
backs are against the wall
because – given today’s high longevity
and low growth – change is inevitable,
says Jim Leech, president and CEO,
of the Ontario Teachers’ Pension Plan.
In an address ‘Living today’s demographic reality: Leadership in pension
funding innovation’ at the Public Pension Forum’s ‘Conference on Pension
Reform – the New Brunswick Model
and Directions for Canada,’ he identified
six questions that need to be addressed:
How are pensions being made more
sustainable in Canada?
What must we do to protect pensions without
damaging public or corporate finances?
How do we ensure intergenerational equity in
an era of shifting demographics?
How can we best address
a private sector savings
gap?
What can be learned from the New
Brunswick reform experience?
Can this model be emulated elsewhere?
“The question,” he said, “is not
whether or not to change, it’s when and
by how much.”
He was one of the first of a series of
speakers who attempted to tackle these
issues.
The opening keynote speaker, Gerry
McCaughey, president and CEO of
CIBC, set the stage looking at pension
reform in the broadest context by looking at pensions as a key element of an
individual’s savings.
Main Financial Goals
“For many Canadians,” he said,
“life’s two main financial goals are buy-
Joe Hornyak, executive editor of Benefits
and Pensions Monitor, attended the
‘Conference on Pension Reform’
(jhornyak@powershift.ca).
ing a home and planning for retirement.
Both represent a form of savings.” Home
ownership begins as debt, but over time
is transformed into an asset that is future
savings. And, the emphasis on housing as
a form of savings has been fundamentally
reinforced by the recent shortening of
amortizations from 40 years to 25 years.
“Meanwhile, pensions, TFSAs, RRSPs,
PRPPs, and any other money that individuals are able to set aside, these are savings
the whole way through,” he said. Right
now, when it comes to these two critical
contributors to savings, about 70 per cent
of Canadians own their own homes, up 10
per cent from 60 per cent in 1971.
He even downplayed, somewhat,
concerns over the indebtness of Canadians saying that 75 per cent of the new
debt that Canadians have taken on in
recent years has been to finance a home.
“This is debt with a purpose – debt that
over the course of time will be transformed into one of the most important
assets that Canadians will ever own,”
said McCaughey.
And home ownership as an investment works for Canadians because they
understand it.
Investing and saving for retirement,
however, is like the “tail wagging the
dog,” he said, because the need to save
42 Benefits and Pensions Monitor | April 2013
42
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seems to have become secondary to generating rates of return. “Individuals are
more focused on how they’re investing
their money rather than on how much
they’re putting away, and for how long.”
Longest Horizon
The solution, a mechanism that is easy
to understand and simple to participate
in; puts the money of Canadians to work
over the longest possible horizon – as
much as 40 years or more – to maximize
returns and grow savings; provides a predictable income stream at retirement; and
takes advantage of the benefits of scale
that already exist, he said. “And we don’t
have to look very far to find an example
– it’s the Canada Pension Plan.” He suggested that Canadians be
given the opportunity to
enhance their pension savings by making additional,
voluntary contributions to
the Canada Pension Plan –
or a CPP-like vehicle.
And the sense that
something needs to be
done was emphasized by
Bill Morneau, executive chairman of
Morneau Shepell and co-chair of the
summit. He said many sponsors of
defined benefit plans are looking for any
way they can to move away from these
plans. Experts know they are superior
because they take investment decisions
away from those ill-prepared to make
them and they remove longevity as a risk
to the plan. In addition to the funding
issues sponsors of these plans now face,
employers are concerned that employees
won’t spend 30 years with them so DB is
not the best solution for their workforce.
And he sees the trend as irreversible.
He is hard-pressed to come up with one
new DB plan created in the last decade.
“DB, in its current format in the private
sector, is on a one-way path to extinction,” he said.
www.cpbi-icra.ca
| The Back Page |
By: Jim Helik
LEARN & NETWORK
Attend the CPBI FORUM 2013 to hear from Canadian
and international experts delivering relevant
information on current industry challenges.
