Employers rethink retirement plans

CanWest News Service
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Fifty-nine per cent of employers are likely to reassess their retirement and pension programs by the end of this year as the onus for retirement savings shifts away from companies and onto the shoulders of workers, say experts.
Post-retirement health care benefits are also disappearing, with one third of employers saying they expect to reduce coverage for future retirees and 43 per cent reporting they might look to retirees to share more of the cost of these benefits, according to a survey of retirement trends by Hewitt Associates.
"We see a real trend away from retiree health care benefits," says Rob Vandersanden, a principal with Hewitt's Calgary office. "People just won't have that safety net of the additional health care benefit after retirement and that means they're going to have to save even more for retirement."
Post-retirement health care benefits are just one part of pension plans. A broader, and continuing trend, indicates workers will have to start saving more to retire as company pensions slowly become a thing of the past.
"More and more employers are getting out of the pension game," Vandersanden says. "That means employees are going to become more responsible."
Only about one-third of working Canadian adults have pensions, the majority of which are administered by funds that have taken substantial financial hits with large, unfunded liabilities.
Regulators are grappling with proposed changes and reforms to how retirement programs are implemented, funded and used.
"Taxpayers in general are not keen for the government to be stepping in and backstopping these programs because most of us don't have retirement programs to start with, so they're going to have to find a way to address that particular issue without public money," says Vandersanden.
In response to the economic events of the past year and prior fiscal imbalances, regulators have extended the payment period for some of the special contributions companies have to make into retirement funds to make up for the shortfall in some pension funds.
Instead of funding the deficiency over five years, many companies can now do it over 10 years with some stipulations, while regulators across Canada have been studying a potential revamp of the whole regulatory pension structure, says Vandersanden.
Federal and provincial politicians have launched studies and delivered reports on the issue at a rate not seen in a decade. Companies have been moving away from defined benefit toward defined contribution plans for the past few years, a move that requires employees to pay a greater share of their pension plans.
Forty-five per cent of employers rank employee understanding of their program as a high priority, while 42 per cent said workers have to take responsibility themselves.

Organizations: Hewitt Associates

Geographic location: Calgary, Canada

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