While recent changes to the British Columbia Pensions Benefits Standards Act will allow the province to establish a new multi-employer pension plan, “the devil will be in the details,” said an advocate from the Canadian Federation of Independent Business (CFIB).
The plan is being developed in an effort to assist the nearly 80 per cent of British Columbians employed in the private sector who are not covered by occupational pension plans.
In November 2008, the Joint Expert Panel on Pension Standards, involving representatives from B.C. and Alberta, released a report examining the feasibility of a multi-employer defined contribution (DC) plan.
While Alberta has yet to announce its intentions, a working group within the B.C. government has started developing a framework based on the panel’s recommendations.
The province anticipates the new plan — which will operate at arm’s length from the government — will be established by July 2010.
Although many business and employee advocates said they are heartened to see efforts to strengthen pension infrastructure, some disagree about the model of enrolment.
The plan, which will be available to all workers in B.C., is voluntary. However, businesses and employees will be automatically enrolled and must then opt out if they do not want to continue membership.
Automatic enrolment will put too much pressure on small businesses, said Brian Bonney, director of provincial affairs B.C. at the CFIB, an advocacy organization for small- to medium-sized business. Instead, the plan should use an opt-in model, he said.
“We see that as being very critical to the (plan’s) success,” he said. “(Businesses) say, ‘My employees expect that I’m going to do that and I feel the pressures of not opting out but I still have the burden when I’m not making money. My only option, therefore, is reduce employee hours or lay off.’”
Plan would help small business retain workers
The proposed plan would improve the ability of small businesses to retain workers, said Bonney. Some industries have been facing a shortage of qualified labour and small businesses have never been able to compete with large organizations for talent, he explained.
By the time a small employer finishes training a new employee, she is often hired by a larger organization, said Bonney.
“Quite often it’s the benefit plan they cite as a reason for that,” he added. “For small businesses to say, ‘With minimum cost to my business we can offer pensions to future employees,’ it’s going to make (them) more competitive.”
The plan would also give employers struggling with pension costs an opportunity to offer staff an alternative, said Rosalind Gilbert from the Association of Canadian Pension Management (ACPM), an advocacy group for the pension industry.
The opt-out feature will encourage more people to participate, said Gilbert, who co-chaired an ACPM task force to review the report by the B.C. and Alberta panel.
While ACPM supports most of the recommendations, the government should consider creating a committee to review plan options, she said.
“ACPM’s only reservation is that the government does consider (the panel’s) recommendation for a steering committee that will do some groundwork before the plan is in place,” she said.
While the details are still being defined, it’s important the B.C. government work with Alberta as much as possible and engage other provinces in discussions about harmonization, said Gilbert.
Rick Robertson, associate professor at the Richard Ivey School of Business in London, Ont., echoed the desire for Canada-wide participation and suggested an expansion of the Canada Pension Plan (CPP) as an alternative.
“I would prefer it to be national in scope as opposed to regional. It makes for a larger organization,” he said. “Simple reality is size does matter in the markets. You get bigger opportunities.”
Collaboration also makes sense because other provinces such as Quebec, Ontario and those in the Maritimes are facing similar pension challenges, he said.
Through the past year, workers across Canada have watched as the value of their pensions decreased. It is a reality that could be better managed under a larger plan, said Robertson.
“We’re still exposed to market risks… That’s why I would like to see something like CPP where we could share the risks (and) benefits,” he said. “People have probably thought about it before but this economic downturn has got more people thinking about retirement and the wealth they’ll need to get into retirement than ever in the past. We’ve ignored the issue up to now.”
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