Some of the speakers already confirmed
(by order of appearance on the program)
PETER SHEAHAN
International Expert on Leveraging
Business Trends and New Market
Opportunities
CPBI Thanks All FORUM 2013 Star Sponsors
DIAMOND STAR
PLATINUM STARS
GOLD STARS
SILVER STARS
BRONZE STARS
SUPPORT
LEO DE BEVER
Chief Executive Officer, Alberta
Investment Management Corporation
DONALD G. M. COXE
Chairman, Coxe Advisors LLP.
CLAIRE HUSSON-CITANNA
Portfolio Manager, EMD Research
Analyst, Franklin Templeton Fixed
Income Group
KEITH AMBACHTSHEER
Director of the Rotman International
Centre for Pension Management
(ICPM)
DAVID P. RICHARDSON
Senior Economist, TIAA-CREF
Institute
JEFFREY SIMPSON
National Affairs Columnist,
The Globe and Mail
CHRIS GILES
Economics Editor, Financial Times
(United Kingdom)
STEVE MILLER
Senior Vice President & Chief
Medical Officer, Express Scripts
DON DRUMMOND
Former Senior Vice President and
Chief Economist, TD Bank Financial
Group
Peter Sheahan
Donald Coxe
Leo de Bever
Keith Ambachtsheer
David Richardson
Jeffrey Simpson
Chris Giles
Steve Miller
Don Drummond
Network and connect with your
peers at the
THE CPBI HALL OF FAME
THE
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CPBI
HALL
OF
FAME
| Conference Report |
Solvency Rules
As well, the solvency rules in Canada created to protect
defined benefit pension plans may actually be destroying them,
said Paul Moist, national president of CUPE. “Millions of Canadians went to work today with no employer pension and little
chance of getting one,” he told the summit, making the decline
in workplace coverage the most critical issue facing retirement
saving today. With 11 million out of 18 million workers having
no access to an employer sponsored plan, senior poverty will rise
if employers are allowed to continue to retreat from DB plans.
Savings programs, such as registered retirement savings
plans (RRSPs), have not worked as with 60 years of advertising, only about 25 per cent of Canadians contribute and this is
heavily weighted to higher wage earners. Most Canadians can’t
participate because they live “pay cheque to pay cheque. However, they are actually helping to pay for the tax breaks granted
to those with RRSPs.”
He advocated an enhanced Canada Pension Plan, saying the
“world is not going to end if those Canadians and their employers without pension plans paid a bit more into the CPP.” In fact,
he said, Canada should be treating retirement savings the same
as it does healthcare, by pooling the risk.
Pooled registered pension plans (PRPPs) would bring more
equity to the workforce by giving more Canadian workers
access to employer pension plans, said Tom Reid, a senior vicepresident at Sun Life Financial.
Engine Of Growth
He said that small business is the engine of Canadian economic growth. However, employees at these firms often have no
access to an employer pension plan, even though one survey suggests 72 per cent of these businesses believe employers should
offer some sort of plan. However, for PRPPs to be effective,
some “nudge” factors – such as auto enrolment – are needed.
This is critical to creating the scale needed to bring management
fees down to the same level as those of larger employers.
And Canada needs PRPPs, said Ted Menzies, Canada’s minister of state for finance. He said about 9.3 million Canadians
have no pension plan. And while participation in RRSPs is high
for middle and high income earners, modest and middle income
households are not saving enough for retirement.
This supports an OECD conclusion that there is a growing
role for private pensions, thus the creation of PRPPs – larger
scale, broad based savings plans for employees with or without
employer participation. They promise low cost by spreading the
costs out over a large group of people creating economies of
scale where members benefit from buying in bulk. Harmonizing
the rules across the country will also keep costs down.
While they may not be a “silver bullet,” he said, “when it
comes to saving for retirement, PRPPs are the right solution at
the right time for millions of Canadians to save for retirement.”
