Pension de-risking: How companies can manage pension risk

 

The de-risking of defined benefit (DB) pension funds is a global trend. The increasing volatility of global capital markets is bringing this trend to the forefront in Canada and the United States, where many DB pension plans have solvency deficiencies. More and more, shareholders are demanding to know what steps companies are taking to manage pension risk.

Companies can use a range of strategies to manage and lower their pension risk. Lawyers in Osler’s leading Pensions & Benefits Practice  are at the forefront of addressing legal and other issues that arise in the context of the various de-risking options that are available to pension plan sponsors.

Osler’s Pensions and Benefits Practice draws on deep and wide-ranging expertise from one of the largest groups of full-time pensions and benefits law practitioners in Canada. Our lawyers develop strategies for addressing the legal issues that arise with the various de-risking options that are available to pension plan sponsors. As new developments in pension de-risking take place, we will continue to provide insight – be sure to check back on this page for updates. 

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Resources

Pension design innovation for the 21st century

Osler, Hoskin & Harcourt LLP — October 15, 2019

At a recent Osler seminar, we featured four speakers who discussed innovative pension products that have been created within the current legal framework. These products have the potential to expand pension coverage and bring better pensions to Canadians.  In this blog post, we highlight the innovative pension products discussed at our seminar. Read more


Ontario pensions and benefits: Opportunities and obligations – The road forward (webinar)

Osler, Hoskin & Harcourt LLP – June 5, 2018

In this webinar, Osler lawyers and special guest speakers discuss the new defined benefit funding rules and other current issues in pensions and benefits law. Their discussion includes a number of trending topics and developments, including pension de-risking and whether Ontario’s new buy-out annuity discharge provides new opportunities. View the webinar


Ontario’s proposed DB funding rules lack solvency reserve accounts: Pension Investment Association of Canada (PIAC)

Benefits Canada – March 14, 2018

Benefits Canada looks at PIAC’s letter to Ontario’s Minister of Finance Charles Sousa, which calls out the province’s proposed defined benefit solvency funding framework for its lack of solvency reserve account structures, a model that exists in the regulatory landscapes in Alberta, British Columbia and Québec. Read more


Take advantage of current plan health by de-risking now, sponsors urged

Benefits Canada – January 18, 2018

In this article, Benefits Canada covers Mercer’s annual retirement outlook event. According to investment consultants at Mercer who spoke at the event, plan sponsors should de-risk their pension plan now, if they are able to do so. Read more


Four pension and retirement trends to watch in 2018

Benefits Canada – December 29, 2017

This article looks at the four pension trends to watch for in 2018, including defined benefit funding reform. According to Benefits Canada, during 2018, employers affected by this reform will need to adapt their pension’s financial management strategies to reflect the changes. Read more


New DB pension proposals in Québec, Ontario tackle annuity purchases

Benefits Canada – August 24, 2017

In this article, Benefits Canada looks at pension developments across Canada, including new draft regulations that were published in Québec that address policies around annuity purchases for defined benefit pension plans and the Financial Services Commission of Ontario’s proposed amendments to the province’s regulation on the superintendent’s consent for annuity purchases on plan windup. Read more.


Target benefit plans in Canada

Estates, Trust & Pensions Journal (Vol. 36) – June 2017

In this chapter of the Estates, Trust & Pensions Journal (Vol. 36) titled “Target benefit plans in Canada,” Jana Steele, a partner in Osler’s Pensions and Benefits Practice Group, offers a comprehensive overview and comparison of the key attributes of TBPs. Read more.


'A winning combination of conditions': Loblaw completes pension de-risk triple play

Financial Post, National Post – January 31, 2017

If, as some market practitioners expect, the Canadian group annuity market will rise to between $4 billion and $5 billion this year — or about 50 per cent more than the record set last year — then presumably it’s important to start the year with momentum. And that seems to be the case thanks to a $350-million transaction involving Loblaw Cos. that was signed off on late last year but which was only announced Tuesday. Read more.


Bill C-27 to add annuity purchase provisions to the PBSA

Osler, Hoskin & Harcourt LLP – November 11, 2016

On October 19, 2016, Bill C-27 was introduced in the House of Commons. The big news from the introduction was that Bill C-27, if passed, would amend the federal Pension Benefits Standards Act, 1985 (PBSA) to permit federally regulated employers (banks, railways, etc.) to establish target benefit plans. Also included in Bill C-27 was another change sure to be welcomed by administrators of defined benefit plans under federal jurisdiction. Read more.


