Money alone cannot buy happiness · The international engineering, consulting, construction and operations company has its hand in a plethora of environmental initiatives: carpooling,

■ Rule changes allow retirees infour western provinces to receiveRRIF-like payments directly fromtheir DC plan . . . . . . . . . . . . . . . . . . . . . . 8

■ “Pharmacogenetics”, orpersonalized medicine, will soonrevolutionize the way drugs areadministered . . . . . . . . . . . . . . . . . . . . . 15

■ Smaller pension funds arelooking for ways they can swimwith the big fish in lucrativeprivate equity waters . . . . . . . . . . . . 24

Sept./Oct. 2007

Vol. 4 • No. 5

Greening your business isn’t just good forthe environment — companies engaged inthe effort believe it also helps them attract,

retain and motivate employees.“Cool projects attract, and they keep staff,”

says Lorna Howieson, Canadian region facilitiesoperations manager for CH2M HILL. “Ouremployees tell us they join us and then staybecause we do interesting projects. This puts usin a competitive position to win the war for talentby attracting employees who share our corebeliefs in sustainability.”

The international engineering, consulting,construction and operations company has itshand in a plethora of environmental initiatives:carpooling, annual Earth Day activities such astree planting, volunteer park cleanups and regularenergy-consumption audits.

Engaging employees

Office “Green Teams” consist of volunteerschampioning environmental stewardship, settingannual goals to reduce paper use and increase

Going green is good businessBy Carly Foster

Total Canadian salarybudgets are expected toshow slightly smaller

increases next year, but authori-ties say organizations taking atotal rewards approach to com-pensation will still be well-positioned to attract and retaintalented workers.

According to WorldatWork’s34th annual Salary BudgetSurvey, salary budgetsincreased by 4% in 2007 (upfrom 3.5% in 2005 and 3.8% in2006), but actual 2007 growthoutpaced inflation by 1.8% dueto an April 2006 drop in theconsumer price index. Thistranslates to the greatestincrease in purchasing powerfor employees since 1998.

However, the survey fore-casts a .1% smaller increase insalary budgets for next year, at3.9%. The slowdown reflects astable trend of salary growth inmost organizations,” saysWorldatWork professionaldevelopment practice leaderJim Stoeckman.

Competing for talent

Ceridian’s HumanResources Director David Bellexplains why getting base payright is so important.

With the exception of thosein sales, base pay is the greatestpart of the cash element ofcompensation,” he says “So forprobably 80-90% of the popu-lation, if base pay isn’t right,

“The annual increasedoesn’t seem to be theplace where theattraction and retentionof employees occurs,”says Steven Osiel, PalBenefits total rewardsconsultant.

(See Salaries on page 12)

Money alone cannot buy happiness“Total rewards” approach can offset lower salary budgetsBy Sheryl Smolkin

Anew report from credit-rating agency DBRS saysby the end of 2006 the

funded status of Canadian andAmerican defined benefit pen-sion plans improved signifi-cantly from the “perfect storm”of 2000-2003. And severalindustry experts agree that as aresult, many of these funds arenow better positioned to with-stand any future shifts in theeconomic climate.

According to the DBRAstudy of 536 predominatelyNorth American pension plans(Canada: 80; International: 75;U.S.: 381), public perception ofa serious problem in the fund-ing of DB plans is inaccurate inover 90% of reviewed plans.

The report identifies fouryears of escalating stock marketreturns, higher employer contri-butions, stricter regulatory

Debunking DB funding mythsBy Sheryl Smolkin

(See Green on page 27)

Employees and family members of CH2M HILL participate inannual Earth Day tree-planting activities.

(See DB funding on page 21)

EBNCSeptOct_FINAL.qxd 9/26/07 5:46 PM Page 1

Departments

Resource GuideHow to reach key EBNC departments and findEBNC advertisers in this issue ..........................................32

Provider ProfilesThumbnail descriptions and contacts for benefitservice providers, organized by service category ............33

North American Benefits MarketplaceCorporate news, executive appointments, mergers andacquisitions, professional opportunities, products andservices from the benefits industry’s leading vendors and service providers ..............................................................34

From The EditorDB funding levels have improved signifi-cantly. However, with recent marketvolatility there is even greater need forsolutions that will effectively address anumber of fundamental DC retirementsavings challenges.…………………… 5

Contact us1325 G Street N.W., Suite 900, Washington, DC 20005

Phone: 202/504-1122; Fax: 202/772-1448

Editorial Director: David [email protected] 202/504-1111

Editor-in-Chief: Sheryl Smolkin [email protected] 416/227-9025

Managing Editor: Carly [email protected] 647/476-5060

Associate Editor: Molly [email protected] 202/434-0325

Associate Editor: Lydell [email protected] 202/504-1115

Associate Editor: Chris [email protected] 202/504-1118

With a little help from our friendsBecause part of our mission is to help energize discussions across the entire

employee benefits industry, the publishers of Employee Benefit News Canadahave enlisted the assistance of industry members with various areas of specialtyexpertise and experience.

These Editorial Advisers are not just “window dressing” on our masthead.They play a vital role in helping us make sure our articles are timely, accurateand relevant to our audience. Our reporters and writers are in frequent contact aswe brainstorm story ideas and confirm our understanding of industry develop-ments. From time to time, you will see these advisers quoted in an article or withtheir own byline on a contributed piece.

We thank them in advance for their contributions of time and their willingnessto be part of something new and bold for the employee benefits profession.

Employee Benefit News CanadaEditorial Advisers

❥ Peter C. Arnold, National Practice Leader, Investment Consulting,Buck Consultants, an ACS Company

❥ John Cardella, Executive VP of Human Resources, Ceridian Canada

❥ Sandra Wieder Cohen, Partner, Osler, Hoskin & Harcourt LLP

❥ Mike Collins, VP of Marketing Group Savings & Retirement Solutions,Manulife Financial

❥ Cheryl Craven, VP of Human Resources, Toronto Sick Children’sHospital

❥ Brian A. P. FitzGerald, President and CEO, Capital G Consulting Inc.

❥ Wes Jones, Manager Group Product Development, Great-West Life

❥ Karen Kesteris, Director of Product Development and Marketing, GreenShield Canada

❥ Brian Lindenberg, National Partner, Mercer

❥ Mary Linton, President & COO, Advisory Capital Group

❥ Laura Mensch, Senior VP of Central/Western Region Health StrategiesPractice Leader, Aon Consulting

❥ Jeffrey Stinchcombe, VP of Corporate Development, HealthSource Plus

❥ Bethune Whiston, Lawyer and Principal, Pension Practice,Morneau Sobeco

❥ Mark Zigler, Partner, Koskie Minsky LLP

Contents

Industry Resources

Global watchHR/benefits managers, long waiting toget that exalted chair at the corporatetable with senior management, are notthere yet, according to global studyresults from Deloitte ToucheTohmatsu.……….........................…31


Do you remember what you were doing onAugust 16? I was writing an article about theimpact of the subprime crisis on pension

funds, and the markets were so volatile that everytime I checked the S&P/TSX it was either up ordown several hundred points.

Although I have retired once, and I am receivinga partial pension from my former employer, sudden-ly full retirement seemed like an ever-receding fan-tasy.

For those fortunate Canadians who work a fullcareer in organizations sponsoring defined benefit

pension plans, thegyrations of theequity marketsover the past fewmonths have mere-ly been potholes onthe road to retire-ment.

As discussed inour front pagestory, DBRSreports that afterfour years of esca-lating stock marketreturns, higheremployer contribu-

tions, stricter regulatory requirements and more con-servative assumptions, by the end of last year, therewere relatively few companies in Canada with apension deficiency problem

And although in mid-August the TSX indexdropped approximately 12% to 12,848 from its July19 year-to-date high of 14,623, pension funds werestill, on the whole, better funded than at the end of2006 (see illustration of the Mercer Pension HealthIndex updated to August 16 on page 22) due to ris-ing bond yields.

While another “perfect storm” could occur iffalling equity markets and declining interest ratesconverge, pension experts say that plan sponsorswith well-funded plans will likely deal with themdifferently the next time around.

“We will see companies with the luxury of hav-ing a fully funded plan making more strategic deci-sions around their asset mix and their contributionstrategies,” says Mercer Retirement ProfessionalLeader Paul Forestell.

But recent data from Statistics Canada confirmsmembership in DB plans is levelling off, while par-ticipation in DC plans now accounts for 15.7% ofregistered pension plan membership — up from14.6% in 2001.

So how can plan sponsors and their advisers helpme, and others like me, manage their DC and RRSPsavings so they can more confidently embark on aworry-free retirement?

As you will read in stories published in this issueand the accompanying supplement, “Beyond theCAP Guidelines,” leading providers of group retire-ment services, their clients and their advisers haveput a great deal of thought into solutions for a num-ber of fundamental DC retirement savings chal-lenges.

For example, Bill Turnbull, general manager, Co-operative Superannuation Society Pension Plan haslobbied hard for changes at both the federal andprovincial levels so plan members can stay in theplan without being forced to annuitize.

Currently Co-op plan members residing in west-ern Canada can draw a variable benefit once theyreach early retirement age and have fully terminatedtheir employment — and if Turnbull has his way,Ontario and other provinces will soon follow suit.

Although plan sponsors are concerned aboutpotential liability if they provide plan members withadvice, as opposed to education, Standard Life’sDirector of Strategy and Research, Anna Del Balsosays: “Some clients are actually thinking about mak-ing advice available. The answer as to who isresponsible may be who pays for the service.”

“Plan sponsors could provide a capped amountthat plan members can spend on retirement/financialplanning services, much like a Health SavingsAccount,” suggests Joan Johannson, managingdirector and senior VP of Integra Group RetirementServices.

Bill Kyle, Great-West Life Assurance Company’ssenior VP of group retirement services thinks plansponsors should consider some of the principlesunderlying recent 401(k) reforms in the U.S.

“Rather than trying to turn people who do notregularly work in the financial sector into experts sothey can achieve a decent retirement, plan sponsorscan design plans with features like automatic enrol-ment, adequate contribution levels and investmentportfolios based on specific risk-profiles,” he says.

At EBNC we are actively monitoring emergingbest practices in DC design and investment that arecurrently gestating in boardrooms and at confer-ences across the country.

Watch for more articles about DC innovations inthe November/December issue - including our sec-ond “DC Providers Directory” and a feature“Looking under the hood of target date funds inCanada.” And also keep an eye out for our newquarterly publication I2 — Investment Insider thatwill appear for the first time in our final issue of theyear as a prelude to a complete redesign in 2008.

With all of these projects on the go, it looks likethe next few months are going to be very busy —which is probably a good thing. Markets are stillunstable, and my savings had not fully recovered.Besides, I’m having way too much fun to seriouslycontemplate retirement anytime soon — S.S.

Publisher/Group Vice President: Jim Callan

EDITORIAL HEADQUARTERS1325 G Street N.W., Suite 900

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Editorial Director: David AlbertsonEditor-in-Chief: Sheryl SmolkinManaging Editor: Carly FosterAssociate Editors: Chris Silva, Molly Bernhart, and Lydell BridgefordDirector of Editorial Projects: Marsha TurneySenior Art Director: Hope Fitch-MickiewiczAssociate Art Director: Robin HenriquezExecutive Creative Director: Sharon Pollack

EDITORIAL ADVISERSPeter C. Arnold, National Practice Leader, InvestmentConsulting, Buck Consultants, an ACS Company; JohnCardella, Executive VP of Human Resources, CeridianCanada; Mike Collins, VP of Marketing, CanadianPension Operations, Manulife; Cheryl Craven, VP ofHuman Resources, Toronto Sick Children’s Hospital;Brian A P FitzGerald, President and CEO, Capital GConsulting Inc.; Wes Jones, Manager Group ProductDevelopment, Great-West Life; Karen Kesteris,Director Product Development and Marketing, GreenShield Canada; Brian Lindenberg, National Partner,Mercer; Mary Linton, President & Chief OperatingOfficer, Advisory Capital Group; Laura Mensch, SeniorVP of Central/Western Region Health StrategiesPractice Leader, Aon Consulting; Jeffrey Stinchcombe,VP of Corporate Development, HealthSource Plus;Bethune Whiston, Lawyer and Principal, PensionPractice, Morneau Sobeco; ; Heidi Winzeler, Counsel,Osler, Hoskin & Harcourt LLP (New York); Mark Zigler,Pension Department Head, Partner, Koskie Minsky LLP

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Sheryl Smolkin

Potholes on the road to retirementBy Sheryl Smolkin

Sept./Oct. 2007 • Employee Benefit News Canada 5


By Matthew A. Rotenberg

Acommunications expert working for one of thelarge insurance companies once told me a storyabout the challenges he faces when attempting

to simplify the communication of investment optionsto a new employees at an enrolment meeting.