Another solution offered, and one of the themes of the conference, was New Brunswick’s shared risk pension plan proposal.
‘Win For All’
David Alward, premier of the province, told the summit that
selling New Brunswick public sector workers on the shared risk
pension plan required education and communication every step
of the way. Fortunately, he said, the unions did understand and the
campaign to educate retirees is ongoing. For current and future
employees, pensioners, and taxpayers, he calls the new plan a
“win for all” because there is a measure of equity in it. Estimates
are the fiscal impact on the province will be in the 10s of millions
of dollars in reduced risk on a go-forward basis. It also spreads
the risk so younger employees don’t up bearing the brunt of paying for retiree pensions today. “At the end of the day, this is the
best model for New Brunswick,” he said. The shared risk plan is
similar to multi-employer plans where contributions and benefits
can be adjusted depending on the funding levels of the plan.
Alward did say the province is looking at PRPPs and enhancing CPP may be another option. However, the latter is not
viable right now considering the current state of the province’s
economy.
BPM
Correction
In the statistical report for the Managers of U.S. Assets feature in the February issue of Benefits and Pensions Monitor,
the numbers for CI Institutional Asset Management were not
reported.
The statistical report should have shown $83M in all cap
value and $441.6M for core equities, $123M for active bonds,
and total U.S. assets for Canadian pension funds of $647M.
Total pension assets managed by the firm were $2,230.3M as of
September 30, 2012.
Benefits and Pensions Monitor apologizes for this omission.
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www.bpmmagazine.com/
benefits_events.php
| conferences |
Paul Grimes, senior vice-president, sales,
at Industrial Alliance; Frank Swedlove,
president of the Canadian Life and Health
Insurance Association and chair of the
Global Federation of Insurance Associations; and George Graziani, senior vicepresident and head of longevity North
America, at Swiss Re; will be among the
featured speakers at the ‘2013 LIMRA
and LOMA Canada Annual Conference.’ It takes place May 8 in Toronto,
ON. For more information, visit http://
www.loma.org
‘CAPITAL: The Fuel for Business’ is
the theme of the CVCA annual conference. It will feature the role the industry plays to stimulate business with the
‘real’ energy of venture capital and private equity. Leading industry experts will
address the most current topics of strategic importance to capital providers, those
seeking investment capital, and all categories of service providers who facilitate
this investment industry. It takes place
May 22 to 24 in Banff, AB. For more
information, visit www.cvca.ca
‘Global Challenges; Canadian Solutions’
is the theme for ‘CPBI FORUM 2013.’
Sessions include the ‘State of Global
Markets’ with Donald G. M. Coxe, strategy advisor, BMO Financial Group, and
chairman, Coxe Advisors LLP; and Leo
de Bever, CEO, Alberta Investment Management Corporation (AIMCo). Keith
Ambachtsheer, director of the Rotman
International Centre for Pension Management (ICPM), and David P. Richardson,
senior economist, TIAA-CREF Institute,
will examine ‘How to Improve Canada’s
Pension System.’ It takes place May 27 to
29 in Chicago, IL. For more information,
visit http://www.cpbi-icra.ca
BPM
�
www.standardlifeinvestments.ca
For complete event information, visit
www.bpmmagazine.com/benefits_events.php
www.standardlifeinvestments.ca
‘Using Social Media to Communicate
Pension and Benefits’ and ‘Deferred
Annuities in DC Plans’ will be among
the areas examined at the ‘2013 Alberta
Regional CPBI Conference.’ Keynote
speakers include Warren Jestin, senior
vice-president and chief economist at
Scotiabank, who will discuss a ‘New
World Rising.’ It takes place May 8 to
10 in Banff, AB. For more information,
visit http://www.cpbi-icra.ca
The International Foundation of Employee
Benefit Plans’ ‘Canadian Legal and Legislative Update’ will examine recently
enacted and proposed legislation and regulations. Topics will focus on the changes
taking place as they relate to pension and
health issues. It takes place May 9 and 10
in Charlottetown, PEI. For more information, visit http://www.ifebp.org
April 2013 | Benefits and Pensions Monitor 45
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jhelik@powershift.ca
| The Back Page |
‘Is Our Plan Members Learning?’
