NOVEMBER/DECEMBER 2008 • VOL 5 NO 6
FeatUred
Affordable wellness focus of Healthy Workplace Month
attraCtIng gen y
Top employers top of mind for new grads By andrea daVIs
I By stepHenIe oVerman
T
he real success of Canada’s Healthy Workplace Month depends upon what happens after Oct. 26. The Sept. 29-Oct. 26 designation was made to introduce workplace health to Canadian organizations and to be “an opportunity to share stories” about successful wellness activities, said Lori Walker, healthy workplace coordinator for the National Quality Institute. More than that, “we hope the initiatives will act as a challenge for the next year,” she says.
(see HealtHy worKplaCe on page 27)
also InsIde
t pays to be on top. A comparison between the top 100 employers in Canada, as featured in Macleans magazine, and a recent survey of university and college students reveals that several of Canada’s top employers are also top of mind for new graduates — and great benefits help great companies make both lists. “From Learning to Work: Canada’s Campus Recruitment Report” surveyed 27,000 students at universities and colleges across the country about their perceptions and expectations of work, as well as their opinions on which companies they’d like to work for when they graduate. Only 12 companies made both lists, which could add to the perception that Generation Y has impossibly high standards when it comes to work. But if there’s one lesson
Eric Meerkamper, partner with DECODE, one of the companies behind the campus recruitment report, wants employers to learn from the study, it’s that they should not stereotype younger employees. “Nine out of 10 articles [about Gen Y] are negative, and talk about them as being demanding, whining, not respectful of their structures, challenging of the culture and being difficult,” he notes. “Frankly, there are people like that in every generation, age group and every life stage.”
The relevance of benefits
Plan sponsors have long struggled with making pension and benefits appealing and relevant to younger employees. But the commonly held belief that young employees just don’t care about pension and benefits is not borne out by the DECODE research.
(see new grads on page 23)
marKet tUrmoIl
6 RETIREMENT
How investment fees can erode DC plan balances
DC plan members seek capital preservation
12 INVESTMENT INSIDER
Product allocation vs. asset allocation
By sHeryl smolKIn
18 HEALTH
Supporting managers in dealing with mental health
Working around the clock page 22
A
midst an unprecedented period of market volatility, calls from defined contribution plan members to employers and record keepers have increased, and some members have opted to move all or part of their account balances to GICs. This is consistent with results of a national telephone poll of more than 1,000 Canadians conducted for Manulife in early October, revealed that cash and fixed income investments are narrowing the gap on Canadians’ own homes these days as the most popular havens for money.
Aon VP Tony Ioanna says: “Plan members are asking, ‘What do you think I should do? Is my money protected?’ As soon as they hear their balance has gone down, they basically say, ‘I don’t need this pain. I’d rather sleep at night, and I’m going GIC.’”
Plan members seek guidance
Marc Poupart, director of pension and retirement programs at the Hudson’s Bay Company, says a few more DC plan members have called to reconfirm what they’ve got, but he continues, “Not a lot are chang-
(see dC memBers on page 0)
November/December 2008 • Employee Benefit News Canada
CONTENTS Editor’s Desk 4 A plea for a national DC plan. Editor’s Inbox 5 Liability-driven investing can help immunize pension funds against market volatility.
Benefits Retirement
28
Retirement savings plans and financial education
6 8
High fees erode DC plan balances. Whether there is one DC investment option or many, education is required.
Investment Insider
Features 26 Healthy Workplace Month highlights affordable wellness
DB and DC investment trends
NQI launches its first month-long wellness initiative.
12 Product allocation can enhance retirement income. 16 Relying on credit-rating agencies alone is not enough.
DC Directory 28 EBNC’s third annual DC Plan Provider Directory includes key
Benefits Health
contact information for financial institutions that offer products and services to plan sponsors.
Health care plans, drug benefits, LTD and wellness
18 Support for managers is critical when addressing mental health in the workplace.
19 A team-based fitness challenge combats sedentary lifestyles.
Industry Resources
Quality of Life
Resource Guide 32
Added-value benefits that build loyalty
22 Shift work takes a toll on employees. Here’s what you can do to help.
Global Watch
Provider Profiles 33
Understanding benefits without borders
How to reach key EBNC departments and find EBNC advertisers in this issue.
Thumbnail descriptions and contacts for benefit service providers, organized by service category.
25 Many companies are not tracking the ROI of expat assignments. 6
12
25
Employee Benefit News Canada is published 6 times a year by SourceMedia, Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 212/803-8200. Subscription Rates: 1 yr Canadian $49.00CAD, 1 yr US - $39.00US. Publications Mail Agreement No. 40917038. Change of Address: Notice should include both old and new address, including ZIP code. Return undeliverable Canadian addresses to: PO Box 503, RPO West Beaver Creek, Richmond Hill, Ontario L4B 4R6. Employee Benefit News Canada is intended only for employee benefits professionals. POSTMASTER: Please send all U.S. address changes to Employee Benefit News Canada/SourceMedia, Inc., PO Box 530, Congers, NY 10920. The publisher does not perform due diligence on the companies or products discussed or advertised in Employee Benefit News Canada. © 2008 Employee Benefit News Canada and SourceMedia, Inc. All Rights Reserved.