Rethinking plan design and funding: pension innovation in Canada

Osler, Hoskin & Harcourt LLP – September 22, 2016

Pension plan design possibilities are evolving in various jurisdictions across the country. This is happening at a time when many plan sponsors have been considering pension risk management and recognizing plan design as a key risk management tool. Read more.


Pension de-risking – FAQs

Osler, Hoskin & Harcourt LLP – March 2016

Clients turn to our pensions and benefits experts for advice on how they can manage pension risk. Here are some of the most frequently asked questions. Read more.


Longevity risk transfers for pension plans

Osler, Hoskin & Harcourt LLP – February 24, 2016

Learn more about pension de-risking and longevity risk transfer structures from Osler’s pensions and benefits law experts. View the presentation.


Pension plans team up for $530-million ‘de-risking’ annuities deal

The Globe and Mail – January 26, 2016

Two Canadian pension plans are teaming up to buy about $530-million of annuities in a creative deal to transfer investment, inflation and life-expectancy risk to an insurance company. Read more.


Planning to annuitize current retirees? Fifth Circuit unambiguously upholds Verizon’s right to de-risk

Osler, Hoskin & Harcourt LLP – August 19, 2015

Sometimes you appreciate confirmation that actions – you always thought were permissible – continue to be viable options. We have received confirmation from the U.S. Court of Appeals for the Fifth Circuit that the long-standing practice of de-risking by purchasing annuities from insurance companies remains permissible. Read more.


Canadian derisking market could favour first movers

Pensions & Investments – August 10, 2015

Canadian corporate plan’s derisking activity has been muted at best. There’s been little publicized activity in corporate DB plan derisking apart from large-scale moves. Read more.


Target benefit plans go west

Osler, Hoskin & Harcourt LLP – July 15, 2015

When British Columbia’s Pension Benefits Standards Act comes into force on September 30, 2015, employers that sponsor plans in British Columbia will have more plan design options available to them. Following New Brunswick and Alberta, both of which currently have comprehensive target benefit regimes in place, British Columbia’s pension laws will soon include provisions for target benefits plans. Read more.


Is the pension de-risking window closing? New IRS guidance limits plan sponsor options

Osler, Hoskin & Harcourt LLP – July 15, 2015

Score one for the opponents of de-risking. The U.S. Internal Revenue Service has just announced that it will be amending its regulations on required minimum distributions to prohibit offering lump sum windows to retirees in pay status. This is a 180 degree about face for the IRS, which previously issued private letter rulings to large sponsors, including Ford and General Motors, permitting these lump sum cash outs. Read more.


BCE shifts pension longevity risk to Sun Life

Benefits Canada – March 3, 2015

BCE has reached an agreement to transfer the longevity risk for $5 billion of pension plan liabilities to Sun Life Financial. Under this new longevity insurance agreement, the first of its kind in North America, the Bell Canada pension plan will pay monthly premiums to Sun Life. In exchange, Sun Life will make monthly pension payments into the plan for the lifetime of existing pensioners. BCE currently provides both DB and DC plans. Read more.


BCE Inc, Sun Life Financial Inc partner up in employee pension plan agreement

Financial Post, National Post – March 3, 2015

In an agreement that is the first of its kind in North America, BCE will transfer the longevity risk for $5 billion of pension plan liabilities to insurer Sun Life Financial. Read more.


Bell Canada transfers C$5 billion in pension liabilities to Sun Life in longevity swap

Pensions & Investments – March 3, 2015

Bell Canada Pension Plan, Verdun, Québec, on Tuesday said it transferred C$5 billion (US$4 billion) in pension liabilities for current retirees to Sun Life Financial under a longevity insurance agreement. Read more.


Canada’s BCE reaches pension risk deal with Sun Life

The Wall Street Journal – March 3, 2015

Canadian communications company BCE Inc. is taking further steps to strip risk out of its pension obligations by striking a multibillion-dollar deal to transfer what it calls “longevity risk” to insurer Sun Life Financial Inc. Read more.


Do target benefit plans reduce costs and risk?