By: Jim Helik
T
are left to navigate one by one through
an ever-changing cornucopia of financial
products armed only with education?”
Effective financial education would need
to be “extensive, intensive, frequent,
mandatory, and provided at the point of
decision-making, in a one-on-one
setting, with the content personalized for each consumer … A new
highly skilled professional class of
affordable, competent, independent financial educator-counselortherapists would need to be created,
regulated, and maintained.” So far, no
society has shown that they are willing
to bear these costs, nor should we, Willis
argues. “We do not ask people to be their
own doctors, lawyers, auto mechanics,
or food safety inspectors.”
he continued prominence
of defined contribution
pension plans places a
great emphasis on the
financial education of
members. Additionally, in the past few
years, Canada has had two national
conferences on financial literacy. Our
country will celebrate its third annual
Financial Literacy Month this year
(hint: it is in November).
So given all this activity it is fair to
ask, adapting former U.S. president
George W. Bush’s famous gaff, “Is
our plan members learning?”
And the short answer is … no.
Academic Research
While previous academic research
showed startling gaps in peoples’ ability to do simple financial arithmetic, as
well as the behavioural issues that have
led to poor investment choices, recent
academic work has taken a different
path. It has examined whether financial
education has had a measurable impact
on investor actions. James Choi, David
Laibson, and Brigitte Madrian asked this
question in a Brookings Paper on Economic Activity titled ‘Are Empowerment
and Education Enough? Underdiversification in 401(k) Plans.’ In the wake of
Enron and WorldCom collapses where
employees found much of their retirement savings in company stock wiped
out, the authors wondered whether such
news had an impact on future investor
behaviour. They found that despite the
publicity surrounding these, there was
little change in investor behaviour.
Helaine Olen’s book, ‘Pound Foolish:
Exposing the Dark Side of the Personal
Financial Industry,’ shows a disconnect
between what people say they want
(to learn about finance) and what they
actually do.
A Charles Schwab survey, ‘Teens and
Money,’ shows some interesting changes in 16 to 18 year olds between 2007
(the time of the first survey) and 2011
(the most recent survey). More teens are
now saying that learning about money
management is one of their top priorities
(from 53 per cent in 2007 to 80 per cent in
2011). But this learning isn’t happening.
In all of the categories examined, teens
are, to put it politely, “showing declines in
knowledge” over this time period. Fewer
18-year olds have either savings accounts
or chequing accounts than they did in
2007. All of the other knowledge-based
financial questions showed sharp declines
over these five years.
This comes as no surprise to Lauren
Willis, of the Loyola Law School. In the
paper ‘The Financial Education Fallacy,’
she says that “objective observers generally admit that research to date does not
demonstrate a causal chain from financial education to higher financial literacy
to better financial behaviour to improved
financial outcomes.” And yet the search
for financial education continues. She
views this whole attempt as being misguided and asks whether we want to “live
in a society where ordinary consumers
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Basic Math Skills
Willis’ picture isn’t entirely bleak as she
notes there may be far more cost-effective
ways of achieving the goal of better financial planning (such as, perhaps, improving
basic math skills in schools) or other quasiregulatory changes.
Maybe the focus should be on
improving the financial lives of individuals and retirees, rather than on the
one-size-fits-all idea of financial education?
BPM
Jim Helik is a contributing author
to the ‘Managing High Net Worth’
course and the ‘Commodities As
Investments’ course published by CSI
Global Education. He is also one of
the first holders
in Canada of the
Human Resource
Management Professional designation
from the Society for
Human Resource
Management.
jhelik@powershift.ca
�
www.standardlifeinvestments.ca
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At Standard Life Investments, we understand the value of potential.
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Take a long-term view today at standardlifeinvestments.ca
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