November/December 2008 • Employee Benefit News Canada
Editorial Headquarters
Editor’s Desk
1325 G Street N.W., Suite 900 Washington, DC 20005 202/504-1122 • Fax: 202/772-1448 Vice President & Group Publisher: Jim Callan Editorial Director: David Albertson Editor-in-Chief: Sheryl Smolkin Managing Editor: Andrea Davis Associate Editors: Lydell Bridgeford Director of Editorial Projects: Marsha Turney Senior Art Director: Hope Fitch-Mickiewicz Associate Art Director: Robin Henriquez
Editorial AdvisErs
Peter C. Arnold, National Practice Leader, Investment Consulting, Buck Consultants, an ACS Company; David Bell, Director, Human Resources, Ceridian Canada; Mike Collins, VP of Group Savings & Retirement Solutions, Manulife; Cheryl Craven, VP of Human Resources, Hospital for Sick Children; Brian A P FitzGerald, President and CEO, Capital G Consulting Inc.; Wes Jones, Manager Group Product Development, Great-West Life; Karen Kesteris, Director Product Development and Marketing, Green Shield Canada; Brian Lindenberg, National Partner, Mercer; Laura Mensch, Senior VP of Central/Western Region Health Strategies Practice Leader, Aon Consulting; Jeffrey Stinchcombe, VP of Corporate Development, HealthSource Plus; Bethune Whiston, Partner, Morneau Sobeco; Heidi Winzeler, Counsel, Osler, Hoskin & Harcourt LLP (New York); Mark Zigler, Pension Department Head, Partner, Koskie Minsky LLP; Gary Grad, VP Institutional and Investments Analysis, Fidelity Investments; Michel Jalbert, VP Consultant Relations, CIBC Asset Management; Janet Rabovsky, Practice Leader, Investment Consulting, Watson Wyatt Canada; Roger Renaud, President and Director, Standard Life Investments; Perry Teperson, VP and Portfolio Manager, Leith Wheeler; Keith Walter, Senior VP, Sales & Marketing, MFC Global. Professional Services Division Executive Vice President & Managing Director: Michael Dukmejian
Advertising Headquarters 1770 Breckinridge Parkway, Suite 500, Duluth, GA. 30096 770/381-2511 • Fax: 770/935-9484 ADVERTISING SALES Staff
Account Managers: Peter Craig, peter.craig@sourcemedia.com, 65 Barr Cres., Brampton, ON L62 3E3, 905/840-3588, Fax: 905/840-0003 Patricia Tramley, ptramley@mediajls.com, 14 Wilton Rd., Poite-Claire, PQ, H9S 4X4, 514/426-9722, Fax: 514/426-4736 Vice President Business Development: Adam Reinebach Production Director: Deborah Kim, deborah.kim@sourcemedia.com Production Coordinator: Ivette Jimenez, ivette.jimenez@sourcemedia.com Marketing Manager: Amy Metcalfe, amy.metcalfe@sourcemedia.com Provider Profiles and Benefits Marketplace: Kurt Kriebel, kurt.kriebel@sourcemedia.com
CIRCULATION Staff
One State Street Plaza, 27th floor, New York, NY 10004 212/803-8200 • Fax: 212/803-1568 Customer Service: 800/221-1809 • Fax: 212/803-1592 e-mail: custserv@sourcemedia.com Reprints: Charlton Sanabria, charlton.sanabria@sourcemedia.com • 212-803-8377 List Rental: Stacy Dandridge 212/803-8571 • Fax: 212/843-9611 stacy.dandridge@sourcemedia.com Group Circulation Director: Michael O’Connor Fulfillment Director: Jessica Reid
Conferences
Benefits Management Forum & Expo National Account Executive, Conference and Exhibitions Group: Chris Frey • 212-803-6568 • christopher.frey@sourcemedia.com
SourceMedia, Inc.
Chairman & CEO: James M. Malkin Chief Financial Officer: William Johnston Vice President, Sales & Customer Service: Steve Andreazza Senior Vice President, Finance & Accounting: Richard Antoneck Senior Vice President, Operations: Celie Baussan Executive Vice President, Chief Content Officer: David Longobardi Executive Vice President, Marketing & Strategic Planning: Anne O’Brien Senior Vice President, Brand Management: Holly Sraeel Senior Director, Human Resources: Ying Wong Reproduction Policy No part of this publication may be reproduced or transmitted in any form without the publisher’s written permission.
TRANSACTIONAL REPORTING SERVICE Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by SourceMedia, provided that the appropriate fee is paid directly to Copyright Clearance Center, 222 Rosewood Dr., Danvers, MA. 01923, U.S.A.
Contact us Editorial Director: David Albertson david.albertson@sourcemedia.com Editor-in-Chief: Sheryl Smolkin sheryl.smolkin@sourcemedia.com Managing Editor: Andrea Davis andrea.davis@sourcemedia.com Associate Editor: Lydell Bridgeford lydell.bridgeford@sourcemedia.com
202.504.1111 416.227.9025 519.265.0515 202.504.1115
Promoting adequate retirement savings for all A plea for a national DC plan By Sheryl Smolkin
Ambachtsheer also calls for the CSPP to operate as an expert, high-performance financial institution at arms length from government, similar to the CPP very time over the past few years that a Canadian jurisdiction has grafted yet another set of amend- Investment Board. His study has been widely circulated and promoted ments onto their pension standards legislation, in submissions to expert panels in Ontario, B.C., it has occurred to me that we might be better off if we Alberta and Nova Scotia examining current pension could junk the current system and start again with a standards legislation. Both Campbell’s announcement single pension statute instead of many. and a recommendation for a similar provincial proTherefore, when I heard recently that B.C. Premier gram contained in a draft report released for further Gordon Campbell has announced the province incomment by the Nova Scotia Expert Pension Committends to create a privately financed defined contributee reveal that the general idea is gaining traction. tion plan that will be available to employers, employBut the problem is that if provincial group retireees and self-employed people on a voluntary basis, I ment savings vehicles are created, we risk couldn’t help remembering what Keith yet another layer of fractured fiefdoms Ambachtsheer said when I interviewed with inconsistent programs that will not him earlier this year: serve the best interests of either employers “If these politicians truly looked at or their employees. the public interest, they would create a Because each province has unique prinational program.” orities, different legislative calendars and a In a study published as part of the distinctive style of legislative drafting, it is C.D. Howe’s pension papers that built certain that no two statutes would be idenon previous research, Ambachtsheer tical, or available as of the same effective identified both the lack of workplace date. And inevitably there would be “have” pension coverage for 3.5 million Canadiand “have not” provinces. ans and the high cost of retail products, Sheryl Smolkin, Employers carrying on business in in which 5.5 million Canadians invest, as Editor-in-Chief multiple jurisdictions would have little major impediments to accumulation of incentive to opt into provincial programs if adequate retirement savings. those programs do not allow them to easHe offered both a vision and a plan to ily deliver consistent benefits for all of their employees. establish the Canadian Supplementary Pension Plan Lack of mobility options could create similar impedithat would provide a decent post-work standard of ments for members. living for the millions of Canadian workers currently Further, instead of creating one infrastructure to accumulating insufficient retirement savings. As a basis for further study, the report