2014 marks the 10th anniversary of the CPBI Atlantic Regional Conference. Under the theme Winning Strategies Making the Right Moves, the 10th CPBI Atlantic Regional Conference took place from September 24th to the 26th at the Digby Pines Resort & Spa in Digby, Nova Scotia. On behalf of the CPBI membership and the CPBI staff, the Board of Directors congratulates the CPBI Atlantic Region Council on this important milestone.
In a true Atlantic tradition, a Town Crier proclaimed the opening of this year conference. Over 200 attendees were present this year event, including David Harding and Valerie Robinson, who have both never missed an Atlantic regional conference since it first started in 2003.
This year's conference program featured keynotes address by Terry O’Reilly, CBC Radio Host and Author, on the topic Why Customers Have to Feel, Not Just Understand; Darrell Bricker, CEO, Ipsos Public Affairs Worldwide on The Big Shift: the Battle Between Old Canada and New Canada and Don Drummond, Former Senior Vice President and Chief Economist, TD Bank Financial Group, on Fixing the Productivity Malaise. Also on the program was a friendly golf game at the Digby Pines golf course, evening receptions and dinners and entertainments featuring the Mike Cowie’s Vibe Trio and a special performance by Dave Hemstad a three-time Canadian Comedy Award nominee.

Shared Risk Sets Out Rules

Future boards will know the rules and what to do when shared risk plans are in deficit or surplus situations and that is one of the key advantages, says Steve Mahoney, partner, asset and risk management, at Morneau Shepell. And this is one of the greatest advantages, he told the session ‘Risk Management in Shared Risk Plans?’ at the CPBI Atlantic regional conference. This governance aspect is “huge,” said Troy Mann, assistant deputy minister, pensions and employee benefits division, for the province of New Brunswick. It is prescriptive for what happens when in surplus or in deficit, removing discussion, debate, or any paralysis, he said. This was one of the major drawbacks of defined benefit plans. Often, when plans were in a surplus position, benefits were enhanced, new benefits added, or contribution holidays taken. However, when plans go into deficit, these enhancements would exacerbate the shortfalls. The shared risk governance model enables sponsors to avoid these outcomes.

Alternatives Becoming More Accessible

New approaches to access alternatives and overcome the lack of comfort with them is making them accessible to smaller pension funds, says Peter Muldowney, senior vice-president, Connor, Clark & Lunn Financial Group. He told the session ‘Can Alternative Solutions Become the New Traditional Solutions’ at the CPBI Atlantic region conference that these approaches include managed accounts which can alleviate transparency and fee concerns. Open ended funds are allowing investors to move in and out easier alleviating concerns about liquidity and outsourced CIOs are solving fiduciary management issues. These are improving the transparency of alternatives and providing execution solutions, especially for smaller investors. The reasons for including alternatives in a portfolio are to provide for diversification and, hopefully, generate better absolute returns. However, he said when adding alternatives to a portfolio, the investor needs to make sure they are assessed based on how they fit in the portfolio, not the expected outcome.        

DC Litigation In U.S. Offers Insights

Litigation over defined contribution plans has yet to take place in Canada. However, Natasha Monkman, of Hicks Morley, says Canadian sponsors should look at the U.S. experience to help them avoid and defend against future actions. Speaking on ‘DC Plans Should Look South’ at the CPBI Atlantic region annual conference, she said the Canadian DC experience is much younger than that in the U.S. where more members are nearing retirement. As well, Canada’s guidelines are not law whereas in the U.S. policies around DC are closer to law and it relies on individuals to bring legal action. Fees, selection of default funds, and imprudent selection of investments are the leading causes of legal action in the U.S. However, she said the bottom line for sponsors is to make sure they meet the standards for their fiduciary duty. These are just as important for DC plans as for defined benefit plans although far more attention is paid to the governance of the latter.

Focus Shifted To Manage Absenteeism

Focusing on the 99 per cent of employees who do not cause problems has enabled Saint Francis Xavier University in Nova Scotia to make significant improvements in its programs for managing absenteeism and medical expenses. In the session ‘Winning Strategies and Best Practices for Managing Medical Leave: A Plan Sponsor’s Approach to Absenteeism and Managing Medical Expenses’ at the CPBI Atlantic regional conference, Janet Reid and Reid Estey of the university said the key to their success was a shift in the HR philosophy from cradle to grave values to demonstrating that HR was a quantitative contributor. They decided to shift their attention from the one per cent of employees who were taking up 99 per cent of their time to the 99 per cent who were not problems. In doing so, they learned that wellness of a top priority for its employees. To meet their needs, they used their employee assistance program as the cornerstone of wellness, instead of just in times of crisis. This allowed them to provide early support for new cases. It also allowed them to manage employee expectations and empower employees to manage their absence, information, and income. Support is triggered after four consecutive or eight sporadic absences and cases are managed concurrently with the WSIB and LTD. As well, they shifted from requiring medical evidence for absence to asking for medical evidence to return. Results have seen an increase in EFAP use by 125 per cent with 18 per cent of employees using these services and a decline in LTD premiums of 17 per cent.

Canada in Productivity Malaise

Canada is in a productivity malaise and even Don Drummond, former senior vice-president and chief economist at TD Bank Financial Group, admits he doesn’t know how to fix it anymore. In the session ‘Fixing the Productivity Malaise’ at the CPBI Atlantic regional conference, he said, in fact, most of the old problems have been fixed over the last two decades yet Canada’s productivity is still lagging. For the pension industry, this has an impact because if the economy is performing in a reasonable manner, there would be some inflation which would result in an increase in interest rates. Instead, in this environment of lagging growth, the risk/reward on long-term bonds will not be as high as in the past and pension funds with balanced portfolios are looking at four per cent rates of return. They will not be happy with this, he said.

Politics One Of Biggest Challenges

Reform of the Canada Pension Plan hasn’t gone anywhere and it won’t with this federal government, says Graham Steele, a former Nova Scotia minister of finance and now a political commentator. He told the ‘At the Crossroads: Challenges Facing the Atlantic Region’ session at the CPBI Atlantic regional conference that in the back rooms of Ottawa they are against it, so they “pretend to be working on it,” with more study and more research. But, they “won’t do anything about it.” In fact, one of the biggest challenges facing Canada is politics, but “most people have no idea of what to do about it.” For example, the number one issue facing every government is the sustainability of the healthcare system. However, while they know what to do, they don’t know how to do it. When government does take action, it is largely because the politics “came together.” He says his single greatest accomplishment as finance minister was to reform the province’s public service superannuation plan. However, while they were able to take that sick pension plan and fix it, they couldn’t do the teachers plan because the politics were different, leaving the province with one healthy plan and one sick plan. Politics is in a bad way, he said, because politicians succeed by following the rules of the game. However, these are not designed for good government, they are designed to win votes and win elections.