Companies think twice about security of executive pension top-ups

But most still believe securing plans is not worth it
By David Brown and Lesley Young
|Canadian HR Reporter|Last Updated: 06/25/2002

When Confederation Life collapsed in 1994, more than 30 retired executives lost out on supplementary pension benefits, and failed to win them back in the courts in 1997. Suddenly, security of supplemental executive retirement plans (SERPs) became an issue for a large and growing number of those who qualify for them.

Nevertheless, most Canadian companies’ SERPs still aren’t secured, though some research indicates that might be changing. William M. Mercer Ltd. research shows that 40 per cent of its clients that provide SERPs now secure them. This is up from a third in 1997 and just one quarter in 1994. And it is proof of what experts say is a trend toward securing supplemental plans, which is due, at least in part, to the continued hot labour market.

Every time we meet with top business people, security of SERPs is the big issue they want to talk about, said Grant Inglis, senior consultant and actuary at Watson Wyatt. Most companies agree that SERPs are vital, not only to paying executives — and a large portion of high-earning middle management — their rightful pension earnings, but because it’s a competitive recruitment and retention incentive.