suggests a DC administer a single, new program and invest employer/employee contributions, up to 10 or more bureauprogram with the following key features: cracies would be required — certainly undermining • Auto-enrollment of all noncovered workers in the any economies of scale. CSPP. In the same week the CSPP paper was released, • Use of the CPP/QPP payroll deduction mechanism. C.D. Howe pension panel co-chair Claude Lamoureux • Operates within the existing tax and regulatory spoke to the Economic Club of Toronto in his capacregime for pensions. ity as a special advisor to the Canadian Institute of • Targets a 60% post-work replacement ratio. Actuaries. • Sets an earnings floor and ceiling for CSPP deducWhile primarily advocating for an environment tions. conducive to defined benefit pension plans, he ac• Sets an automatic default CSPP contribution rate knowledged Ambachtsheer’s work and called for a na— for example, 10% of earnings — with contributions tional pension reform summit to stimulate the positive of lower-wage earners going into a tax-free savings appetite for much-needed pension reforms among the account. ranks of government officials, cabinets and caucuses. • An opt-out option for both employers and emNo one who has tracked the gut-wrenching impact ployees in regards to the automatic default contribuof global stock market gyrations on their retirement tion mechanism. savings this fall can deny the need for a cost-effective, • An opt-in mechanism so where employers or emwell-managed national pension plan accessible to all. ployees opt out, they can still use the program to accumulate personal savings within the current tax structure. We have a once-in-a-lifetime opportunity to create a brand new program from the ground up and to do it • An RRSP asset transfer option. right. Stakeholders must impress upon federal and pro• A number of annuitization options with an “autopilot” deferred annuity purchase initiated for each par- vincial politicians that by taking off their partisan hats and overcoming constitutional challenges, they can ticipant at age 45 (individual can select earlier or later create a unique legacy that will benefit constituents age) with a target of annuitizing 50% of accumulated and their families for generations to come. —S.S. participant assets at age 65.
E
Editor’s Inbox
November/December 2008 • Employee Benefit News Canada
LDI helps pension funds weather the storm By Tony Williams
P
ension funds that are currently underfunded on either a going-concern or a solvency basis due to the unravelling of global capital markets since August 2007 should seriously consider liability-driven investing to immunize them from market volatility. Although the current unprecedented financial crisis has affected all investors, some pension funds that follow a liability-driven investment and funding strategy have successfully maintained their funded position. For example, the Teamsters Canadian Pension Plan has subscribed to an LDI strategy for more than 10 years, and TCPP results to the end of 2007 reveal the pension fund is in a strong financial position. In addition to reporting surplus on a going-concern basis and no solvency deficiency at the end of last year, the chairman of the TCPP Board of Trustees, Louis Lacroix, was recently advised that the events of 2008 have had a relatively minor effect on the plan’s overall financial health.
How LDI Works
LDI begins with the premise that fund assets should be invested to earn a return each year equal to or greater than the return required to support the liabilities of the plan. A large portion, or perhaps the entire fund, is invested in bonds and other fixed income investments that match the anticipated liability cash flows over time. For the TCPP, 80% of the fund is invested in a fixed income portfolio that matches the projected future liability cash flows of the plan. The balance of the fund is primarily invested in diversified real estate and commercial mortgage portfolios, and other returnenhancing investments. Over the years 2002 through 2007, the TCPP fund had a rate of return of over 10% per year. Over the same period, research from Watson Wyatt Worldwide shows the median Canadian pension fund had an annual return of 7.6%. More important, the TCPP return exceeded the required liability return over this period. Yet the typical Cana-
dian pension fund underperformed its liability return by about 2.5% per year, contributing to deficits and solvency deficiencies.
A typical investment policy
The majority of pension funds do not use LDI. Instead, with their advisers, they develop investment policies that mandate that a high percentage of assets (typically 50%-60%) is allocated to Canadian and foreign equities, with the balance of the fund invested in short- to midterm bonds. Although equities are expected to outperform bonds over longer time periods, they are volatile. There is nothing wrong with a pension plan investing in equities, as long as the plan sponsor can accept the risk of short-term returns being below the liability return. However, for negotiated-cost multiemployer pension plans like the TCPP, funding shortfalls, which could arise if fund returns are lower than expected, may lead to benefit cuts for plan beneficiaries, as there is no method of increasing contributions rapidly to address funding shortfalls. Reducing the variance between asset and liability returns is a key objective of LDI that, in turn, provides high benefit security for plan beneficiaries. An LDI strategy will not guarantee solvency deficiencies or unfunded liabilities won’t arise, but the strategy can make such deficiencies much less likely.
Pain now or pain later
Despite the growing realization of the power of LDI, many pension fund managers have been reluctant to consider LDI because of a concern about the potentially higher initial costs of benefits as a result of current low interest rates. An investment policy with high allocations to equities usually means the actuary can use a higher interest rate to value the liabilities because of the assumed equity risk premium (resulting in lower liabilities and a better funded ratio). In contrast, implementing LDI may trigger the need to cut benefits because of the lower expected return on the bonds in the portfolio, and hence a lower interest rate assumption for valuing liabilities.
Snapshot of an LDI policy Adoption of an LDI strategy involves some or all of the following changes to investment policy: More bonds and longer bonds Increase the portion of the fund allocated to bonds and other fixed income investments and lengthen the duration of the fixed income portfolio to be closer to the liability duration. Reduce stocks Reduce the amount of the fund allocated to stocks. Having a portion of the fund in stocks can increase expected fund return, but the stock allocation must consider the plan’s ability to withstand periods of negative equity returns. Add alternative investments Real estate and infrastructure investments with a stable, long-term income stream can increase the expected return without disrupting the liability-matching strategy. Adding an overlay strategy of absolute return investments (portable alpha) with a stable and high return can also improve the total fund’s expected return.
