More than half of private sector defined benefit plan sponsors in Canada have converted their plans to defined contribution arrangements for current or future employees, according to a new report.
Global professional services firm Towers Watson, Toronto (NYSE, NASDAQ: TW), published this finding in a summary of results from a survey of senior executives at more than 150 Canadian organizations.
The 51% of plan sponsors that have switched to DC from DB plans is up from the 42% that Towers Watson recorded in 2008. The study says the trend “shows no sign of relenting.”
The survey also reveals that recent improvements in economic conditions have had “virtually no impact” on executives’ perception of a DB funding crisis. The percentage of respondents who agree that there is a pension funding crisis has remained at historic highs since the financial downturn of 2008.
The survey found that more than half of respondents (56%) believe the funding crisis will persist for the long-term, compared to 34% who held this view in 2008, before the onset of the recession. Just under one-third (32%) perceive funding challenges to be a cyclical phenomenon.
Of the private sector DB plan sponsors considering adjustments to their plan design, funding policy or investment strategy, more than half (52%) indicate that they have prepared a “journey plan” of measures to contain cost and volatility, the study adds.
However, a majority of respondents (59%) agree that employees will be showing a greater appreciation for DB pensions. The potential impact on attraction and retention is also a major concern for the majority (52%) of organizations that are considering plan design changes.
–Warren S. Hersch