“I use the example of tins of tuna on sale at thegrocery store to demonstrate the up-and-down natureof investments and the benefits of buying low.Essentially the message was if tuna goes on sale from$2 a tin to $1, you can buy twice a much for thesame price, and you still get the same tuna.”

At this point he started to laugh as he continuedthe story:

“One day I get a call from the manager of ourmember contact centre and she issounding a little annoyed and ratherbewildered. ‘Within the last few dayswe have been getting numerous callsfrom members wanting to invest theirregistered retirement savings planassets into the Tuna Fund!’”

While the average DC plan sponsorwill not have to answer questionsabout the “Tuna Fund,” educating andengaging employees about investmentoptions is a continuing challenge.

As a result, in recent years therehas been considerable interest in pre-packaged investment portfolios suchas lifestyle and lifecycle funds (or tar-get year funds) that are relatively sim-ple for plan members to understand.

Nevertheless, for many employers,these products still miss the markwhen it comes to providing a totalinvestment solution for both plan sponsors andplan members.

Achieving a balance

So what can responsible sponsors do? Howcan they balance the needs of members tomake simple, informed choices, while at thesame time ensuring that they fulfill theirresponsibilities under the CapitalAccumulation Plans Guidelines to provideclear and appropriate information?

The simple answer, if one really exists, isto customize portfolios that combine all thebest elements of lifestyle and lifecycle fundsand in doing so provide significant benefits toall stakeholders.

Customized portfolios offer a flexible and

unique prepackaged investmentsolution that is suitable for any plantype and size. By taking intoaccount both a member’s age andhis/her risk profile, this investmentoption offers the benefits of lifestyleand lifecycle funds, without theadded costs or lack of transparency.

Members determine their ownrisk profile and investment period.Then it’s a matter of simply select-ing the appropriate box fromamong the predesigned matrixes.

Sophisticated versions of theseportfolios dynamically move mem-bers from one life-cycle stage to

the next as they age,and automaticallyrebalance the portfolioson a quarterly basis.Their simplicity andflexibility are both easyto communicate tomembers and simplefor plan sponsors tomonitor.

Designed fromexisting funds

The customized port-folios are designed fromthe plan’s existing funds, making monitor-ing of the underlying funds easy. Typically,a service provider will create the basicasset mix and provide fund recommenda-tions as part of their basic service offering.

Small- and large plan-sponsors can easi-

ly adopt the portfolios, and in many cases software isavailable to make the decision making and monitoringprocess easy. Regardless of plan size, sponsors canbenefit from the simplistic approach to setting up and

Customized DC investment portfolios bring home the tuna

InvestmentBENEFITSEmployee Benefit News Canada SEPT./OCT. 2007 6

From a complianceperspective, monitoringof the customizedportfolios is simplified, asdue diligence is likelyalready occurring on thefunds within the plan,says Matthew A.Rotenberg, Standard Lifesenior consultant, groupsavings and retirementmarketing.

Characteristics of pre-packaged investment solutions Lifestyle Funds Life cycle Funds Customized Portfolios

Simplified investment solution easily communicated to members X X X

Takes into account investor profile X X

Takes into account investment period X X

Suitable as default fund X

Evaluation of various investment components possible X

No cross subsidization of fees by members X

Automatic re-alignment of assets as members approach retirement X X

Automatic rebalancing of assets regularly X

SOURCE: Standard Life Canada

Customized portfolios are designed from the plan’s existing funds

(See Customized portfolios on page 32)


8 Employee Benefit News Canada • Sept./Oct. 2007

By Sheryl Smolkin

Recent changes to income tax regulations and pen-sion statutes in the four western provinces allowpayment of a variable benefit from a defined con-

tribution pension plan. While most industry expertsthink this option will only appeal to large public sectorplans with significant internal administrative capabili-ties, at least one consultant sees variable benefits as aviable alternative for smaller plan sponsors.

Due to new Canada Revenue Agency regulationsreleased in the fall of 2005, payments out of moneypurchase pension plans can now be made in the sameway as payments from a registered retirement incomefund. The rules require that the amount of the variablebenefit payable to the member each year after age 71be at least the minimum prescribed in the tax rules.

In April 2004, British Columbia amended their pen-sion statute to allow life income-type payments directlyfrom DC plans even before the tax changes came intoeffect. Subsequently, Saskatchewan (May 2006),Alberta (August 2006) and Manitoba (June 2007)passed similar enabling legislation. With the exceptionof Saskatchewan — where all pension funds areunlocked at retirement — the variable benefit with-drawn each year cannot exceed a maximum amount.

Saskatchewan plans lead the way

Bill Turnbull, general manager, Co-operativeSuperannuation Society Pension Plan, lobbied hard forchanges at both the federal and provincial levels, andhe hopes to bring other provinces — notably Ontario— on board sooner rather than later.

“Our members across the country want the abilityto stay in the plan without beingforced to annuitize,” he says.

Currently, Co-op plan membersresiding in western Canada can drawa variable benefit once they reachearly retirement age and have fullyterminated their employment.Provisions have also been made forpartial withdrawals in cases ofphased retirement.

“If people want to stay in the plandue to the trust level and the costlevel, now they can,” commentsTurnbull.

Between September 2006 andJuly 2007, approximately 20% of the555 people who retired from the Co-op plan selected the variable benefitoption.

The average account of these peo-ple was $584,832 — as opposed tothose who took a pension ($132,464)or transferred their funds to a lockedor unlocked life income fund orRRIF ($163,268) with a financialinstitution.

Turnbull thinks one reason why members with higheraccount balances are opting for variable benefits is thatpeople who have saved more than they think they willuse want to make sure they can bequeath it to their heirs.

Saskatchewan’s PublicEmployees Pension Plan is thelargest DC plan in the country.Based on a 2004 survey in which53% of respondents said they want aRRIF-like benefit payable from theplan, a variable benefit was intro-duced in May 2006.

Saskatchewan’s DeputySuperintendent of Pensions ArtMilne thinks the size of the Co-opand the PEPP plans are the primaryreason why they have both lobbiedfor and embraced variable benefits.“The concept is simple, but youneed to be a payer and everythingthat goes with that — issuingcheques, T4s. These plans are bigand sophisticated enough to providethe administration and support.”

Limited interest to date

“This would not have been done,to be perfectly frank, if it hadn’tbeen for Bill Turnbull advocating forit,” says Alberta’s DeputySuperintendent of Pensions EllenNygaard. Yet she reports little inter-est to date from single employer orindustry-sponsored DC plans inAlberta’s new DC retirement income accounts.

Nevertheless, Nygaard suggests that the new provi-sions may at some point be of interest to multi

employer plans that are finding itdifficult to fund a defined benefit.

“Now typically they say they areproviding a defined benefit, butthese flat-benefit plans are DC inthe build-up phase as far as CRA isconcerned. There’s nothing stop-ping them from saying they areactually a DC plan and paying vari-able benefits from the plan to pro-vide a service for members whoprefer to have their money managedby someone else.”

Although a number of his clientshave asked about the DC RIA whenmaking other required plan amend-ments, Calgary-based Osler Hoskin& Harcourt partner Chris Brown saysthey got at least a couple of repliesfrom their DC providers that theirsystems are not set up to handle thisprogram, so they won’t provide it.

Brown also suggests one factorthat could be inhibiting Albertaplan sponsors is that variable bene-

fits and 50% unlocking go hand-in-hand. But hebelieves the main reason there will be limited interestfrom smaller, single-employer DC plans is that, “akey advantage from an employer’s perspective of atraditional DC plan is that plan sponsors have no

ongoing obligation to membersonce they terminate or retire andtake their money out of the plan.”

Continuing relationshipwith retirees

In contrast however, maintaininga continuing relationship withretirees is a high priority for theUniversity of British Columbia pen-sion plans.

“We are very paternalistic here.We like to keep our dollars in theplan. By allowing LIF paymentsfrom the plan since November 2004,we have staunched the flow ofmoney out of the plan considerably,”says Cheryl Neighbour, executivedirector of operations for the UBCfaculty plan.”

And in spite of the fact that theUBC pension funds exceed $1 bil-lion, the university has retained SunLife as record-keeper to make LIF-like payments from the plan.

“We probably could have adminis-tered these payments internally,” saysNeighbour, “except we did not want tohave to keep up-to-date with detailslike the amount of money they were

allowed to withdraw each year.”She also thinks that the UBC plans were “sort of a test

case” for Sun Life and, once their systems were up andrunning, they were planning to actually market the product.

Yet Sun Life Group Retirement Services VP ofrollover markets Tom Reid says they have fewer than10 DC clients in their national accounts market that

offer variable benefits. “We’re just not seeing [the interest] it so it hasn’t

become a priority to develop anything more than theniche business I talked about.”

However, he says there is considerable interest intheir group-choice RRIF product that is offered as arollover option for members of their clients’ groupretirement plans. “There is money in motion

Keeping retirees in DC plansNew tax rules allow DB-like payments from DC plans

Sun Life Group RetirementServices VP of rollover marketsTom Reid says they have fewerthan 10 DC clients in theirnational accounts market thatoffer variable benefits.

(See Variable benefits on page 10)

Maintaining a continuingrelationship with retirees is ahigh priority for the University ofBritish Columbia pension plansaccording to Cheryl Neighbour,executive director operations forthe UBC faculty plan.

[Variable benefits attract]

people who have saved more

than they think they will use

[and] want to make sure they

can bequeath it to their heirs.

EBNCSeptOct_FINAL.qxd 9/27/07 10:46 AM Page 8


(From page 8)

whether a member terminatesor retires. The group choicevalue proposition is advice,and fees that are significantly

lower than retail,” says Reid.

Small company aheadof the curve

Consultants interviewed byEBNC also confirm most of theirprivate sector clients are not in ahurry to pay DB-like benefits

from their DC plans, with atleast one notable exception.

“A few clients have investi-gated the option, but only one

has implemented. It’s early daysin terms of the legislation,” saysVancouver-based Aon SeniorVP Brendan George.

But the high-voltage powertransmission engineering firmTeshmont Consultants LLP isclearly ahead of the curve.

In 2004, even beforeManitoba legislation waschanged to permit payment ofvariable benefits, Greg Hurstof Heath Lambert BenefitsConsulting (now MorneauSobeco) filed amendments tothe 50-member plan.

“A couple of very seniorguys were hitting against age69 and had to turn their $1m+assets into retirement income.This would have reduced thefund below $5 million, which isthe breakpoint on investmentmanagement fees for the wholefund.

By leaving their money inthe plan, the reduction in assetmanagement fees more thancovered the additional adminis-tration fees,” says Hurst.

Potential for growth

And Hurst believes there aremore companies out there likeTeshmont. While he concedesthat paying benefits from a DCplan will not be the preferredapproach for plan sponsors whowant to immunize their planfrom potential liability oncemembers leave, he suggests thisis less of a concern than onemight think.

“There are many moreemployers who are genuinelyinterested in facilitating accessto lower investment fees andbetter benefits for both activeand terminated members.”

Neighbour agrees whole-heartedly with Hurst.

“If [an employer] puts in aplan [just] because the union isrequesting it, then lots of timesall they want to do is get rid ofthe employee once they retire,”she says.

