There’s more to pensions than defined benefit versus defined contribution

Flexible plan design or combination plans offer alternatives to the DB versus DC dichotomy
By C. Ian Genno
|Canadian HR Reporter|Last Updated: 02/13/2006

Within the private sector in Canada, employer-sponsored retirement plan designs are changing.

In an environment of funding deficits, complex pension laws, and asymmetrical sharing of risks between plan sponsors and members, it’s perfectly understandable that a number of employers with traditional defined benefit (DB) pension plans are contemplating how much better life might be if only they could adopt the apparently simpler, better understood, and less risky defined contribution (DC) pension model.

As such, more employers are converting from DB to DC. In board meetings, directors ask management why they haven’t moved to DC yet. Newly hired human resources executives can make their mark by undertaking a conversion to DC as one of their first initiatives. Analysts closely scrutinize DB obligations in assessing potential investment opportunities. There aren’t many outspoken champions of DB plans within the business community these days. It seems everyone you ask says DC is the way to go.