Multiemployer and public employer defined benefit plans in Canada face “significant funding challenges,” but are taking steps to address their plans’ long-term viability, according to a survey by the International Foundation of Employee Benefit Plans.
Seventy percent of survey respondents reported that their plans took steps to strengthen their financial standing. The most common approaches among these respondents include:
• examining actuarial cost methods and assumptions (41%);
• reviewing investment policies and revisiting them if necessary (36%);
• examining benefit formulas to determine if they can be achieved in the future (29%);
• seeking increased contributions without a comparable increase in benefit accruals (25%); and
• revising actuarial cost methods and assumptions (24%).
In an effort to improve solvency ratios, 44% of respondents said additional contributions will be needed to fund pension plans in 2010 and 15% said they will likely reduce pension benefits this year.
Also, 51% said that generating returns in a low-interest environment as being among their most important investment issue. Forty-eight percent cited understanding risk as an important investment issue, 45% matching assets and liabilities, and 41% diversification.
Seventy-eight percent of funds reported their fund has a written investment policy.
Sally Natchek, the foundation’s senior director of research, said in a telephone interview that the survey results show plans “have got their act together” in working to improve their funded ratios.
The survey, “Funding and Investment Issues for Defined Benefit Plans in Canada: Multiemployer and Public Sector Survey Results, 2010,” was conducted in February and surveyed 251 multiemployer plans and 136 public employer plans.