“But if the employer caresabout the employee and wantsto make sure they have optionswhen they retire, why wouldn’tthey keep it in place? It’s nodifferent than getting a pensionfrom a DB plan.” — S.S

Variable benefits

ACPM



Salaries

then total comp will not be right either.”However, industry experts do not

believe the levelling off of salary budgetswill undermine the ability of most compa-nies to recruit or hold on to skilledemployees, even in tight labour markets.

“The annual increase doesn’t seem tobe the place where the attraction andretention of employees occurs,” PalBenefits total rewards consultant StevenOsiel says. He views the annual increaseas more of a maintenance element of com-pensation, or a cost of living allowance.

“Remember that even where there is a3.9% salary budget, that could translateto anything from 0% to 10% at an indi-vidual level, depending on internal equityissues and what is required to retain high-performing, skilled people,” says Bell.

The focus on rewarding top perform-ers is also reflected in recently releaseddata from Mercer in Canada. WhileMercer agrees that base pay increasesfor 2007 and 2008, will be 3.9%, thestudy notes the highest-performingemployees (10% of the workforce) areexpected to receive base pay increases of6.5% in 2008 compared to 3.7% foraverage performers (56% of the work-force) and 2.3% for the weakest per-formers (6% of the workforce).

But in spite of the importance of cashcompensation, both Bell and Osiel main-tain that a total awards approach is thecornerstone of a successful attractionand retention strategy.

Understanding total rewards

“From the employee perspective totalrewards means understanding all the bitsand pieces the company awards toemployees, be it salary, a subsidizedcafeteria or savings plans,” says Osiel.

But he views total rewards quite dif-ferently from a management perspective.

“It’s making sure your compensationand benefits dollars are spent on pro-grams that align your people strategywith your business strategy.”

Bell says at Ceridian, total rewardsrefers to much more than cash com-pensation such as benefits, incentivesor bonuses. “We look at it more broad-ly, including what we call psychologi-cal rewards — things like careeropportunities, having a fun and sup-portive work environment, a manageryou respect and opportunities to learnand grow.”

The increased focus on total rewardsis reflected in the beefed-up series ofattraction and retention programs thatWorldatWork asked survey participantsto rank. For the first time, flexible work

schedules and telecommuting programsappeared on the list.

“We know flexible work schedulesare becoming more prevalent andthought they would appear in the toptier,” says Stoeckman. “But it reallyexceeded our expectations when 62% ofall participants said they offer flexiblescheduling, and Canadian companiesranked them as the second most popularattraction and retention program afterbase salary increases.”

Other popular programs

Other forms of compensation thathave increased in popularity over the lasttwo years — possibly reflecting tighterlabour markets — are employee referralbonuses (from 47% to 51%); hiringbonuses (from 44% to 50%); and reten-tion bonuses (from 27% to 37%).

WorldatWork does not characterizetraditional benefit plans, such as pen-sions and health care, as attraction andretention programs because Stoeckmansays they view them less as differentia-tors and more as accepted practices.

Nevertheless, Bell says that an impor-tant component of Ceridian’s total rewardsprogram is a flexible benefits plan thatprovides a range of options for employeesat different stages in their lifecycle.

“Benefits that will attract, incent andexcite a 22 year old right out of schoolare very different than those that willinterest someone with a couple of kidsand a big mortgage or someone else whois five years from retirement.”

This difference in values is furtherreflected in results of a national careersurvey conducted on behalf of RSMRichter, an independent accounting,business advisory and consulting firm.

The study found that only 16% ofrespondents under 30 starting a careerview high monetary compensation as themost important thing a company canoffer, while career growth and profession-al development was listed as a top priorityby 37%. In contrast, 25% of workers over40 said salary was the prime considera-tion when they started out.

Career advancement has not been onWorldatWork’s list of attraction andretention programs until now, butStoeckman says it is definitely on thetable for future years.

“We’ve discovered you have to artful-ly weave together compensation, bene-fits, work-life programs, career develop-ment and opportunities, and recognitionto have a compelling value propositionthat will engage employees over the longterm,” he says. — S.S.

MFC Global

Programs used to attract & retain employees2005 2006 2007

Market adjustments/increase to base salary 56% 60% 64%

Flexible work schedules – – 62%

Employee referral bonus 47% 48% 52%

Sign-on/hiring bonus 44% 51% 50%

Project milestone/completion bonus 20% 23% 42%

Retention/stay bonus 27% 30% 37%

Part-time employment with benefi ts – 34% 32%

Paying above market 35% 30% 31%

Spot bonus (individual) 28% 30% 30%

Stock option program 24% 23% 28%

Telecommuting/telework – – 25%

Exempt over-time pay or time off 21% 20% 18%

Job sharing – 12% 17%

Special cash bonus/group incentives 14% 16% 17%

Larger merit increase budgets 9% 12% 16%

Stock grant programs 5% 9% 13%

Separate salary structures 7% 10% 9%

Phased retirement – 6% 8%

Paid sabbaticals 3% 3% 4%

SOURCE: WORLDATWORK 34th Annual Salary Budget Survey

(From page 1)


HealthBENEFITS

Employee Benefit News Canada SEPT./OCT. 2007 13

By Suzanne Lepage

Bob Smith, your award-winning VPof sales, tells you he has colorec-tal cancer and the recommended

therapy is not covered by either hisprovincial drug plan or the company-provided group health insurance. Theout-of-pocket cost is more than he canafford, and he’s unsure as to what to donext.

Cancer is the second leading causeof death due to chronic disease, trailingonly cardiovascular disease, and recentstudies suggest it may soon be No. 1.

According to Manulife Financial,cancer is also the third-highest cause oflong-term disability, representing 12%of their claims.

In the past, cancer was dealt with inthe privacy of an oncologist’s office,and it was not a topic for discussion inthe workplace. However, because alarge number of new cancer patients arepart of the working population, youmay be having a similar discussion withother employees sooner rather thanlater.

Group health care plans

So how can you help Bob?The first thing you can do is to con-

tact your insurer and ensure both youand Bob fully understand the plan pro-visions.

While your company-sponsoredhealth care program may provide cover-age in many cases, for a number of rea-sons it can also be difficult to under-stand available alternatives.

For example, many private insurerscover oral cancer medications and notIV medications, because they believethe Canadian Health Act requires thatmedically necessary IV drugs should bedispensed in hospitals and coveredthrough hospital budgets.

Some private plans pay for treatmentif the drug is not delivered in hospital,which in part explains the growingnumber of private infusion clinics inCanada. Nevertheless, there are

Cancer patients need help navigating uncharted waters

A postal-code lotteryIn a November 2006 article in the Globe and

Mail, Andre Picard described the provincial patch-work of coverage for cancer drugs as “an unofficialpostal-code lottery.”

Health care varies provincially in Canada and sodoes funding of cancer treatments.

The Cancer Advocacy Coalition of Canada’s2006 Report Card illustrates that access to the top24 cancer drugs varies significantly amongprovinces, resulting in inequities across the coun-try.

Further, some provinces have cancer agenciesthat fund cancer treatments. In others, cancertreatment is funded on a hospital by hospital basis.Most provinces fund IV medications, but only fourprovinces fund oral medications. As a result, oraldrugs are more typically paid for by private drugplans or cash.

Because the future of oncology drug develop-ment is moving toward oral medications that offerbetter safety and convenience for the patient, a keychallenge is how to fund these medications whenthey fall outside the traditional cancer agency fund-ing model.

In addition, certain new drugs have beenapproved by Health Canada, but not approved forprovincial funding, which leaves many patients inlimbo. The necessary drug is available — some-times even in a hospital — but there is no one tocover the cost.

The new Canadian Joint Oncology Drug Reviewincludes all provinces and territories exceptQuebec and uses the current Ontario oncologydrug-review process. It was introduced to “helpensure a more timely, effective and efficient reviewand evaluation of cancer drugs.”

However, since Ontario provides a lower level ofcoverage for oncology drugs than other provinces,the net result may be even less public coverageacross the country for oncology medications. The JODR alsomay extend time to provincial listing, since provinces will onlydetermine funding after the JODR review is completed. Thiscould add almost 140 days to each existing provincial drug-review process, which can already take up to 300-to-500 days.

According to 2007 statistics from the Canadian CancerSociety, most new cancer patients are 60 and over. However,recent surveys of large employers reveal that almost half do

not offer postretirement benefits and, of those that do, themajority plan to reduce them or eliminate them entirely.

With the reduction of public funding for oncology treat-ments and the disappearance of private drug plans for retirees,it will be even more challenging to deliver the necessary break-through biologic drugs for cancer and other conditions toCanadians of all ages across the country on a consistentbasis.— E.B.N.C.

NF

P E I

NS

NB

Hospital

Hospital

Hospital

Hospital

QC

ON

Provincial Formulary ORPrivate Drug Plan OR Cash






M B

S K

AB

Cancer Board

Cancer Board

Cancer Board

Cancer Board Cancer Board

Cancer Board

Cancer Board

Cancer Board

Cancer Board

Cancer Board B C

IVOral

Oncology Drug Funding—Fragmented National System

Top 24 cancer drugs by province

20

13 13

17

4

15

75 4

10

1

5

1

2

10

7

13

3

13

9

0

4

8

12

16

20

24

BC AB SK MB ON QC NB PEI NS NL

Fully paid by the province Paid with various limitations

Source: CC AC Report Card 2006

(See Cancer drugs on page 14)


concerns about about moving apatient outside of the hospitalsetting and a traditional care

stream for treatment. Private infusion clinics try to

partner with the public system,

but there can still be issuesaround coordinating patientcharts, medical records and lab

work, plus the patient may needto receive an extra infusion,rather than having all of their

cancer medications infused atone time.

Patient assistanceprograms

There are also patient assis-tance programs that may be ableto help Bob understand how tobridge gaps in drug coverage.

Because navigating theprocess for receiving paid treat-ment is highly complex andconfusing, Cancer Care Ontariohas a pilot cancer drug assis-

tance program which uses an800-number to help guideemployees through their benefitchoices.

Many pharmaceutical com-panies have also developedpatient assistance programs tohelp individuals effectivelydetermine available coverage sothey can focus on the reality ofdiagnosis of a deadly disease.

For example, once a physiciandetermines a patient requires aspecific product, the physicianand patient can generally fax in a registration form or the patientcan call an 800 number to register with the drug company.

“Many pharmaceuticalcompanieshave...developed patientassistance programs tohelp individualseffectively navigate thecomplexities of ourcurrent health caresystem,” says SuzanneLepage, nationalmanager, private healthcare, market access atHoffmann-La RocheLimited.

Cancer drugs(From page 13)


IFEBP

(See Cancer drugs on page 16)



By Carly Foster

Mailing a mouth swab or blood sample to a labyou found online for DNA testing might seeman odd prelude to curing what ails you, but

experts say pharmacogenetics will soon revolutionizethe way drugs are administered. Moreover, they say itwill save lives and billions of dollars in health carecosts.

Insurance companies and benefit managers are stilleyeing developments cautiously as they prepare cost-benefit analyses. But some futurists say the trends areinescapable.

“It’s one of the first steps toward personalized medi-cine,” says Micheline Piquette-Miller, a professor at theUniversity of Toronto’s faculty of pharmacy, and direc-tor, division of biomolecular sciences. “It’s not a matterof whether it’s going to happen, it’s when.”

Pharmacogenetics promises to individualize drugtherapy based on genetic differences, she says.Because how individuals respond to or eliminate drugsis often determined by their genetic makeup, genetictests may identify those most likely to respond tospecific therapies.

One size does not fit all

“Persons who have a genetic defect in their drugmetabolizing enzymes...[result] in a higher likelihoodof drug toxicities after standard doses,” she said.“For these individuals, genetic testing is likelyto improve their drug therapy by reducing theincidence of adverse events.

“Genetic tests which identify individu-als at risk of toxic effects or those whoare unlikely to respond tostandard therapy can beused to identify specif-ic populations ofpatients [who require]personalized drugtherapy.”

