DB plans struggle to survive

Could restoration of tax advantage increase future pension plan coverage?
By Bill Gooden
|Canadian HR Reporter|Last Updated: 11/08/2011

Defined benefit (DB) pension plan coverage in Canada has declined over the last couple of decades, at least within the private sector. While many factors are cited for this decline, one important reason was the attempt to level the playing field in 1991.

Prior to that, meaningful tax assistance was available only to DB pension plans. Defined contribution (DC) pension plans permitted tax-deductible contributions up to only $7,000 per year (and for registered retirement savings plans even lower) while a DB plan could require tax-deductible contributions upwards of $25,000 for older, higher-paid individuals.

Thus, companies looking to reward upper management on a tax-deferred basis were quick to establish DB pension plans. It was almost considered foolhardy for a company not to have one.