Benefits Canada – January 12, 2015

Are target benefit plans a cost-effective and risk-reducing alternative for pension plan sponsors versus traditional DB plans and DC plans? And are we seeing an uptake in these plans across the country? Read more.


Pension plan risk management in Canada

Osler, Hoskin & Harcourt LLP – August 2014

Pension plans, and their members and sponsors, face various risks, including investment, inflation, funding, longevity and regulatory risks. Where a plan sponsor takes action aimed at addressing or minimizing one or more of these risks, this is known as de-risking or risk management. De-risking or risk management may take various forms along a broad spectrum of options, from LDI, asset allocation and other investment strategies to plan design changes and risk transference strategies. Read more.


De-risking at risk? Lawmakers urge changes

Osler, Hoskin & Harcourt LLP – October 29, 2014

Plan sponsors such as Ford, General Motors and more recently, Motorola, have made headlines for implementing strategies to remove liabilities from their balance sheets by cashing out participants and transferring their pension liabilities to third party insurers in accordance with existing law. Read more.


C.D. Howe paper: Target benefit plans in Canada – An innovation worth expanding

Osler, Hoskin & Harcourt LLP – July 15, 2014

Osler’s Jana Steele co-authored the C.D. Howe Institute paper “Target benefit plans in Canada – An innovation worth expanding” with Mel Bartlett and Angela Mazerolle. The paper reviews the challenges facing defined benefit (DB) and defined contribution (DC) pension plans, and argues for the need to move beyond the DB versus DC debate towards “a middle-ground option that incorporates some of the positive attributes of both designs.” Read more.


De-risking your retiree pensions? Verizon court affirms plan sponsor rights to shed obligations

Osler, Hoskin & Harcourt LLP – April 28, 2014

Plan sponsors interested in removing pension liabilities from their balance sheets have been waiting with interest to see the end result of the challenge by Verizon retirees to Verizon’s deal with Prudential annuitizing benefits of 41,000 retirees. Read more.


Federal government announces target benefit plan consultation

Osler, Hoskin & Harcourt LLP – April 24, 2014

Earlier today, the Minister of State (Finance), Kevin Sorenson, announced that the federal government is launching consultations on a potential federal framework for Target Benefit Plans, or TBPs. TBPs would be a new, voluntary, sustainable and flexible pension option available to federally regulated private sector employers and Crown Corporations. Read more.


Amendments to Alberta’s proposed new Employment Pension Plans Act

Osler, Hoskin & Harcourt LLP – April 22, 2014

On April 16, certain changes to the new Employment Pension Plans Act (the Proposed New EPPA) were introduced as Bill 10, Employment Pension (Private Sector) Plans Amendment Act, 2014 (Bill 10). The majority of this Bill’s changes are quite minor and essentially clarify language in the Proposed New EPPA. Read more.


The ABC’s of target benefit plans – Part III

Osler, Hoskin & Harcourt LLP – April 1, 2014

In this post, Jana Steele discusses the status of single employer TBPs across Canada – outside of New Brunswick. Read more.


Rescue operation

Canadian Lawyer In-House – March 31, 2014

A decade ago, having a conversation about pensions was rather yawn-inducing. Now, it’s a political hot potato, up for much discussion and debate — and reform. Read more.


New Brunswick reforms MLAs pensions to shared risk

Osler, Hoskin & Harcourt LLP – March 27, 2014

On March 26, 2014, the New Brunswick legislature introduced for first reading Bill 51, An Act Respecting Members’ Pensions, which proposes to move Members of the Legislative Assembly to the shared risk pension plan currently available for other public sector employees in New Brunswick. With the introduction of Bill 51, the New Brunswick government continues its innovative pension reform initiatives. Read more.


The ABC's of target benefit plans – Part II

Osler, Hoskin & Harcourt LLP – March 17, 2014

In this post, Jana Steele focuses on New Brunswick, as the first jurisdiction that has implemented comprehensive target benefit legislation. Read more.


The ABC's of target benefit plans – Part I

Osler, Hoskin & Harcourt LLP – March 10, 2014

This is Jana Steele’s first blog post in a series regarding target benefit plans (TBPs) (also called defined ambition plans). In this post, she describes what TBPs are and why such plans should be permitted under pension laws as a design option. Read more.


Can you save money by de-risking your U.S. defined benefit plan?