The currently used“trial and error” or“one-size-fits-all”methods of prescribinghave not proven effec-tive, Piquette-Millersays. Despite often highcosts, many prescribeddrugs are ineffective in alarge number of patients.She gives the example ofdrug therapy for hepatitis:Costing around $5,000 ayear, it is effective in lessthan half of treated patients.

Adverse drug reactionsrepresent the fourth lead-ing cause of hospitaliza-tion in the UnitedStates, and areresponsible for100,000 deaths peryear in the U.S. —

costing a whopping $30- and$150 billion, respectively. Datafrom American health manage-ment organizations suggest thecost of treating drug reactionsexceeds the cost of providingthe medications themselves.

U.S. labs lead the way

While the tests — costingbetween $500-$3,500 — arenot being performed regularlyin Canada, the direct-to-con-sumer industry is booming inthe United States. Seattle-based Genelex Corp. was thefirst in the world to offer thisservice, and estimates 5% of

its business is comingfrom Canada.

“I think we are onthe cusp of majorchange” saysHoward Coleman, CEO and founder.“Insurance companies are starting to take aninterest in it. I think it can save them a lotof money.”

He points to a recent study looking atthe anticoagulant Warfarin that found thatperforming DNA genetic tests beforeadministering the drug could save $2.2billion annually, prevent 17,000

strokes and 80,000 adverse bleed-ing events.

At a recent Medcoconference,Coleman spokewith benefits man-agers from compa-nies like Ford andPepsi and theWorld Health

Organization whowere very interestedin the new technolo-gy.

“We’re seeing insur-ance increasingly pay[for the tests], but it’sstill slow,” he said. “Ithink they see it com-ing...and are trying tofigure out how it’sgoing to work.”

Cost/benefitanalysis

Piquette-Millerwarns, however,that findingexperts to inter-pret the tests

and then administer appropriate drug therapy “will ulti-mately determine the impact of genetic tests on totalhealth care costs.”

“We want to make sure the tests are reliable,” shesays. “Insufficient studies have been performed to provecost effectiveness.”

Sal Cimino, manager of pharmacy and professionalservices at Green Shield Canada, has seen pharmacoge-netics coming. He has done presentations on the tech-nology as part of an “up-and-coming” seminar to someof Green Shield’s clients, but has not been approachedby any pharmacy companies in Canada that have it yet.

“Before we advocate payment for any service forour clients...we need evidence,” Cimino says. “Whatvalue are you going to get out of this? If these geneticlab tests work...and it does have better outcomes, wewould advocate having them, as long as the cost isn’texorbitant and self-limiting.”

Barbara Martinez, a senior associate at Mercer,agrees.

“Perhaps the initial question should be whether thepublicly funded provincial plans should pay for test-ing,” she says. “Plan sponsors must be cautious aboutadding new therapies where the cost-benefit equationhas not been determined.”

The clinical usage of the tests is still in its infancy,Piquette-Miller says. And Roderick McInnes, scientificdirector of the Canadian Institute of Genetics, recentlytold the The Globe and Mail: “The vision is terrific. It’swonderful and exciting. It’s just not yet ready for primetime.” — C.M.F.

Made-to-measure medicinePharmacogenetics could soon revolutionize the way drugs are administered

What Canadians thinkabout genetic testing

• 83% believe that genetic testing is accurate.• Most say they are open to using tests to screen for

disease risk.• Almost one in five would spend more than $1,000

to test for susceptibility to a treatable form of can-cer.

• One in 10 would pay the same to test for an incur-able form of the disease or for an incurable neuro-logical disorder.

• One in five would spend $1,000 to test for theirchild’s susceptibility to a curable cancer, while justover one in 10 would test for incurable cancers atthat price.

• The same number would spend $1,000 to deter-mine their child’s risk of developing heart disease.

• Few Canadians want to see genetic testing used forpurposes other than disease screening: Checking fora child’s sexual orientation through testing was sup-ported by only 11%, while only 9% support usingsuch tests to determine a couple’s romantic compati-bility.

SOURCE: The Strategic Counsel for The Globe and Mail

“It’s one of the firststeps towardspersonalizedmedicine. It’s not amatter of whetherit’s going to happen,it’s when,” saysMicheline Piquette-Miller, a professor atthe University ofToronto’s faculty ofpharmacy anddirector, division ofbiomolecularsciences.


Where it is determined thatpublic or private coverage is notavailable, a financial means test

can often be requested, andfinancial assistance may be off-ered on a sliding income scale

with a portion of the drug costspaid by the patient. Theapproval is typically for a spe-

cific period, and it is designedto provide assistance to thosewho need it most.

Other employee support

If there is still a differencebetween the cost of the drugsand public/private coverageavailable to employees like Bob,larger organizations may consid-er requesting their insurers toextend coverage to the pre-scribed drugs on a compassion-ate basis, or even directly reim-bursing Bob for his out-of-pock-et expenses.

However, this type of deci-sion will not be taken lightly. Itwill typically be based both ona cost/benefit analysis to theorganization and the broaderimplications of the decision ifadditional employees requestsimilar support in future.

Regardless of what yourdecision is in Bob’s case, hisquery may be the catalyst thatresults in your organization ask-ing these more fundamentalquestions:

• What coverage do weexpect for the insurance premi-ums we pay for our groupinsurance plan?

• Why should individuals,company-sponsored benefitplans or private employers haveto pay for coverage in one partof the country that is covered bygovernment programs in anoth-er?

If you think your insurancecoverage needs enhancement,pick up the phone and call yourinsurer. If you believe thatprovincial programs should bemodified to facilitate country-wide consistent access to cancertreatment, contact your federaland provincial members of par-liament and make sure yourvoice is heard.

Bob may have been the firstemployee who asks for supportin his fight against cancer, buthe will not be the last. You andyour employees need all thehelp you can get to navigate inthe uncharted waters of theever-changing oncology land-scape. — E.B.N.C.

Suzanne Lepage is nationalmanager, private health care,market access, at Hoffmann-LaRoche Limited. She can be reachedat [email protected].


MFC Global

Cancer drugs(From page 14)


By Carly Foster

Retirement is the last thing on JodiAvery MacLean’s mind. “That’s themost depressing thing to think of,”

the 28-year-old magazine editor fromToronto says. “I enjoy my work andcareer and don’t want to be thinkingabout coming to the end of it at all.”

It’s this sentiment that plagues plansponsors, employers and financialgurus — and ends up financially hurt-ing many young people in the long run.The standard solutions are educationabout the joys of compound interest,and/or automatic plan deductions.While there are pros and cons to vari-ous approaches, nearly all analysts

agree youngeremployees need helprealizing what’s atstake.

“Most people don’twake up to this untilthey’ve squandered somuch of the value oftime,” saysChristopherCartwright, VP of theFinancial EducationInstitute of Canada.“What does it take toretire successfully? Ittakes money andinvestment return onthat money. Time ishugely important.”

If you sit down withthe 20-35 set and say,“I want to talk to youabout retirement,” theyinstantly tune out,Cartwright says. A 28-year-old does not wantto think about whathappens when they’re65.

The issue is two-fold, says ColinRipsman, VP retire-ment services forFidelity InvestmentsCanada.

With 30-40 years toworry, retirementseems so far away that

young people don’t want to forgo con-sumer spending to deal with it, he says.And those really heavy-spending years— student loans, first car, first house,childcare — funnel income to currentconsumption needs.

Yet the fact remains, “these are theyears [saving will] have the mostimpact,” he says. “It’s a challenge forplan sponsors to increase awarenessdespite the fact [retirement] is so faraway.”

Not only that, but a segment of theunder-35 population is lacking financialliteracy, and is either not interested anddoesn’t care about retirement spending,or doesn’t understand and are afraid,Ripsman says.

“We see the biggestchallenge [as] how tocapture that group ofemployees and help themmaximize the value oftheir plans.”

Ripsman saysemployer-sponsored reg-istered retirement sav-ings plans can be anattraction for young peo-ple because withdrawalscan be made from theseaccounts.

But he suggests locked-in programs, such asdeferred profit sharingplans with company contri-butions or defined contri-bution plans that restrictwithdrawals, are bettervehicles for ensuring themoney is tucked away and guaranteeduntil retirement — ultimately a moresound investment model for this agegroup.

Yet there are still two major issueswith young employees — they frequent-ly switch jobs, and the inability toaccess their money is perceived as anegative, Ripsman says.

MacLean, on the cusp of being auto-matically enrolled in her company’s pen-sion plan, laments being forced in.

“I’m in my late twenties, and I’m notgoing to stay with the company [forev-

er],” she says. “I wish Icould control it on myown.”

“That’s part of thedilemma plan sponsorsface,” Ripsman says.“You...want to make surethat while the employeeis with you, they’re maxi-mizing the value of theplan and take as much asthey can.”

Malcolm Hamiltondisagrees.

“If the optimal strategywas to save heavily from ayoung age, [employers]would do their employees agreat service to help themsave for retirement,” saysthe Mercer pension con-sultant. “But it’s just not

true in cities such as Vancouver andToronto with high housing prices.”

Hamilton is a firm believer in livingfrugally and paying off debt — especial-ly mortgages — rather than saving forretirement at a young age. People needless money than they think they do tolive comfortably in retirement, he says,and it makes mathematical sense to paydown debt first then start saving.

“By diverting compensation to retire-ment savings, you’re not doing them a

BENEFITSEmployee Benefit News Canada SEPT./OCT. 2007 18Retirement

Getting Gen X-ers to save stands as test of time

Tips for engaging Gen-Xers• Mandatory participation and automatic enrolment.• Automatic contribution escalation as employees age.• Better default funds—such as lifecycle funds—so mem-

bers at least have an asset mix consistent with theirstage of life.

• Simple, personalized, actionable and measurable tools• Automated systems taking predetermined outputs and

giving a recommended portfolio.SOURCE: Fidelity Investments Canada

Says Toronto magazineeditor Jodi MacLean ofretirement: “That’s themost depressing thing tothink of. I enjoy my workand career and don’twant to be thinkingabout coming to the endof it at all.”

(See Gen X-ers on page 19)


Ceridiain

Canada

favour,” Hamilton says, addingmany young workers would opt outof mandatory retirement plans anduse the funds toward mortgagerepayment if given the choice.“The premise should be: ‘We won’ttell you to save, we’ll encourageyou to save.’”

While Cartwright appreciatesthe practicality of automatic with-drawals and enrolment into a com-pany’s retirement program — par-ticularly no broker or bank paper-work, no fees and the ability toshift between funds — he dislikesthe “lack of engagement” inherentin these approaches.

“[At the end] they take off theblindfold and ta-da! There’s a pen-sion,” he says. “The employee has made no decisions. Andonce off the conveyer belt, they have to be the manufacturers

of their own destiny.”For MacLean, it wasn’t an ad

or RRSP season or even heremployer that started her thinkingof her twilight years — it wasFather Time.

With “the big 3-0” looming, itwas only in the past year that shestarted tucking away 2% of herincome into a bank RRSPthrough monthly automatic with-drawals.

“You hear so many differentopinions,” MacLean says. “Welike to listen to (our financialplanner) and hope he’s telling thetruth. If we make mistakes, wehope we can catch up later on.”

Cartwright says it’s all aboutplanning.

“It’s not about retirement at the moment, it’s about takingcontrol of your financial security,” he says. “That’s whatgrowing up is all about. But along the way, we have an oppor-tunity for employers to play constructive roles.” — C.M.F.


“By divertingcompensation toretirement savings,you’re not doing[employees] afavour,” saysMalcolm Hamilton, apension consultantwith Mercer.

“Most people don’twake up to this untilthey’ve squandered somuch of the value oftime,” saysChristopherCartwright, VP of theFinancial EducationInstitute of Canada.

Canadians under 35 areahead of past generations in

retirement savings:• 70% aged 25-34 have started asavings plan.• Only 25% aged 50+ say they’dstarted at the same age — mostwaited until age 35.• Almost 1/3 aged 18-24 are alsostashing retirement pennies.