This reality may require plan sponsors to phase in the move toward LDI. For example, changing the bonds in the fund to match the duration of the liabilities — without changing the equity weighting — will improve liability tracking, but not result in a significantly lower interest rate being used by the actuary. As the financial condition of the plan improves over time, the move to LDI would continue by reducing equities and increasing liability-matching bonds in the asset mix. The alternative of sticking with the current investment policy leaves the plan exposed to further risk due to lower bond yields and poor equity returns. LDI can also be phased in over time by applying the strategy to a portion of the plan’s liabilities (i.e., retired lives) and directing future contributions toward additional fixed income investments that are more closely matched in terms of duration to the liabilities. However, even with the suspension of solvency funding in some jurisdictions, many multiemployer pension plans will still have going-concern unfunded liabilities that will force benefits cuts. In these circumstances, implementing LDI at the same time
can ensure, with a high degree of certainty, that only one cut will be required. The same cannot be said of maintaining a portfolio heavily invested in equities. Although with LDI a pension fund may realize lower returns than where there is an asset allocation heavily weighted to equities, the returns should also be more stable. Further, over time, returns will match the returns required to match the change in the liabilities, and provide a high level of security for plan beneficiaries. With LDI, the focus shifts from the rate of return, and how it compares to other funds, to stability of the net-funded position. More stable plan funding and a good night’s sleep. Isn’t it time to seriously consider LDI? —E.B.N.C. Tony C. L. Williams is President of PBI Actuarial Consultants Ltd., and he can be reached at tony.williams@pbiactuarial.ca. TCPP’s LDI strategy was initially developed and implemented by Vancouver-based actuary Bruce Rollick, the actuaries of PBI Actuarial Consultants Ltd. and Phillips Hager & North. Rollick continued to advise the TCPP until his death earlier this year. PBI and PH&N also continue to work with the TCPP Investment Committee and the Board of Trustees to manage and further develop their LDI strategy.
November/December 2008 • Employee Benefit News Canada
Retirement
Fees can erode DC balances generally higher in Canada. Hard statistics are very difficult to come by, but based on an average Canadian CAP with $3.5 million in assets and 135 members, our experience suggests that total expense ratios for a core fund would generally range between 1.25% and 1.5% (assuming commissions are included), as compared to average institutional total expense ratios for U.S. 401(k) plans of 0.76%.
Understanding the problem
By Greg Hurst
F
ees matter. The cataclysmic effects on retirement portfolios of the recent global tsunami experienced by financial markets may be matched or even exceeded by the regular erosion caused by fees on those same accounts. As of Oct. 10, it is estimated that the average balanced fund will have experienced a 20% year-todate loss for 2008. This is similar in magnitude to the results over a working lifetime of each 1% per annum of fees charged to investment funds, which can reduce portfolio values by approximately 20%. Recently, the Rotman International Centre for Pension Management released a paper arguing for a new fee disclosure model for defined contribution retirement programs. This paper compared mutual fund fees across six countries where DC plans are widely utilized, together with their respective regulatory environments. Among the six countries discussed, Canada had the highest mutual fund fees and the least robust regulatory structures. This is consistent with the 2007 Harvard Business School paper “Mutual Funds Fees Around the World,” which studied 19 countries. Canada’s average mutual fund fees of 2.20% per annum (measured as “total expense ratio”) were the highest from a sample of 3,674 funds, and more than double the mean of all countries combined. The management fee component alone of the total expense ratio for Canadian mutual funds was 1.70%, which was more than 1% greater than the mean management fees for all countries combined. Although most capital accumulation plans in Canada utilize institutional investment funds rather than retail mutual funds, institutional pricing is
Why are investment fees so high in Canada? The Rotman paper suggests the answer lies in inadequate fee disclosure. In most CAPs, asset-based fees are only disclosed in aggregate, with recordkeeping and administration, custody, investment management, sales commissions, transactional and implementation cost components all bundled into a single asset-based fee. The paper’s authors argue for a better, plain-language fee disclosure statement that would accompany account statements prepared for investors. In addition to expressing fees as a percentage of assets invested, statements would show the absolute dollar-value impact of fees relative to actual account balances. Furthermore, fees would be broken into their constituent components, e.g. investment management, custody, recordkeeping and transactional costs. It is not difficult to imagine that such disclosure could result in a rapid reduction of fee levels. Consider, as an example, a small CAP that features core investment management fees of 1.50% per year, inclusive of fund operating expenses, with all transactional expenses (withdrawals, terminations, retirements, etc.) covered by fixed fees.
Breaking down the numbers
For illustration purposes, assume that the assetbased fee could be broken down into the following components: • Asset management: 0.30% • Custody and asset transactions: 0.20% • Recordkeeping and administration: 1.00% Let’s further assume that a member of this hypothetical CAP has a $10,000 account balance. The Rotman model fee-disclosure statement would provide the above fee breakdown information to the member, and it would also show that the management and custody components of his fees added up to $50 for the year, and the recordkeeping and administration component amounted to $100. In the following year, assume the member’s ac-
count grows to $20,000 through investment returns and additional contributions. His Rotman model fee-disclosure will now show his asset management and custody fees have increased to $100, and his recordkeeping and administration fees total $200. How can this be? The member may be prepared to accept as an explanation that higher volumes of money generate additional costs for asset management and custody of the assets. However, it will be difficult for him to understand why the recordkeeping costs should also grow so steeply. After all, he pays fees to his bank for similar services on his chequing and savings accounts, yet they don’t increase (or decrease) the fees he pays if he has more (or less) money on deposit.
New U.S. rules for fee disclosure
In the United States, fee disclosure requirements may be moving to a model similar to that proposed in the Rotman paper. The U.S. Department of Labor has published a new proposed regulation for fee disclosure under 401(k) and similar plans to take effect as of Jan.1. These changes in the U.S. are a response to heightened levels of concern over fees charged to 401(k) plans, as there have been a number of class action lawsuits launched against plan sponsors. Common issues in these lawsuits include the failure of fiduciaries to monitor fees and the reasonableCanadian plan sponsors ness of fees charged to will be well-advised to be member accounts. proactive with their service Defendants in these providers and demand betlawsuits include organiter fee disclosure, both at zations such as Wal-Mart, the plan sponsor and memFord, Dell and many ber levels, says Greg Hurst, others. Considering that Morneau Sobeco’s national the Harvard paper shows DC practice leader. U.S. mutual fund fees to be much, much lower than those in Canada, Canada may provide even more fertile ground for class action lawsuits in respect of excessive fees.