Osler, Hoskin & Harcourt LLP – February 12, 2014

Do you know how much keeping former employees in your defined benefit plan costs? Mercer’s U.S. Pension Buyout Index for November 2013 reports that as of December 31, 2013, the economic cost of retaining retiree liabilities exceeded the buyout cost. Read more.


Pension expert Jana Steele on how to pay for pensions

CBC News – December 16, 2013

Pensions and benefits law expert Jana Steele talks to Amanda Lang and Kevin O'Leary about Canada Pension Plan reform. View the video.


Pension liabilities threaten deals, lawyers warn

Financial Post, National Post – September 27, 2013

One thing that can derail a merger and acquisition deal is a looming pension obligation that – in extreme cases – can outstrip a firm’s market value. Read more.


Focus: Canadian employers slow to innovate with pension de-risking

Law Times – August 26, 2013

Many of the more innovative measures to remove or reduce the risks associated with employer pension plans have been relatively slow to take off in Canada. This is for a number of reasons, including the fact that some provinces, including Ontario, have yet to put in place the necessary legislation or regulations. Read more.


The race to de-risk sparks growth for pension practices

Financial Post, National Post – August 14, 2013

Business law firms are beefing up their pension departments to advise clients on a range of changes within the industry, including the "de-risking" of defined benefit pension plans. Read more.


Pension plan de-risking (Part II) – A closer look at DB plan de-risking options

Osler, Hoskin & Harcourt LLP – June 11, 2013

There is a broad spectrum of pension de-risking options available to defined benefit (DB) plan sponsors and administrators. This post (the second of a two-part series) considers these options and some of the related legal and practical issues which may arise. Read more.


Pension plan de-risking (Part I) – What trends do we see in Canada?

Osler, Hoskin & Harcourt LLP – June 5, 2013

An increasing number of public and private sector employers around the world are either abandoning the traditional defined benefit (DB) pension plan model in favour of more affordable and sustainable alternative arrangements, or are doing away with their employer sponsored retirement plans altogether. Read more.


Pension plan de-risking in Canada [PDF]

Financier Worldwide – May 2013

An increasing number of public and private sector employers around the world are either abandoning the traditional defined benefit (DB) pension plan model in favour of more affordable and sustainable alternative arrangements, or are doing away with their employer sponsored retirement plans altogether. Read more.


More pension de-risking ahead

Treasury & Risk – April 13, 2013

The recent news that a U.S. District Court judge awarded class-action status to a lawsuit challenging Verizon’s purchase of annuities to cover 41,000 of its retirees isn’t expected to discourage other employers from undertaking such transactions. Read more.


De-risking on trial? U.S. Verizon litigation still active

Osler, Hoskin & Harcourt LLP – April 11, 2013

There have been some new developments in the Verizon litigation of interest to all sponsors considering de-risking through transferring liabilities to insurance companies. Plaintiffs have filed an amended complaint alleging breaches with respect to the non-annuitized participants and alleging that the pension plan was not 80% funded, which, if true, would prevent full annuitization of their benefits due to restrictions on “prohibited payments” that apply to underfunded plans. Read more.


De-risking U.S. pensions through lump sum offers – What’s on the front burner for 2013?

Osler, Hoskin & Harcourt LLP – February 27, 2013

Does your defined benefit plan have a lump sum option? Nearly 40% of U.S. employers who sponsor defined benefit pension plans are at least “somewhat likely” to offer lump sums to retirees and vested terminated participants in 2013, according to an Aon Hewitt survey released earlier this month. It is safe to say that an even larger group of defined benefit plan sponsors is considering whether to offer lump sums after hearing about the lump sum offers implemented by General Motors and Ford last year. Read more.


De-risking your U.S. pension: Choices and challenges

Osler, Hoskin & Harcourt LLP – December 11, 2012

Defined benefit plan sponsors have become very focused on ways to control their asset volatility and to remove pension liabilities from their balance sheets. In fact, it would be fair to call “de-risking” a hot global issue which is in the spotlight in Europe, Canada and the United States. Read more.

 

Clients of all sizes and on both sides of the border turn to our integrated team of pensions and benefits experts for innovative legal solutions that meet their needs.

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Contacts

For help with your Pension De-risking, please contact:

 

 

Julien Ranger

Julien Ranger
jranger@osler.com
514.904.5631