SOURCE: Edward Jones and Decima Research , July 2007

Gen X-ers(From page 18)


By Sheryl Smolkin

T en years after Quebec’s SimplifiedPension Plan was first introduced,a new study by the provincial regu-

lator shows a significant number ofsmaller employers embracing this formof retirement savings vehicle. But evenmore Quebec organizations might jumpon the bandwagon if a comparable alter-native was available for their employeesin other parts of the country.

SIPPs are defined contribution pen-sion plans in which several employersparticipate, and they are currentlyoffered and administered by nineQuebec financial institutions.

Statistics recently releasedby the Quebec Régie desrentes show that at the end of2005 SIPPS had a total of 828employers (up from 34 in1995), 34,202 members andnet assets of over $500 mil-lion. On average, each ofthese employers has 42 partic-ipating employees.

A basic requirement is thatemployers must make mini-mum locked-in contributionsof at least 1% of annual pay-roll. However, since the pro-gram was modified based onindustry feedback in 2004,employee contributions nolonger must be locked in, andemployers can make lumpsum contributions during the year. Inaddition, administration, interplan trans-fers and transfers from traditional DCplans have been simplified.

The SIPP advantageWith only 18% of Quebec private

sector employers offering pension plans,

the Régie actively promotes SIPPs. Benoit Dufresne, the Régie’s SIPP

team leader, says this form of DC planhas many advantages as compared to agroup registered retirement plan or acombined group RRSP/deferred profitsharing plan.

“Unlike a group RRSP, contributionsmade to an SIPP are not subject to pay-roll taxes, which is a considerableadvantage for small businesses,” saysDufresne. A calculation on the RégieWeb site based on 2004 rates suggeststhat an employer with a total payroll of$2,100,000 making an annual contribu-tion of $1,000 for each worker (basic

salary $35,000) could save$130.80 per worker in pay-roll taxes.

The Régie also notes thatthe tax rules applicable to aSIPP are more advantageousthan those of a DPSP. “Theowner of a business and hisor her family members, whooften make up the majorityof the personnel of a smallbusiness, can participate inan SIPP but not a DPSP. Inaddition, the annual contri-bution that an employer canmake to a DPSP is subjectto a ceiling equal to half ofthat which applies to aSIPP.”

But Ralph Castelli, asenior group retirement and

savings consultant with Standard LifeCanada, thinks the whole concept oftransferring fiduciary responsibility tothe insurance company administeringthe plan is one of the most attractivefeatures of SIPPs for small Quebecemployers.

“Plan sponsors like that the SIPP

does not have to be administered by apension committee — which is a uniqueQuebec requirement. Pension committeemembers are just like you and me, butthey have to take on potential liabilityand obtain insurance for any claims thatmay be made against them.”

Low take-up elsewhereTwo other Canadian jurisdictions

have amended their pension statutes topermit the establishment of a simplifiedDC plan, but the take up-rate has beennegligible.

Manitoba’s enabling legislation waspassed in 2001. Superintendent ofPensions Debbie Lyons says two finan-cial institutions offer Simplified MoneyPurchase Pension Plans and, to date,there are only 17 participating employ-ers with a total of 840 members andassets of just under $9 million.

A lack of flexibility in the Manitobalegislation is one reason why employersmay be bypassing the province’sSMPPP, suggests Castelli. “In Manitoba,all contributions are locked-in as com-pared to Quebec, where [since 2005]only locking-in of employer contribu-tions is required. Quebec has also sim-plified the whole process if you want toconvert from a traditional plan to a sim-plified plan.”

In 2002 the federal govern-ment also introduced simpli-fied pension plans. However,the Office of theSuperintendent of FinancialInstitutions does not tracksimplified plans separatelyfrom other DC plans, andDirector of Actuarial Policyand Approvals Jean-ClaudePrimeau thinks OSFI has “nomore than a handful.”

Growing the programThe number of Quebec

employers participating inSIPPs jumped over 25%between 2004 and the end of2005, when the rules wererelaxed, but the Régie is not content torest on its laurels. The regulator is com-mitted to both continuous improvementand growth of the program.

To gain a better understanding of howSIPPS are perceived in the marketplace,the Régie recently polled 19 group pen-sion plan consultants and representativesfrom nine financial institutions.

Participants told the Régie that, inaddition to the tax breaks and ease ofadministration, small employers viewSIPPs as a valuable attraction and reten-tion tool in a tight labour market.However, the 1% minimum employercontribution, immediate vesting andlocking-in of employer contributions —and, in some cases, employee contribu-tions — are more controversial.

Dufresne says the Régie is currentlyevaluating possible action based on thesurvey results, but further unlockingwill only be considered in the contextof a broader review of locking-in provisions for all Quebec registeredpension plans.

Going national Nevertheless, Christopher Payne, a

VP at Fort Employee BenefitConsultants in Montreal, thinks lock-ing-in is one of the key advantages ofan SIPP, as opposed to group RRSPs“that are a revolving door where moneygoes out the back end as soon asemployees realize they can cash themin.” Payne refers to pension funds as“holy money” set aside for a specificpurpose.

“Providing they are Quebec-basedonly, any of my clients that contribute

to a group RRSP, or even aDC plan, should take alook at the SIPP. There isobviously a huge marketfor these plans — it hasjust been touched.”

Sun Life’s JulieMcDonald agrees theSIPP concept has greatpotential in the right cir-cumstances. However, shenotes that it may not be aviable option for Quebecemployers with employeesin other provinces wheresimplified plans areunavailable.

“The product isabsolutely wonderful. Iteven has supplemental con-

tributions based on whatever the clientwants to base it on, so it’s a little bit ofan RRSP mixed with a DPSP, but it’s apension plan,” says McDonald. “TheRégie has done a really good job mar-keting it, and it’s always up front in ourpresentations to advisers. Now we justneed to get the rest of the countryinvolved.” — S.S.

The little pension plan that couldSlowly but surely, Quebec’s Simplified Pension Plan is gaining traction with the province’s smaller employers

“The program isabsolutely wonderful.Now we just need toget the rest of thecountry involved,”says Sun Life’s JulieMcDonald.


Ralph Castelli, a seniorgroup retirement andsavings consultant withStandard Life Canada,thinks Quebecemployers like thewhole concept oftransferring fiduciaryresponsibility to theinsurance companyadministering the plan.



requirements and more conservativeassumptions as the reasons for thedecline in funding shortfalls.

“In the past year, all of the companieswe looked at contributed to their pensionplans,” says Paul Schroeder, VP ofDBRS and author of the report. “Therehas been a correction over time withrespect to actuarial assumptions and inthe current environment assumptions arevery reasonable — in line with what wewould expect them to be.”

Lists of the 20 best funded and worstfunded Canadian and U.S. pension fundsreveal there are relatively few companiesin Canada with a pension deficiencyproblem. In contrast, the worst fundedU.S. plans are well below the 80%threshold, and significant contributionswill be required on an annual basis.

Mercer Consulting’s RetirementProfessional Leader, Paul Forestell,says the higher funding levels in eventhe poorest funded Canadian plans canbe attributed, at least in part, to morerigorous regulatory requirements in thiscountry.

“In Canada, plans are required tofund over five years based on termina-

tion liabilities. The requirement that allplans be fully funded within seven yearsin the Pension Protection Act bringsU.S. rules closer to Canada, but ours arestill more stringent.”

Demographic factors have had a sig-nificant impact on pension funding, andthis trend is expected to continue inhighly labour-intensive industries withstrong unions and an aging workforce.However, the study suggests the shift todefined contribution plans, downsizingand a reduced demand for domesticlabour has eased some of the pressureand will continue to do so in future.

Towers Perrin Principal Steve Bonnaracknowledges that DC plan conversionscan have a positive impact on DB planfunding, but says this will only occurover the longer term.

“In most of the work that we do withclients to close off DB plans, you findthat, based on reasonable projections, 10years after they convert from DB to DC,their liability is maybe 75%-80% ofwhat it would have been if they had notmade the change.”

DB funding(From page 1)

MFC Global

20 worst/best funded pension plans in Canada (2006)(*80% is the threshold for reasonable funded status)Worst funded plan Best funded plan Funded status

Bombardier Inc. 63.5% Saskatchewan Wheat Pool 146.5%

Canadian Oil Sands Trust 63.6% Enbridge Gas Distribution Inc.

122.4%

Suncor Energy Inc. 71.1% Bank of Nova Scotia 117.5%

Algoma Steel Inc. 71.6% MDS Inc. 117.5%

CanWest Global Communi-cations Corporation

71.9% Manitoba Hydro-Electric Board, The

115.9%

Empire Company Limited 72.4% Great-West Life Assurance Company, The

111.2%

Nexen Inc. 73.4% Enbridge Inc. 110.6%

Shoppers Drug Mart Corpo-ration

75.1% Canadian National Railway Company

107.4%

Catalyst Paper Corporation 75.3% Agricore United 106.8%

Quebecor Inc. 77.2% Rothmans Inc. 106.6%

Nortel Networks Corpora-tion

77.5% Manitoba Telecom Services Inc.

105.3%

SNC-Lavalin Group Inc. 78.3% Sears Canada Inc. 105.0%

Tembec Inc. 79.7% Newfoundland Power Inc. 104.6%

Union Gas Limited 80.3% TELUS Corporation 104.0%

Toromont Industries Ltd. 80.3% Canadian Utilities Limited 103.8%

Laurentian Bank of Canada 80.5% ATCO Ltd. 102.8%

Alcan Inc. 80.5% 80.5% Bank of Montreal 102.1%

Emera Inc. 80.8% 80.8% Toronto-Dominion Bank, The

101.8%

Nova Scotia Power Inc. 81.8% Superior Plus Income Fund 101.7%

ENMAX Corporation 82.8% Hydro-Québec 100.7%

SOURCE: Pension Plans: The Myth of a Pension Problem, DBRS, August 2007

(See DB funding on page 22)


Among their Canadian clients, Forestell and Bonnaralso note that the pace of DB conversions and freezesappears to have slowed down.

“I think there is now a deeper thinking about whatdrives the variability of DB plan financing. There is anunderstanding that, yes, there is volatility in pension plans,but there are ways to manage or mitigate it,” says Bonnar.

Recently released data from Watson Wyatt in theU.S. parallels the Canadian experience. An analysis ofpension plan sponsorship among Fortune 1000 com-panies shows that the rate of pension freeze slowedfrom a high of 7% in 2006 to 4% in 2007, and themajority of companies with DB plans are committedto keeping them.

Nevertheless, neither Schroeder nor Bonnar expectto see a renaissance for DB plans anytime soon. “DBplans will slowly fade and get smaller as time goes by.There will be no swing back to DB because companiesdo not want to take on that risk,” Schroeder says.

But Forestell says there are still cases where compa-nies competing for talent in tough markets are realizingDB plans can be an asset. “We have a number ofCalgary clients in the oil and gas industry that areswitching back to DB from DC,” he says.

And what if a perfect storm of falling interest ratesand lower stock returns occurs again? Will Canadianand U.S DB plans be better prepared?

“Yes,” says Schroeder. “In the U.S., companies nowhave to record pension deficiencies on their balancesheets, so they are paying very close attention to them.”

Both Forestall and Bonnar also agree plan sponsorshave learned a great deal since the late 1990s.

“Once DB plans are fully funded, plan sponsors willtake some risk off the table. They will also make morestrategic decisions around their asset mix and contribu-tion strategies,” comments Forestell.

“In 2000 clients saw risk as a theoretical conceptbecause they had lived through a decade of outstandinginvestment returns,” says Bonnar. “As interest ratesmove there has been considerable work done todecrease the mismatch between assets and liabilities.We’re now seeing further activity in terms of deriva-tives to further reduce that mismatch.” — S.S.

HealthSource Plus


There are still caseswhere companiescompeting for talent intough markets realizeDB plans can be anasset, says MercerRetirement ProfessionalLeader Paul Forestell.

