How Does Your Multi-Employer Pension Plan Measure Up?
The Financial Services Regulatory Authority of Ontario (FSRA) recently released a benchmarking report for Defined Benefit Multi-Employer Pension Plans (DB MEPPs). This benchmarking report is a follow-up to a report on leading practices that we talked about back in 2021.
Here’s a quick summary of the eight leading practices:
- A comprehensive orientation policy to on-board new trustees.
- Trustee education policies to support trustees in fulfilling their role as plan fiduciaries.
- A trustee succession plan to ensure continuity on the Board of Trustees and good plan administration.
- Plan enrolment policies and procedures that support members remaining connected with their pensions.
- An investment policy that considers industry leading practices relevant to how the plan assets will be invested and how trustees will resolve conflicts of interest, shall they arise.
- A risk management policy that integrates funding and benefit policies and outlines the material risks facing the pension plan along with a plan to either mitigate or respond to these risks.
- Plain language communication for plan beneficiaries as to the nature of their pension plan such that they can make informed decisions. This includes clearly explaining the potential and likelihood for benefit adjustments.
- Regular, on-going dialogue between the trustees, advisors and key stakeholders involved in the plan supports awareness, collaboration, and operational effectiveness.
The timing of this benchmarking report is very good, as most MEPPs in Ontario will be transitioning to the new permanent framework for Target Benefit Plans over the coming years and they should keep these leading practices in mind.
The benchmarking report is a quick read that I recommend for all MEPP Trustees. To give you a sneak peak, most of the benchmarking results looked similar to the following chart, which shows that many plans are already following the leading practices, some are working on it, and a few have decided that it’s not for them.
As illustrated in the above chart, the leading practice #6 related to risk management policies is the one which most plans are working to implement or improve upon. I suspect that this is due to the recent release of the final version of the CAPSA risk management guidelines.
Further, FSRA admits that a number of MEPPs have taken a wait-and-see approach on their governance, risk management, and communication policies pending the finalization of the permanent framework for target benefit pension plans. Well, the wait is over, and we recommend that Boards of Trustees consider these eight leading practices as they transition to the new framework and develop/refresh their governance, funding and benefits, and communication policies over the coming years.
How does your MEPP’s results compare to the benchmarks and where can improvements be made?
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