Morneau Sobeco

Morneau Sobeco

October 03, 2005 18:33 ET

Morneau Sobeco: Employers Downplay Role of Personal Retirement Savings

TORONTO, ONTARIO--(CCNMatthews - Oct. 3, 2005) - A majority of organizations continue to endorse the idea of a comprehensive Employer-Sponsored Retirement Arrangement (ESRA), according to Morneau Sobeco's 60 Second Survey for September. In spite of the challenges in sponsoring a plan, 57% of Canadian employers surveyed feel that ESRAs should be able to satisfy an employee's total retirement needs, when combined with government plans. By contrast, personal savings need to play little or no role. This conclusion is based on responses from 180 Canadian employers.

The survey found that 26% of respondents feel that the ESRA should provide mandatory and comprehensive retirement coverage, and that personal savings or optional contributions should not be needed. Another 31% feel that an employee should be able to get comprehensive coverage from the ESRA, but only if the employee contributes more. However, only 7% felt that participation in an ESRA should be optional or that there should be no ESRA at all.

According to survey results, employers' views tended to be reflected in the type of retirement arrangement they currently offer to new (non-union) hires. Of employers that offer just a defined benefit (DB) pension plan, 68% felt that the plan should provide comprehensive coverage versus 57% for all respondents. Employers that have moved towards defined contribution (DC) arrangements felt employees should shoulder more of the responsibility. Only 11% of employers offering just a DC plan to new hires felt that ESRAs should provide comprehensive coverage on a mandatory basis, and 51% felt that the employees should be looking to personal savings for some, if not most, of their non-government retirement income.

The biggest problem employers face in maintaining an ESRA is the volatility of accounting or funding costs, cited by 34% of respondents, according to the survey. For 22%, it was the administrative burden. That percentage was surprisingly constant for employers of all sizes, whether they had under 250 employees or more than 5,000. Another 17% said the challenge in meeting the varying needs of a diverse workforce was the biggest problem. Only 7% felt the possibility of litigation was the biggest issue.

"Employers will always face challenges in sponsoring a retirement arrangement," says Fred Vettese, Chief Actuary for Morneau Sobeco. "But governments are making the job a lot harder than it has to be. If employers had more flexibility in plan design and in funding, the obstacles to providing pension coverage wouldn't be so daunting."

Morneau Sobeco is the largest Canadian-owned pension and benefits consulting and outsourcing firm, providing services to organizations across Canada and in the United States. The firm employs approximately 950 professionals and support staff in 11 cities across North America. Morneau Sobeco's Web-based "60 Second Survey" seeks instant input from pension and benefits plan sponsors on high profile issues. The complete survey results can be purchased by contacting

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