Towers Perrin PrincipalSteve Bonnar says, “Asinterest rates move,there has beenconsiderable work doneto decrease themismatch betweenassets and liabilities.”

DB funding(From page 21)


By Jack Kwicien

In the last several years we have seenan increase in the number of insur-ance agency and brokerage mergers

at all levels. This trend is likely to con-tinue and possibly accelerate due tomarket conditions and financial pres-sures, as well as demographic trends.

Why consider merging your busi-ness at all? What do you hope a mergerwill accomplish?

There are many reasons to considera merger with another complementaryor synergistic business, including:

• Strengthening the managementteam.

• Acquiring new skills and expertise.

• Broadening the product set.• Increasing the top-line revenue

potential.• Achieving operational efficiencies.• Reaching critical mass.• Improving profitability.• Accelerating growth.• Qualifying for more lucrative

carrier contracts and contingencies.• Enhancing technology capabilities.• Opening new markets.• Adding sales channels.• Perpetuating one or both

businesses.• Providing an exit strategy for some

principals.All these issues and some others that

you may be contemplating right noware very valid business reasons to con-sider a merger.

Getting started

But where should you start?Invariably, it is best to begin with anhonest assessment of the strengths andweaknesses of your business today.Only you are likely to really knowwhere the gaps in your firm’s capabili-ties exist and how to bridge those gaps.And be honest with yourself. If organi-zational objectivity is difficult toachieve, then seek the assistance of aknowledgeable, professional businessadviser.

Perhaps you have been partnering

with a local firm or you have done jointcasework with a friendly competitor,and your mutual interest has nowevolved to a point wherediscussions have startedabout the possibility ofmerging the businesses.

What are the characteris-tics of an ideal merger can-didate? Well, certainly hav-ing a solid working knowl-edge of the interested partyis essential. Ideally, youhave worked together in acollaborative manner in thepast. Hopefully, your man-agement styles, personalgoals, business ethics and awhole host of personalattributes are compatible.

Is the chemistry goodbetween all the principals?It’s hard to achieve greatersuccess when you don’t care for theperson you willbe workingwith most ofyour wakinghours.

In an idealworld, the busi-nesses wouldbe synergistic(1 + 1 = 3, oreven 5). Doyou market complementary productsets? Do you serve different markets?Does each team possess expertise in adifferent business discipline? And doyour strengths and weaknesses comple-ment each other?

Perhaps the partnering firm has adesirable proprietary technology thatwould improve efficiencies or facilitatethe opening of a new sales channel. Orit could be that both firms do not havemuch management bench strength.However, the combined entity might bequite strong and multi-faceted withgreat domain expertise.

Aligning interests

Are the business models, marketing

strategies, compensation plans, produc-er contracts and corporate culturescompatible? Perhaps equally important

is when they are notcompatible, what willbe done about it?

As the discussionsunfold, it is absolutelyessential to make cer-tain that the interests ofthe parties involved arealigned. What is thevision for the mergedbusiness? Who willlead? Who will follow?

Be realistic abouthow much change youand your current busi-ness partners can toler-ate and support. Behonest with yourselvesand be candid withyour merger partners.

You also need to know what the deal-breakersare foryour team.

Howwill theculture ofboth busi-nesseschange? Isthat a posi-tive or a

negative? Keep in mind that thisprocess is very much like going fromdating to getting married with all theramifications that entails.

Seeking advice

As you contemplate all these issues,and a myriad of other important points,be sure to use your trusted advisers as asounding board. What do they think ofthe potential transaction being contem-plated? Have you had a preliminarydiscussion with your lawyer?Accountant? Business adviser? Banker?Board?

Ask them in confidence. And be pre-pared to listen to their unfiltered feed-back. You may not get what you want to

hear, but absorbing their combined inputcould help you make your best decisionor avoid your biggest mistake.

Ultimately, every good marketingorganization must ask itself: What willthe customer think? How will ourclients feel? And for that matter, howwill your key employees react, and howwill that affect your customers?

Will your customers view a merger asa positive or a negative? Or, perhaps, willit matter at all? Our customers do notand should not make our decisions forus. But we should tread lightly whereour decisions will alienate our clients.

A discreet, confidential conversationor two that does not divulge the identityof the merger partner may be quiteenlightening, and certainly will beworth the time. It’s better to know aboutany issues, real or perceived, inadvance, before you are standing at thealter with your merger partner or, worseyet, after you have taken your mergervows.

Think outside the box

Don’t be afraid to “think outside thebox” when it comes to consideringpotential merger candidates. Today’scompetitor or administrator or vendormay be tomorrow’s ideal merger candi-date, depending upon what you are try-ing to accomplish.

Think broadly and strategicallyabout what will benefit your clients andcustomers most in the future. Don’tfocus on the way you conduct businesstoday. Think about how you want to beconducting business two or five yearsfrom now.

And think about the roadmap thatwill get you there. Somewhere outthere on the horizon there may not be afork in the road; that may just be amerge that leads to a merger. — E.B.N.C.

Jack Kwicien is the managing partner ofDaymark Advisors, a Baltimore, Md.-basedconsulting and advisory firm that serves theinsurance, banking, benefits, financialservices and workforce managementsectors. For more information, visitwww.daymark-advisors.com.

Employee Benefit News Canada SEPT./OCT. 2007 23

Employee Benefit AdviserCANADA

From dating to getting marriedEnsure your new partner is compatible before you propose a merger

Coverage of Brokers, Consultants and TPAs

Be realistic about howmuch change you andyour current businesspartners can tolerateand support, says JackKwicien, the managingpartner of DaymarkAdvisors.

Think broadly and

strategically about what will

benefit your clients and

customers most in the future.



By David Adler

At the end of June, the Ontario TeachersPension Plan led a leveraged buyout ofBCE Inc, Canada’s largest telecommu-nications company. To pull off thedeal, Teachers successfully outmaneu-vered rival private equity groups ledby Canadian Pension Plan Investment

Board and Cerberus Capital Management (best knownfor its takeover of Chrysler).

The deal was hardly the first-high profile leveragedbuyout by a Canadian pension plan: Teachers, workingwith U.S. private equity giant KKR, previously tookover the Yellow Pages Group in 2002. However, theBCE takeover, valued at $51.7 billion, was the largestprivate equity deal in Canadian history.

Private equity investing by Canadian pension planshas clearly come of age, and many of these plans arenow significant players in the world buyout boom. Butsmaller plans have been more reluctant to fish in privateequity waters.

Money talksAt the upper end of the market, plans like Teachers,

the CPPIB, as well as Quebec’s Caisse de dépôt, areglobal leaders in buyouts. They each have assembledlarge internal teams who make direct investment in ven-tures themselves — something unheard of by their U.S.pension plan equivalents — who farm out all investingto outside managers.

Rick Nathan, president of the Canada’s VentureCapital and Private Equity Association and managingdirector of Kensington Capital Partners says: “We don’thave mega private buyout funds like KKR in Canada.Instead, our biggest pension funds play that role directly.”

For smaller plans, particularly for the 100 or so pen-sion plans with under $10 billion dollars, “you haveclose to a zero allocation for private equity, and thesame is true for endowments,” admits Nathan.

Despite the prominence of recent deals, the overalllag in private equity allocations by Canadian plans isquantified in a report by Greenwich Associates.Although U.S. plans with assets between $1-5 billionhad an average private equity allocation of 2.6% of fundassets, the comparable Canadian figures were only .5%.

And for plans with under $1 billion in assets, this allo-cation dropped to .1% in Canada vs. 1.5% in the U.S.

But there are signs that plans outside of the alreadyactive top-tier players are considering getting involvedin private equity. Unpublished surveys conducted byCVCPEA found the majority of plans with greater than$15 billion dollars are already active or expect to makean allocation to private equity over the next two years.

The newsworthy megadeals as well as megareturns(31.4% for Teachers private equity portfolio in 2006)are certainly factors. “Things are definitely changing.Our industry is maturing very quickly,” says Nathan.

As Teachers’ track record shows, private equity canoffer high returns, but investing in it requires prudence,as well as caution. What is private equity, and whatoptions are available for smaller plans that do not haveinternal expertise?

Understanding private equity

“We define private equity as the acquisition of anexisting business using leverage, and the equities of the

bigfishCanadian public service pension plans are “big fish” in the small pond of privateequity investors, but smaller private sector plans are also looking for ways to jump in.

Swimmingwith the


(See Pension plan on page 26


company are not publicly traded after-wards,” says Jim Leech, SVP and head ofprivate capital at the Ontario Teachers’Pension Plan.

Private equity is typically classified asa distinct asset class from venture capital,which is the seeding of startups. Themanagers of a private equity buyout fundare referred to as “general partners,” andthose who supply capital to them arecalled “limited partners.” Unlike in amutual fund investment, the general part-ners have the ability to actually reshapethe companies they own.

There are a host of reasons why pen-sions, both big and small, go into privateequity,” says Janet Rabovsky, practiceleader, investment consulting, WatsonWyatt.

Perhaps first among these, notesRabovsky, is “the close duration matchfor plan assets,” which is rarely men-tioned in the headlines. Private equityinvesting is a long-term enterprise, withmoney tied up for well over 10 years —a much closer duration match for theaverage pension plan.

Ian Dale, SVP of communications atCPPIB agrees: “We have a very long timehorizon — 15 years — so it makes sensefor us to invest in asset classes that alsohave long investment horizons but paygreater returns.”

Another overlooked investment objec-tive of private equity meets is to give pen-sion plans access to ‘nonpublic’ or non-listed companies.

Rabovsky suggests that in developedcountries, unlisted companies can repre-sent approximately 50% of GDP. “If a pen-sion plan is only investing in public com-panies, it is potentially missing out onlarge sectors of the market not well repre-sented on stock exchanges. Health care andIT are two examples in Canada,” she says.

In search of alpha

But it is private equity’s promise of“alpha” or market beating return, thatseems to generate the most buzz. A studyby American academics Steve Kaplan andAntoinette Schoar found some privateequity managers were consistently able tobeat public equity markets: Funds in thetop quartile of their study generated aninternal rate of return of 22% a year.

Moreover, they found these managers demonstrated“substantial persistence in fund performance... [whichis] markedly different from the results from mutualfunds, where persistence is hard to detect.” In short,some private equity managers not only beat the market,but consistently do so.

Yet, even enthusiasts are upfront about the potentialdownside of private equity investments. Despite Kaplan

and Schoar’s findings about theperformance of top-tier man-agers, the asset class on thewhole doesn’t come off so wellin their study: Average returns,net of fees, were approximatelythe same as the S&P 500.

“The key is to find goodmanagers,” says Rabovsky. Evenassuming that this can be done,private equity is still notinvestor-friendly. Contracts —and the corporate governancerequired — are quite onerous.

“You have to be prepared toaccept that private equity invest-ment is a high-governance andtime-consuming asset class. Thereturns can be enormous, but noone ever said private equity waseasy,” she says.

Getting started

Assuming a pension fund is interestedin acquiring private equity, what are thefirst steps to develop a program?

Plans can either build a team in house,or outsource using an adviser/gatekeeperor fund of funds. Generally, only thebiggest plans, more than $20 billion inassets, would consider building their ownin-house team.

“The economies of scale and levels ofmanagement compensation demanded forsuch an enterprise often don’t make sensebelow this level,” says David Rogers,managing director of Caledon CapitalPartners, a private equity advisory grouplocated in Toronto.

The dilemma for smaller plans is ini-tially how to get an allocation to the equi-ty class approved, and then to choose thebest method of outsourcing the build ofan appropriate mix of investments.

Committing capital to individual pri-vate equity funds and investing directlyin portfolio companies are the typicalways to access private equity opportuni-ties, but both bring risks and enormousgovernance burdens for plans.

Therefore once an allocation isapproved, a pension fund would generallyselect an outside adviser and/or fund offunds manager to sift through potentialmanagers and help tailor an investmentportfolio for the plan over time.

