More DC plans, more for staff to understand

Communication continues to vex, pension plan sponsors say
By Charles Davies
|CHRR, Guide to Pensions & Benefits|Last Updated: 06/29/2004

Some days, David O’Brien wonders what it will take to get the full attention of McCain Foods’ 5,000 employees. O’Brien, McCain’s vice-president, risk management, pensions and counsel, runs the company’s hybrid pension plan, essentially a defined contribution (DC) plan with an optional defined benefit (DB) “guarantee” provision that employees can elect to take on retirement.

Using the company’s pension calculation formula, employees are able to replace 70 per cent of their pre-retirement income after 35 years’ service under the DB option, which was introduced in mid-2002. It’s a generous offering that eliminates some of the inherent investment risk of a DC pension, but it often simply doesn’t register with younger employees, O’Brien said.

“Employees tend to be more passive about pension benefits than pension professionals might think,” he said. “Then they get to 55 and they become obsessed with it.”