A word to the wise
There is an old saying: “The best defence is a good offence.” In considering fee matters, Canadian plan sponsors will be well-advised to be proactive with their service providers and demand better fee disclosure, both at the plan sponsor and member levels. This is particularly true when providers are insurers, as Canada’s fragmented regulatory system imposes neither statutory nor self-regulatory disclosure rules upon the insurance industry. Currently, the only regulatory guidance applicable to insurers is found in the CAP Guidelines, which permits fees to be disclosed on an aggregate basis. —E.B.N.C. Greg Hurst is Morneau Sobeco’s national DC practice leader, and he is located in Vancouver. He can be reached at ghurst@morneausobeco.com.
Retirement
November/December 2008 • Employee Benefit News Canada
DC plans: Educate or dictate?
Whether there is one investment fund or many, employees need financial education By Andrea Davis
T
here is a spectrum of opinions on how best to deal with member apathy in DC plans, but experts say plan sponsors offering one investment fund or many still need to offer plan members some form of financial education. Plan sponsors not subject to the Joint Forum of Financial Market Regulator’s Capital Accumulation Plan Guidelines (because they have no investment choice) do not have to offer education. But “they probably should address retirement education,” says Morneau Sobeco’s National DC Practice Leader Greg Hurst. “I think that [only offering one investment choice] increases [fiduciary duty], because you’re basically taking all the decisions for all the employees,” says Jean-Daniel Côté, principal and Canadian leader of DC retirement consulting with Mercer in Montreal.
The limited choice plan
The Saskatchewan-based Co-operative Superannuation Society, one of Canada’s oldest and largest DC plans, is a multiemployer plan with 32,000 active members and about $2.5 billion in assets. Bill Turnbull, general manager of the CSS pension plan says, “There’s quite a lot of statistical information now that verifies that communication is not an effective driver of behaviour.” The CSS plan deals with plan member apathy by limiting investment choice. The plan offers one balanced fund, and for members nearing retirement, one money market fund. The theory, Turnbull says, is that by limiting choice the plan’s members will actually get a better result than if they have more investment options. “First of all, choice is expensive to offer. Most members don’t use it,” he says. “Of those that do, most underperform a professionally managed balanced fund anyway. When you take a look at the underperformance, and you add to that the extra fees you pay for choice, that is why, in our view, DC plans underperform DB plans by 1 to 2 percent.” Rather than the employer alone setting the terms of the CSS plan, both the employers — credit unions and cooperatives from across Canada — and the employees have equal control and set the plan’s terms as a group.
“The plan is set up with defaults designed around trying to produce a target retirement income,” says Turnbull. “In that process, the members don’t see choosing their own invest-
freedoms that smaller DC plans don’t. “We’re probably able to take the risk of being an anomaly more than other sponsors because if the members want it different, they’ll change it,” he says.
Seldom is a DC plan, in and of itself, sufficient to deliver all of an individual’s retirement income needs. ments as very important. They place a higher value on other things, such as a significant contribution rate, mandatory membership, mandatory contributions and an inability to get at the money before retirement.”
Need for education remains
But just because the CSS plan has opted not to offer investment choice doesn’t mean the need for member education has vanished. It just means the plan allocates its education and communication dollars a little bit differently. And that, says Karen Hall, vicepresident, financial education and employer services with T. E. Wealth in Calgary, is a key point. “Whether you take away investment choice or not, there’s always going to be a need to educate employees about their plan so they understand the future value of that plan.” Instead of spending time and effort trying to get members to analyze their individual risk tolerance and then structuring a portfolio with the best possible return given the level of risk they’re willing to accept, CSS spends its education and communication budget on general financial education and making sure members understand how DC plans work and what they can do to adjust their outcomes as they save. “Everybody’s got a budget for education and communication,” says Turnbull. “Our members have just decided they’re not going to spend it on trying to teach people how to invest because professional management actually works better than if they make individual choices.” Turnbull readily admits that, given its size and structure, CSS has
The specter of lawsuits is what makes many plan sponsors shy away from doing anything that could be construed as not being in the best interests of plan members. “The concept behind a DC plan is that members assume the investment risk in exchange for reaping the plan investment rewards,’” says Colin Ripsman, vice-president with Phillips,
Karen Hall, VP financial education and employer services with T. E. Wealth says, “Whether you take away investment choice or not, there’s always going to be a need to educate employees about their plan.”
Hager & North Investment Management Ltd. in Toronto. “It’s problematic for the plan sponsor to require members to assume investment risk but not permit them to tailor their portfolio to maximize their long-term investment return.” But seldom is a DC plan, in and of itself, sufficient to deliver all of an individual’s retirement income needs, says Hurst. “They [plan members] will likely still need to go out and supplement their company’s plan with personal retirement savings,” he says. “That is the place they can tailor the risk profile of their total portfolio, including their company-sponsored retirement savings, to their appropriate risk profile.” Hurst has at least two clients who’ve opted to go the no-choice route. One is a blue-collar workforce that has proven difficult to educate because of language challenges. The other client, a group of consulting engineers, invests in a balanced fund. “Their costs for recordkeeping, administration and investment for a very small plan, about $8.5 million, is 65 basis points,” he says. “That is pretty hard to beat. And they know the value of that.” While the U.S. market has moved toward auto-enrolment and auto-escalation as ways to deal with member inertia, Canada has yet to embrace such features, mostly due to regulatory and systemic issues
Has education failed? “I think that [only offering one investment choice] increases fiduciary duty,” says Jean-Daniel Côté, principal and Canadian leader of DC retirement consulting with Mercer in Montreal. The theory, says Bill Turnbull, general manager of the Saskatchewan-based Co-operative Superannuation Society, is that by limiting choice the plan’s members will actually get a better result than if they have more investment options.
As a communications consultant, Annie Massey doesn’t agree with the assessment that education has failed. “I would say it’s failing so far because the education that’s being offered isn’t necessarily as good as it could be,” says Massey, a principal with Mercer in Toronto. “But I think it’s still too early to give up on education entirely. There are companies that do it well and get much better results because of that.” For sponsors that choose to only offer one investment fund, she says, “It’s very important that individual plan members still plan for their own retirement, still understand all their streams of income, still understand how much they’re going to get from all their various pensions. They have to have a big-picture understanding of that, and employers have a role in educating people.” —A.D.