Using a fund of funds

The fund of funds route — in whichthe fund decides on the best managers and makes allo-cation decisions — is the most governance-friendlysolution that also gives small plans exposure to a diver-sified portfolio. Teachers’ Jim Leech agrees that “for asmall pension plan (of under $10 billion), a FoF islikely the only way to go.”

This approach is also consistent with how manyU.K. and U.S. funds gained early exposure to private

equity investments before moving into individual fundsand, in some cases, direct buyouts.

But a FoF has an extra layer of fees (up to 1%), andinitial allocations still have to be large. Even if the min-imum investment for a limited partnership in a FoF is$10 million, such small investments make little sensebecause private equity is such a time-consuming assetclass. And Kensington Capital Partners is one of only ahandful of FoF managers in this country.

Despite these limitations, Managing Director ofKensington, Thomas Kennedy, says a FoF still makessense for small plans: “Typically our investors are smallwith under $10 billion in assets. By pooling theirmoney in a FOF, plans gain exposure to both the assetclass and best-in-class expertise.” Kennedy says somelarger plans have also been known to rely on a FOF forpart of their portfolio.

Even given these options, and the potentially highreturns, some plans may decide private equity is stillnot for them.

They may not have the governance capability, timehorizons or interest required to put up with what every-one agrees is a very time consuming asset class. Andthe buyout market has ground to at least a temporaryhalt because of the credit meltdown in the U.S.

Shrinking public markets

But pension plans may not be able to sit on the side-lines forever.

Leech points out public markets are shrinking inCanada as more and more companies are going private,and notes this was the main motivation behind therecent BCE deal: “We were Bell Canada’s largestshareholder for many years, and it was our largest sin-gle holding. We wanted that exposure. If someone elsewere to privatize BCE, we would lose that exposure, sowe did it ourselves.”

Smaller companies may be facing a similar dilemmaif they do not “join the big fish in the private equitypond.” “If you want exposure to the better companiesoperating out there, private equity may soon be the onlyway to go,” he says. — E.B.N.C.

David Adler is a New York-based freelance business writerwho frequently contributes to EBNC.

Rick Nathan, managingdirector of KensingtonCapital Partners says:“We don’t have megaprivate buyout funds likeKKR in Canada. Instead,our biggest pension fundsplay that role directly.”

“If a pension plan is onlyinvesting in publiccompanies, it is potentiallymissing out on largesectors of the market notwell represented on stockexchanges,” says JanetRabovsky, practice leader,investment consulting,Watson Wyatt.

“If you want exposure tothe better companiesoperating out there,private equity may soonbe the only way to go,”Jim Leech, SVP and headof private capital at theOntario Teachers’Pension Plan.


Pension plan(From page 25)



teleworking. CH2M was one of the first companies toparticipate in the Pembina Institute’s unique alternativecomputer program, which aims to power 20,000machines with wind.

“Our employees form the grassroots support for ourenvironmental programs,” Howieson says. “Their par-ticipation helps to shape the organization.”

A recent Adecco survey showed environmental initia-tives are starting to permeate employees’ perceptionsabout their workplaces: 33% would be more inclined to

work for a green company, while 52% believe their com-pany should do more to be environmentally friendly.

Bell Canada has a 20-year record of environmentalawareness, including residual and hazardous wasterecycling, energy efficiency programs and alternativeenergies such as fuel cells and wind programs.

“Everyday Kyoto” asks Bell employees to make a

personal pledge to reduce green-house gas emissions at home,work and during their commute.This means teleconferencinginstead of taking trips, or tele-working from home.

“It engages employees andreally gets people involved,” saysMarc Duchesne, director, corpo-rate responsibility and environ-ment. “[Our initiatives] have hada very positive impact onemployee satisfaction andemployee pride in the company.”

He’s seen a significant rise inemployee interest in the environ-ment, with several people callinglooking for a spot on the compa-ny’s Green Team. This, he says,is a definite sign of the power ofthe environment.

Office championsrequired

Most of Larry Avanthay’sphone calls come from employ-ees who wonder why the reamsof paper in their workplacesaren’t being recycled. The busi-ness advisor and Smart Step — aprogram that works with busi-nesses to build corporate environ-mental initiatives — representa-tive for Metro Vancouver saysevery office needs a champion.

“It takes effort, and it takescommitment,” he says. “[Employees] feel empowered tomake it happen or be given the power to make it happen.So hopefully at the end of the day they feel better aboutthe place they work.”

A successful office environmental program requiressupport from all levels, Avanthay says, because issuescan start as soon as products come in the door — thepackaging of materials, for example, or the environ-mental friendliness of your office supplies.

“It’s critical to the success of your program,” he says.

Beyond bricks and mortar policiesBeing a responsible environmental corporate citizen

isn’t just about recycling, either. At the Ontario PublicService Employees Union (OPSEU), a Green Team isdeveloping the union’s environmental action plan thatgoes beyond bricks and mortar policies.

“Our pension funds must provide secure retirements

for the future of our members, but they also representlots of financial muscle for green activities,” reads a“Greening OPSEU” executive summary. “[We areworking towards] securing the future of our memberswhile exploring ways to reduce the environmentalimpacts of our investments.”

The union is in a unique spot because not only can itwork on the environmental impact of its own unionbuildings, but it can also start talking green within itscontracts, says Dave Fluri, OPSEU’s green campaignofficer.

“How can we, as a fairly large, multimillion dollarorganization, lessen our environmental footprint?” hesays. “There’s the internal greening of our own organi-zation. And how do we lobby for greener workplacesand greener collective agreements? It’s not a traditionalconversation to have with an employer.”

While Fluri agrees that any organization that demon-strates it cares about its employees will win when itcomes to retention and attraction, he shuns the idea ofusing the environment just for that purpose.

“I hate to think we would use it in that way,” hesays. “It can’t just be recognition for the sake of havinga program. In one way, there’s the same danger in theenvironmental movement.”

Green is “in”

There’s no doubt green is in. At the ConferenceBoard of Canada’s War for Talent conference thisOctober, Hewlett-Packard’s VP of human resources ison the docket to speak about the connection betweenattraction, loyalty, engagement and the environment.

“Building corporate responsibility and consciousnessis not only the right thing to do, it’s a prime strategy toattract and retain employees and customers,” the semi-nar description reads. “The interest in environmentalissues is motivating people’s behaviour as employeesand jobseekers, so a commitment to these issues canhave a dramatic bottom line impact.” — C.M.F.

Green(From page 1)

Tips for a green office• Form an office Green Team with representatives

from all levels to set corporate goals.• Get employees involved with challenges and out-

door activities.• Copy and print double-sided to save paper.• Use recycled, unbleached paper.• Use bicycle couriers.• Encourage employees to carpool and use public

transit.• Turn off lights in empty rooms.• Plant trees on company property.• Use re-useable mugs and plates in the cafeteria.• Practice sustainable purchasing.• Perform energy efficiency audits.• Visit www.eya.ca for a free Green Office Guide and

Environmental Self-Diagnosis Guide.

SOURCE: Ottawa Peace and Environment Resource Centre;Environmental Youth Alliance

Our employees tell us that they join us and then stay

because we do interesting projects. This puts us in a

competitive position to win the war for talent by attracting

employees who share our core beliefs in sustainability.

Diana Vangelisti, C2HM HILL’sKitchener-Waterloo area manager,shows a budding environmentalist howto make a bird feeder at the company’sEarth Day celebration.



Signs of

AscentClimbing the benefits

ladder is easier with hard-earned initials

behind your name


By Carly Foster

In the fluid, highly regulated and complex world ofemployee benefits where few specialized college oruniversity degrees are offered, continuing education

and industry designations are often the key to ascent.Whether you are an employer benefits manager

seeking continuing education, or a broker-consultantcourting clients, the number, scope and sophisticationof such designations are on the rise. It’s an importantdevelopment, considering the previous lack of tradition-al career paths.

“You don’t hear a lot of people say, ‘When I growup I want to work in benefits,’” laughs Linda Bielski,director of Canadian Employee Benefits Specialist fieldservices for the International Foundation of EmployeeBenefit Plans. “People fall into this area.”

Ted Patterson, director of the Centre for EmployeeBenefits at Humber College in Toronto, agrees the ben-efits field is becoming much more popular. And hebelieves training will continue to help practitionersenhance their career possibilities.

“People say they didn’t think the industry was solarge, and the opportunities so great,” Patterson says ofresponses to Humber’s offerings. “They’re so wrappedup in their current job that they don’t have the luxury ofsitting back and looking at the big picture.”

Following are some examples of programs that canhelp benefit professionals climb the ladder of success.

CEBS earns respectCEBS is one of the most recognized and common

certifications available in Canada. “It is very extensive,” Bielski says. “It’s not a quick

and easy designation to get — one of the reasons it car-ries the respect it does. If you see someone with aCEBS designation, it signals someone is very seriousabout a career in this area.”

The IFEBP’s CEBS program offers three sub desig-nations (group benefits, retirement and compensation),plus the full CEBS certification. There are eight coursesto complete, which take anywhere from three-to-fouryears part-time, or one year full-time, Bielski says. InCanada, the program is administered through DalhousieUniversity in Halifax, Nova Scotia, which develops thecurriculum and grades exams.

Most graduates are working professionals who dothe courses via distance education, although a smallnumber take formal classes at colleges and universities.The IFEBP has graduated just shy of 1,000 peoplesince the program started in Canada in 1985.

Expanded offerings from Humber College

Humber College’s Certificate of Proficiency inEmployee Benefits (CEB) is a three-part program —touted as the oldest in Canada — that covers plandesign, tax issues, funding and asset management, andfiduciary responsibility.

Patterson says CEB is great for anyone who needs tounderstand the how’s and why’s of pension andbenefits administration.

Some 13 years ago, he realized the need foradditional resources in pensions — and the PensionPlan Administration Certificate wasborn. Now the program travels Canadateaching Pension 101, plan documenta-tion, legislation and actuarial evalua-tion.

“All of our programs have exercisesthat go with them,” Patterson says. “It’snot purely a lecture. It’s learn andapply.”

After Senator Michael Kirbyexpressed concerns over pension trusteeeducation, the Centre crafted theTrustee Development Program. Theadvanced, three-day course targets pro-fessionals in other fields who have aunique oversight role, Patterson says.

He’s very proud of the list of profes-sionals from well-known consulting,law and financial businesses that makeup the Centre’s faculty.

“They’re selected very carefully,” hesays. “You’re only as good as yourinstructional staff.”

Other HR achievements

Other well-known designations include theCertified Human Resource Professional (CHRP) —known as “the most recognized and respected levelof qualification in human resources management inCanada,” according to the Canadian Council ofHuman Resource Associations. “Achieving it meansyou are one of the highest-ranking and skilled pro-fessionals in HR.”

The new GlobalProfessional in HumanResources programrecently brought toCanada by the Society ofHuman ResourceManagement will pre-view for the first timelater this year at collegesin Alberta and Ontario.

Unique adviserdesignations

Canadian employee-consumers are moreknowledgeable andastute than ever, accord-ing to Taylor D. Train,VP of marketing for TheFinancial AdvisorsAssociation of Canada(Advocis) and CEO ofthe organization’sChartered LifeUnderwriter Institute.This, combined with aproliferation of products,the sophistication of thetax system and increasedregulations, makes train-ing not only a requirement but a necessity for benefitadvisers.

“We’re really firm believers that education is a cor-nerstone of professionalism,” saysTrain. “Education is absolutelyessential to a person’s ability tomove forward and differentiate them-selves...and help customers in thefuture.”

Programs, such as those offeredby Advocis, need to be constantlyupdated to keep up with changingregulations, Train says.

“There’s a lot out there that’spassed off as education,” he says,adding continuing education needs tobe rigorous and to a college standard.“All of these things have to beembedded into what I consider to bemeaningful [continuing education].”

He points to Advocis’ RegisteredHealth Underwriter (RHU) designa-tion — the only one of its kinds inCanada — crafted out of emergingissues surrounding living benefits.With many people joining companieswhere no benefits are offered, orworking contract or short-term, theylack proper critical illness, long-term

care, disability and group insurance.“They have to build their own plans outside,” Train

says. “They need someone out there who can help peo-ple understand the benefits environment.”

