According to a report published by Great-West Life, Defined Benefit Pension plans are shrinking from 31% coverage to only 24% coverage. Although DB coverage is dropping, employers are not giving up on retirement plans. According to some studies about 50% of Canadians participate in a Capital Accumulation Plan (Group RRSP, DC Pension or DPSP) of some sort.
CAP plans are becoming more prevalent in the workplace as a way to attract, retain and reward employees. If you are implementing a Group RRSP or Defined Contribution Pension, here are 4 key areas to review for planning
Plan Design and Reviews
When designing a plan, employers want to ensure that the Group Retirement Plans work in conjunction with the rest of the benefits and within the values of the overall culture of the organization. Some of the decisions that need to be made in plan design are:
- What is the best plan? Group RRSP, Pension or DPSP
- What kind of employer matching program will be put in place?
- Will there be an eligibility requirement where the employee has to work for a minimum time period to be eligible to participate?
- Will the plan participation be voluntary or mandatory?
- Will there be different benefits for different employees? (For example, part time vs full time or executives vs front line or tenured employees vs new employees)
- What investment choices should go into the plan and what are the fees?
Just like anything else, it is important to shop around for the best Group retirement plan. No company offers the “BEST” product so it is important to shop the market with some key questions:
- What are the investment choices?
- What are the fees of the plan?
- What level of service do you provide?
- How much administrative support do you provide?
- What education services do you provide for employees?
It is very important to develop a review strategy to shop the market from time to time even if you are happy with your existing plan. The marketplace changes quickly these days and employers have a responsibility to shop the plan once in a while. Shopping around can also help employers re-negotiate existing plans and fees.
Any time there is a new service provider put in place, there is some administration that needs to happen
Once the plan is in place there is some ongoing administration and support that is required with new hires, terminations, bonuses, etc.
Training employees on the plan and the tools of the plan is required not just at the initial implementation of the plan but also periodically in the future.
Far too often companies will work hard to get the business but then focus too much time and resources on getting new clients as opposed to servicing existing clients.
With Group retirement plans future commitments to service the plan from the broker or the plan provider are critically important. It’s best to get a written commitment up front with something called a service contract.
Here are some of the service issues to discuss:
- Employee education and training – what will be provided and how often
- Overall plan design review – From time to time it is important to look at the overall design to see if some tweaking needs to be made. Good brokers and plan provides will have some benchmark statistics for comparison
- Shopping the plan – How often will the plan go to market for tendering? Who will be responsible?
- Individual consultations – Does the broker or plan provider offer individual consultations? If so will there be a conflict of interest to ‘sell’ financial products to the employees? Is that a concern?
- Compliance monitoring – who is responsible for making sure the plan is compliant on all levels and meets the requirements established in the CAP guidelines?
- Ongoing communication – communication is the key to making any relationship last.
As you can see, there can be quite a few issue to consider when implementing a Group Retirement Plan. The good news is a qualified broker or plan provided can take a lot of this work off your plate.