Retirement
10 November/December 2008 • Employee Benefit News Canada
DC members (From page )
How plan sponsors are responding
Enhanced communications
ing or going to more secure investments, which really is the right thing because you don’t want them to sell when the market is low and buy back when it is high.” Nevertheless, Standard Life’s Manager of Financial Retirement Services Xuan Bui says: “It’s been quite a roller coaster over the last few weeks. There has been a 40% increase in calls, which has been very challenging for us. A lot of members have been reacting very emotionally to the market, and they want reassurance.” Many do not necessarily want to change their investment strategy, but Bui says they do want to understand how the market is performing, the impact on their portfolio and what, at the end of the day, they should be doing. ”Some of them just want peace of mind, and no matter what you say they move everything to guaranteed funds. But I would say 70% of our callers end up realigning their investment portfolio for future contributions but not touching any of the money currently invested,” she says. At Sun Life, VP of Client Relationships and Education Services Nadia Darwish says call centre volume is up about 20%, and daily Web site visits have doubled. “While the number of dollars transferred to lower-risk investments is trending up a little bit higher than normal, the number of plan withdrawals has increased only marginally. The amount of money being moved to GICs is not significant.” Manulife has also experienced a 20%-25% uptick in call centre activity over previous years at this time. In addition, Manulife’s VP of Operations Steve Smith says there has been a significant movement of money out of equities and bonds. “If we look at September 2007 over September 2008, we’ve seen a doubling in movement from segregated funds and
Tony Ioanna
mutual funds into GICs and other fixed-income products.”
Xuan Bui
In response to the current financial crisis, some DC providers have prepared different forms of communication that plan sponsors can opt to deliver to their members in a variety of ways. “It appears that those with deeper pockets have done more,” says Ioanna. ”Plan sponsors are obviously very reluctant to provide any financial guidance, so naturally they are turning to us. Standard Life has set up a special Web site with a letter from our president for plan members and communicated this to plan sponsors so they can provide a direct link from their intranets. We have also provided messages in member statements and on our ‘member-only’ VIP room directing them to this special site,” says Bui. ”Information provided explains [issues from] the exposure of various funds [that] members may have selected to the collapse of financial institutions in the U.S., which in most cases is fairly negligible,” she says. “We have also been able to reassure them that all of the funds are operating within their established guidelines.” Commenting on Sun Life’s approach, Darwish says, “We have been working with plan sponsors and consultants to keep the lines of communications open.” Steps taken to ease concerns include: regular updates on current market conditions; information to help members “weather the storm,” also posted on Sun Life’s Web site; and materials plan sponsors can choose to distribute to members. ”We’re finding most plan sponsors are directing plan members to the Sun Life site, where they can access the most recent communications regarding the current environment plus their plan balances at the same time,” Darwish notes. Manulife has prepared individual communications for plan sponsors or consultants who have contacted them on behalf of plan sponsors, but Smith
Marc Poupart
Data collected in an Aon Retirement Pulse Survey of 100 DC plan sponsors in late October 2008 reveals sponsors have deployed a number of tactics with their plan participants in these trying times, with the leading being: • Emphasizing the importance of asset allocation and maintaining a well-diversified portfolio .
(49)*
• Communicating openly and continuously information provided by other third parties .
(44)
• Suggesting to participants that they consider seeking professional investment advice and actually providing professional investment advice through the plan .
(39)
(20)
• Confirming their fiduciary oversight and governance, and their commitment to monitor the investments and act in the best . interest of the participants
(32)
*Denotes number of plans. SOURCE: Aon Canada
says there have not been a large number of requests for this service. ”We have included general ‘stability of Manulife’ types of communications — for example, that S&P has just confirmed our AAA rating,” he explains. “In a lot of cases clients were anticipating a high number of questions, but in the end they did not elect to have us mail or send communications directly to members. However, some did post materials on their own Web site.” Although he is definitely monitoring the situation, Poupart says deciding on the appropriate level of proactivity is difficult. “We really haven’t sent out specific communications because this could create panic. Our position is that if something really blows up, we will act, but we don’t want to cause the blowup.” ”I’m not sure at this stage if plan sponsors should be communicating
Evan Howard
other than perhaps reviewing their educational materials,” says Osler pension partner Evan Howard. “They may want to bring in the people who normally provide education to plan members to let them know what their options are and the pros and cons of switching. However, it is not the role of employers to counsel people.” Nevertheless, Ioanna thinks any decisions should be made in the context of the Capital Accumulation Plan Guidelines, which require ongoing communication with members. ”This is an extreme situation. I believe plan members expect plan sponsors and service providers to communicate with them regularly and provide expert commentary from market sources. In my view, you score a lot of points with members even if you send something out from the service provider or post it on your intranet,” he concludes. —S.S.
Steve Smith
Nadia Darwish
12 November/December 2008 • Employee Benefit News Canada
Investment Insider Product allocation trumps asset allocation near retirement
By Sheryl Smolkin
F
or members of a defined contribution plan in the “retirement risk zone” five or 10 years before or after retirement, product allocation will have a more significant impact on retirement income than asset allocation, says York University Professor Moshe Milevsky in his latest book, “Are You A Stock Or A Bond?” “We hope down markets will bounce back, but the problem is that as you get closer to retirement and have to withdraw assets from your nest egg, the negative returns may not be offset by the positive returns you get next year because you are withdrawing money already.”