Advocis also offers Chartered Life Underwriter andCertified Financial Planner designations, as well asclasses at colleges across the country and annual pro-fessional development schools and conferences.

“Education is absolutelyessential to a person’sability to move forwardand differentiatethemselves...and helpcustomers in the future,”says Taylor D. Train, VPof marketing for TheFinancial AdvisorsAssociation of Canada(Advocis), and CEO ofthe organization’sChartered LifeUnderwriter Institute.

A person’s progressionthrough the ranks canoften be linked to thecompletion of industrycourses and designations,says Katherine C.Milligan, VP of educationand training for LOMA.

Designations 101AAPA: Associate, Annuity Products and AdministrationACS: Associate, Customer Service AFSI: Associate, Financial Services InstituteAIAA: Associate, Insurance Agency AdministrationAIAF: Associate in Insurance Accounting and FinanceAIRC: Associate, Insurance Regulatory ComplianceALMI: Association, Life Management InstituteARA: Associate, Reinsurance AdministrationCEB: Certificate of Proficiency in Employee BenefitsCEBS: Certified Employee Benefit SpecialistCFP: Certified Financial PlannerCHRP: Certified Human Resource ProfessionalCLU: Chartered Life UnderwriterCMS: Compensation Management SpecialistCPFS: Certified Professional, Financial Services CPLHI: Certified Professional, Life and Health InsuranceFCA: Financial Services Compliance AdministrationFFSI: Fellow, Financial Services InstituteFLMI: Fellow, Life Management InstituteFSM: Financial Services ManagementGBA: Group Benefits AssociateGPHR: Global Professional in Human ResourcesPFIC: Pension Fund Investment CertificatePCS: Professional, Customer ServicesPPAC: Pension Plan Administration CertificateRHU: Registered Life UnderwriterRPA: Retirement Plans AssociateTDP: Trustee Development Program

SOURCE: EBNC

(See Training on page 30)




Pal Benefits


LOMA partners with Seneca College

The Life Office Management Association has part-nered with Seneca College to create a first-of-its-kinddegree in financial services management, includingmost credits towards a Fellow, LifeManagement Institute(FLMI) designation.This can be complet-ed right out ofhigh school.

That, alongwith Associate,CustomerService (ACS)are the twomost commondesignationsLOMA awardsin Canada, saysKatherine C.Milligan, VP ofeducation andtraining.

“People whojoin an insurancecompany and wantto get the big pic-ture and understandthe organizationneed to pursue edu-cation,” she says. “Alot of companies useour programs for thispurpose.”

Most life and healthinsurance companiesare LOMA members,and have education coor-dinators who help delivercourses. Other education topics

— credits which can be usedtowards LOMA’s litany of availabledesignations — include financialservices, insurance administration,

investment principles,annuities and compli-

ance.“We’re the

world’s largesteducator of people who work in

financial services operations,”Milligan says. “If people

want a global career, FLMIis recognized around theworld.”

In the past year, theorganization awarded 64FLMI designations

to Canadianemployees, part of

2,137 around theworld.

Experienceis definitelyimportant, butdesignationscan bumppotentialhires up the

food chain,experts say.

Milligansays compa-

nies hiringfrom withinwill often give

preference tothose with des-

ignations such asa FLMI. A per-

son’s progressions through the ranks often parallels thecompletion of industry courses and designations.

“Experience is one of the best educators of all,”Train says. “It’s fine to have 50 years in the business”but work experience can be hard to measure. “Thatcan only come from your commitment to educationand the ability to apply that experience.” — C.M.F.

Training(From page 29)

Educational organizationsand institutionsCanadian Council of Human Resource Associations:www.cchra.caFinancial Advisors Association of Canada (Advocis):www.advocis.caHumber Centre for Employee Benefits:www.humber.ca/cebInternational Foundation of Employee Benefit Plans(IFEBP): www.ifebp.orgLife Office Management Association (LOMA):www.loma.orgSeneca College Centre for Financial Services:www.senecac.on.ca/cfsSociety for Human Resource Management:www.shrm.org

Experience is definitely important, but

designations can bump potential hires

up the food chain, experts say


By Chris Silva

HR/ benefits managers, long waiting to get thatexalted chair at the corporate table with seniormanagement, are still waiting — and likely will

be for years to come, study results from DeloitteTouche Tohmatsu reveal.

Although the report, which surveyed more than500 HR and non-HR executives in North America,Asia and Europe, found 88% believe people issueswill become more important over the next three-to-five years, it appears HR is still viewed as little more than an administrator of employee benefits and paperwork.

Only 23% of the respondents believe HR currentlyplays a crucial role in strategy formulation and businessoperations.

Consequently, the majority of senior-level executives(63%) rarely or never consult their senior HR team onmergers or acquisitions.

“It’s a stunning paradox that HR is not being lookedto for leadership on the people agenda,” says JeffSchwartz, principal with Deloitte Consulting and a co-director of the study, “Aligned at the Top.”

“Many top company executives believe the HRdepartment lacks the business insight to drive strategicinitiatives around top-priority issues, such as leader-ship, talent management, creating a high-performanceculture, and training and development.”

Further indicating the perception gap, 52% ofrespondents said they do not have a chief humanresources officer (CHRO) or a chief people officer, yeta shockingly low 3.9% described their organization asworld-class in both people management and HR, whilenearly half (49%) said their capabilities are merely“adequate” and need to improve.

All is not lost

There are indications that both business executivesand HR leaders expect the situation to improve andfor HR’s role to expand.

Of those respondents that said they didn’t have aCHRO, the majority (68%) said they expect to addone within the next three-to-five years.

Respondents were asked to rate the most criticalpeople management issues. They said:

• Leadership development and pipeline (76%). • Talent management (72%).• Creating a high-performance culture (72%). • Training and/or development (65%).• Compensation, benefits, and pension planning

and management (42%).“There is going to be a bridge between HR and

executives,” says Schwartz. “There was a very strongview that people issues are important and will becomemuch more important.

“Most HR leaders we talked with are incrediblyexcited about what we call the broader opportunitiesin people management.”

Outsourcing admin

Among other findings, companies are outsourcingselected HR activities at an increasing rate — an indi-cation that more time is being freed up for HR/benefitsmanagers to focus on strategic business issues.

On average, 29% of companies already outsourcerecruitment, training and payroll, while another 18%expect to outsource these and other HR activities in thenext three-to-five-years, Deloitte finds.

There’s a strong sentiment, however, that HRneeds to understand the business first before it’s considered useful to the company beyond a purelyadministrative sense.

“If HR wants to be a player, then they need to under-stand and have a clear and broad view of the organiza-tion, and figure out how they could contribute to the bot-tom line,” remarks Judy Thorp, executive managingdirector of the compensation and benefits practice withSMART Business Advisory & Consulting.

“One of the issues I’ve found with some clients,”she continues, “is that HR professionals strugglebecause they don’t have a profit-and-loss focus.”

In short, experts say, a successful CHRO needs tobe a business person first and an HR executive second.

Schwartz feels HR leaders are up to the task.“Our guess is that this is a challenge that most HR

managers want,” he says. “HR is like the dog thatcaught the car. They’ve been asking for a seat at thetable to discuss people issues for as long as I canremember.” — C.S.

Still the odd man outCiting pros’ lack of business insight, HR function still largely viewed as administrative, not strategic

WatchGLOBALEmployee Benefit News Canada SEPT./OCT. 2007 31

Source: Deloitte, 2007




monitoring investments. From a compliance perspective, mon-

itoring of the customized portfolios issimplified, as due diligence is likelyalready occurring on the funds within theplan. Substitution of an individual com-ponent fund (such as one of theCanadian equity managers) is uncompli-cated, cost effective and can easily be

communicated to members. From the member perspective, the

transparency of these customized portfo-lios also offer several additional advan-tages.

Typically, lifecycle and lifestyle fundmanagers will charge the same fee foreach of the options, regardless of thecomposition of the individual funds. This

can create a scenariowhere more conservativeportfolios are cross-subsi-dizing the more aggressiveones. In addition, lifecycleand lifestyle fund man-agers typically charge apremium for managing thecomponent investments.

In contrast, the invest-ment management fees forthe customized portfoliosare based on the pro-ratacost of the individualinvestment funds withinthe portfolio. This meansthat members pay for whatthey use, and the inclusionof GICs within the moreconservative and moderate

portfolios makes them a very economicaloption.

Furthermore, the number of optionscan easily be expanded to include boththree-or-more standard investor profilesand three or more time horizons. A sam-ple three-by-three matrix is illustrated inthe chart accompanying this article.

From the plan sponsor’s perspective,

it may seem that the selection processhas gotten more complicated as themember decision-making process hasbecome more simplified, but, as dis-cussed above, this is more than offset bythe ease of compliance with variousrequirements in the CAP Guidelines

In the past, sponsors felt their respon-sibility was complete if they chose 15 or20 quality funds for the plan and gavemembers the information they thoughtthey needed.

However because plan sponsors nowhave a heightened awareness of theirresponsibilities under the CAPGuidelines, they are looking for real dif-ferentiating factors that will increasemembers’ engagement and significantlychange member behaviour in a positiveway.

The use of an appropriate packagedinvestment solution such as customizedportfolios is one way to help them meetthis objective. — E.B.N.C.

Matthew A. Rotenberg is a seniorconsultant, group savings and retirementmarketing at Standard Life in Montreal. Hecan be reached [email protected].


Resource Guide

This index is provided as an addit ional service. The publ isher does not assume any l iabi l i ty for errors or omissions.

10 . . . . . . ACPM

19 . . . . . . Ceridian Canada

17 . . . . . . Ceridian Web Seminar

7 . . . . . . . Desjardins

2 . . . . . . . Great-West Life

36 . . . . . . Green Shield

22 . . . . . . HealthSource Plus

9 . . . . . . . HR Professional Association of

Ontario – Regional Edition

14 IFBEP

35 . . . . . . Manulife Financial

12 . . . . . . MFC Global

16 . . . . . . MFC Global

21 . . . . . . MFC Global

30 . . . . . . Pal Benefits

Retirement Trends Supplement Advertisers

2 . . . . . . . Great-West Life

8 . . . . . . . Integra

4 . . . . . . . Standard Life

PG.# ADVERTISER PG.# ADVERTISER

CANADIAN REGIONAL MANAGER PETER CRAIG Call 905/840-3588 • FAX 905/840-0003

REPRINTS OF ARTICLESNeed reprints of an Employee Benefit News Canadaarticle? Just ask! It’s only a phone call away. Call or write to:

Godfrey R. LivermoreDirector of Reprints & Alternative Media SalesSource MediaOne State Street Plaza, 25th FloorNew York, NY 10004888/909-6366 • Fax 212/843-9624 [email protected]

LETTERS TO THE EDITORFeel strongly about something you’ve read in EmployeeBenefit News Canada? Would you like to author a guestcolumn or feature?

Send your suggestions, comments or opinions to theEBNC editor-in-chief at [email protected] look forward to hearing from you!

Sample customized investment portfoliosInvestment Period Conservative Moderate AggressiveMore than 25 years 15% Canadian Equity Manager A

15% Canadian Equity Manager B30% Bond Manager C30% 5 year GIC10% US Equity Manager D

15% Canadian Equity Manager A15% Canadian Equity Manager B35% Bond Manager C10% 5 year GIC12% US Equity Manager D13% Int’l Equity manager E

23% Canadian Equity Manager A22% Canadian Equity Manager B25% Bond Manager C15% US Equity Manager D15% Int’l Equity manager E

Between 10 and 25 13% Canadian Equity Manager A 12% Canadian Equity Manager B25% Bond Manager C40% 5 year GIC10% US Equity Manager D



Less than 10 10% Canadian Equity Manager A10% Canadian Equity Manager B20% Bond Manager C50% 5 year GIC10% US Equity Manager D



SOURCE: Standard Life Canada

(From page 6)

Customized portfolios


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