Understanding product allocation
Milevsky characterizes “product allocation” as a catch-all phrase for investment products that are guaranteed by promises, as opposed to products that move with the vagaries of the stock market. He cites the example of two individuals with assets in a pension plan invested in a 60/40 equity/bond mix. “If I’m in a DC plan, but you are in a defined benefit plan, you have a guarantee and I don’t. Our asset allocation may be identical, but our product allocation is very different. Product alloca-
tion is about capturing things other than stocks and bonds in our personal balance sheet.” Using the following three acronyms, he describes three completely different silos that can be used to finance retirement: • SWiPs. Systematic withdrawal plans are collections of stocks and bonds. Retirees manage the portfolios and draw out as much as they want at
“If the fees are high for guaranteed benefits, it’s not necessarily for the guarantees. It is for active money management and because you are getting advice, and hopefully some kind of service,” says York University Professor Moshe Milevsky.
their own discretion. There are no guarantees how long the money will last if the individual lives for a long time, inflation is higher than expected or if markets go down. • LPIAs. Lifetime payout income annuities are at the other end of the spectrum. They are irrevers-
ible, but they are guaranteed for life. They don’t have a market value or upside potential, but they are implicitly a very valuable asset because they protect owners from outliving their resources. • GLiBs. Guaranteed living-income benefits are modern products that have been engineered in the last 10 or 15 years based on derivatives, and puts and calls. In Canada they are called guaranteed minimum withdrawal benefits, while in the U.S. they are known as guaranteed minimum income benefits or living benefits. This new generation of products provides income for life — not as much as an income annuity — but if the market increases dramatically so returns are better elsewhere, the portfolio can be liquidated and moved to other investments. In October 2006 Manulife was the first Canadian insurer to release Guaranteed IncomePlus in the retail market, and since then several improvements have been announced. Subsequently other financial institutions, including Desjardins (November 2007), Industrial Alliance (December 2007), Sun Life (March 2008) and Empire Life (October 2008), have rolled out retail guaranteed retirement-income products with similar features. (see allocation on page 14)
14 November/December 2008 • Employee Benefit News Canada
Allocation (From page 12)
Deciding on the right product mix So how can individuals determine the product mix that is right for them? “In the absence of anything I know about a particular individual, I think all these products belong in the retirement income portfolio. But as soon as someone clearly defines to me what is important, the allocation shifts,” Milevsky explains. By way of example, he describes two extreme scenarios: “Let’s say I’m talking to someone who says he is not investing for himself, because he’ll never run out of money. His goal is to leave as much as possible to his children and grandchildren in as tax-efficient way as possible. I would advise him an income annuity makes no sense because he is wealthy and his preference is to create an estate. On the other hand, if someone tells me they have no children, and they basically want to die broke with the last cheque going to the undertaker, I’ll tell him an income annuity with no guarantee period is ideal. The insurance company will transfer all the risk
Investment Insider
The nuts and bolts of Group IncomePlus Manulife’s Group IncomePlus is currently the only Canadian guaranteed minimum withdrawal benefit investment option available on a group retirement platform. Manulife’s Director of Marketing Lisa Callaghan describes how it works: “If the plan sponsor elects to include Group IncomePlus as an investment option, the member can opt to put some, all or none of his money into this product. Funds are invested in Manulife’s Balanced Asset Allocation Fund, but he also gets a guaranteed income of 5% of contributions plus market growth captured each year on his anniversary date. The fee for the guarantee is an additional 45 basis points over the balanced fund’s investment fees, which vary from plan to plan.” “Once a member chooses to put a portion of his savings into Group IncomePlus, he immediately starts to build a notional value called the ‘guaranteed benefit base’ that increases with every additional dollar contributed,” she explains. “This GBB is not available as a cash value and is only used to determine the amount of the member’s guaranteed income in retirement.” While the market value of the fund fluctuates like any other investment, once a year on the plan member’s birthday an annual step-up adjustment is calculated. Any market gains on that date are added to the member’s GBB. “Members continue to benefit from equity market exposure but if markets go down, the GBB is not reduced,” she says. The GBB will only reduce after retirement if the member withdraws more than 5% a year. When members have been participating in Group IncomePlus for five years or more, they are eligible to begin drawing their guaranteed annual income of 5% of the GBB as early as age 60. However if both the member and his/her spouse are at least age 60 as of the member’s retirement date, and the five-year holding period has been met, a spousal income option is available that will provide a guaranteed annual income payment of 4.5% of the GBB for the lifetime of both the member and the spouse. “We did a roadshow across the country for brokers and consultants when we rolled out the group product last June, and the reaction was very positive. It is a top priority for us to provide excellent education to market sources because it is important to us that the right people use Group IncomePlus at the right time for the right reasons,” concludes Callaghan.
Investment Insider from his balance sheet to their balance sheet and when he passes away, the asset will be exhausted.” GLiBs that guarantee a stream of payments after retirement are starting to appear on the list of investments available to members of employersponsored group retirement programs. “I’m seeing this trend particularly in U.S. DC plans — 401k plans, 403b plans and the like — that are now putting these products on the menu as savings instruments. So five, 10, maybe even 15 years before retirement, people start to allocate wealth to these investment vehicles in anticipation of the fact that they are going to be retiring,” Milevsky notes. In June 2008, Manulife Canada was again first off the mark with Group IncomePlus, an investment option available to any group retirement savings plan on the Manulife platform [see “The nuts and bolts of Group IncomePlus,” page 14]. While Milevsky suggests that in some cases turmoil in the markets has put a hold on this type of innovation in Canada, he says “I think that variations on these types of products will grow, and you are going to see DC plan sponsors, trustees and administrators evaluating whether they should be DC investment options, along with stocks, bonds and mutual funds.”
At what cost?
Nevertheless, some industry pundits have given LPIAs and GLiBs a bad rap because, they suggest, fees and other costs associated with them undermine their value as retiree investments. But Milevsky thinks it is important to differentiate between what the product is trying to do and the fees charged for a particular product from a particular company. “If the fees are high for guaranteed benefits, it’s not necessarily for the guarantees. It is for active money management and because you are getting advice, and hopefully some kind of service. Put options are not free. If you go to the options exchange, a put option is usually as expensive, if not more so, than some of those retail products.”
And what if recently retired DC plan members or those close to retirement do not have the downside protection of a guaranteed product and have
November/December 2008 • Employee Benefit News Canada
seen their retirement savings drop dramatically in recent volatile markets? There is no magic bullet, says Milevsky. “There has to be
a realization that every drop in the TSX or the Dow translates into a longer working life. People should sit down and put together a little matrix that
15
says for every 5% drop in their portfolio, how much longer they are going to have to work to maintain their standard of living,” he says. —S.S.
Investment Insider
16 November/December 2008 • Employee Benefit News Canada
Rating the credit-rating agencies Who’s who? Standard & Poors (estab. 1860) Moody’s (estab. 1900) Fitch (estab. 1913) Canadian Bond Rating Service (estab. 1972, bought by S&P in 2000) Dominion Bond Rating Service (estab. 1976) The recovery on a senior secured bond is typically in the range of 75%, while an unsecured bondholder may only recover 20%-30% of their investment.
©iStockphoto.com/Karl Dolenc
Investment grade?
By Heather Mason-Wood and Mike Swan
risk by limiting exposure to lowerquality issues. The ratings range from AAA for the highest issues to D for an issuer who is in default. Bonds rated nvestors have long relied on credit from AAA to BBB are considered to ratings to guide their investment be investment grade, whereas bonds decisions and to control the risk rated below BBB are profile of their investments. considered speculative However, following the grade. collapse of the AAA-rated To establish the asset-backed commercial credit rating, credit paper market, investors are analysts will consider now questioning whether a number of factors, credit ratings have outlived including the strength their purpose. and predictability of In fact, the U.S. Securithe issuer’s cash flows, ties and Exchange Commisthe amount of debt to sion recently recommended be serviced, the industhat investment funds do Ultimately, a credit rattry in which the issuer their own credit work rather ing should be viewed operates and other exthan rely on credit ratings. as a useful tool, but ternal factors that may never as a substitute impact the issuer’s Alphabet soup for informed analysis, ability to service its Traditional credit ratings says Canso Investdebt. This type of ratrate the risk of default of ments Counsel Ltd. ing does not, however, an issuer. These ratings are Investment Analyst consider the recovery commonly used in investMike Swan. in the event the issuer ment policy statements to does default. control overall portfolio
I
A new type of rating called a recovery rating was developed to address this limitation. Moody’s and Standard & Poor’s started issuing recovery ratings in 2007, and Dominion Bond Rating Service is in the process of doing so this year. Recovery ratings range from RR1, the highest rating, where
The chart at right, taken from a recent S&P report on credit ratings and defaults, shows the probability of default over five-year periods for each rating category. The Canadian AAA probability of default is abnormally high at 4%, due to the default of Confederation Life in the early 1990s. Looking at BBB-rated issues, there is a 2.8% probability of default over five years. At this rate of default, assuming that the recovery on an unsecured bond is roughly 25%, you would lose 2.1% on the average investment grade BBB portfolio over five years.
Strengths and weaknesses
Credit ratings can be valuable tools for informed investors. The rating
Relying solely on credit ratings will leave you more vulnerable to being stuck with the next illiquid ABCP issue. the investor is expected to recover almost all of the initial investment, to RR6, where almost total loss is expected. To determine the recovery rating, analysts will look at the value of an issuer’s assets in a liquidation, together with the lender’s claim to those assets.
agencies hire skilled credit analysts who have an in-depth knowledge of the issuer’s business, and analysts at ratings agencies often have access to nonpublic information on companies. As a result, ratings reports can be a good source of information on the overall business and key business risks.
Investment Insider
November/December 2008 • Employee Benefit News Canada
CANADIAN AND GLOBAL DEFAULT RATES 50% 45% 40%
Default Rate
35% 30% 25% 20% 15% 10% 5% 0% AAA
AA
A
BBB Canada
BB
B
CCC/C
Global
Source: Standard & Poors RatingsDirect©
17
trading at cents on the dollar. Not surprisingly, Moody’s has since abandoned this approach. Flawed quantitative models: Rating agencies use quantitative models to assess credit ratings. The problem with these models is that their value is almost entirely determined by the quality of the assumptions used to developthem. The debacle with ABCP, based on pools of mortgage-backed securities, provides a perfect illustration. To determine the credit ratings for these securities, the agencies used statistical models to define potential changes in residential housing values. However, the time periods they used for these models were too short to include past credit downturns. The actual decline in housing prices was far greater than their assumptions, and the securities have proven to be far lower quality than their AAA ratings. Finally, credit ratings assess the risk of default of an issuer, but don’t take into account other important risks to investors, such as valuation, liquidity and takeover risks.
Caveat emptor Ratings agencies have also advised issuers on how to structure deals to achieve higher ratings for their issues, which can also compromise their independence. Slow on the uptake: Furthermore, some ratings agencies have been slow to react to bad news. For example, S&P still had Enron rated as investment grade four Heather Mason-Wood, VP of days after the company Canso Investment Counsel defaulted. The ratings Ltd. says recently, the U.S. agencies knew that EnSecurities and Exchange ron was in difficulty for Commission recommended some time, but they were that investment funds do hesitant to downgrade their own credit work rather the issuer without having than rely on credit ratings. completed an in-depth review. While this is often prudent, as a ratings downgrade can seriously impact tions to access their ratings reports, an issuer’s business, by the time a the primary source of revenue for the review is complete it can be far too ratings agencies is the fees paid by late for investors. issuers. Since companies can choose In addition, some rating agenwhich credit-rating agency they will cies use a philosophical approach pay to rate their debt, the business interest of the rating agency may conflict when rating companies. In 2007, Moody’s decided that banks were with the independence of their credit so integral to their country, the analysis. larger banks should be assigned In 2007, the SEC reviewed the practhe country rating. This meant that tices of S&P, Moody’s and Fitch when many banks in developed counrating subprime mortgage-backed tries instantly became AAA-rated. securities. They found evidence that Three Icelandic banks wasted at one firm, employees discussed no time in coming to Canada to whether the firm would lose business issue Maple bonds at very low if it changed its rating methodology. However, there are also many problems with relying on rating agencies to do your credit analysis. The greatest weakness is the inherent conflict of interest in the “issuer pays” business model. Conflicts of interest: While investors pay the ratings agencies for subscrip-
yields because of this AAA rating. Yet Iceland has been seriously impacted by the current credit crisis; two of their banks are now rated CCC, while the third is in default. Investors who relied on the AAA rating have been seriously impacted, as these Icelandic bank bonds are
RATING
ABILITY TO MEET COMMITMENTS
AAA
Extremely Strong
AA
Very Strong
A
Strong
BBB
Adequate
BB-B
Uncertain
CCC-C
Highly Vulnerable to Non-Payment
D
In Default
Source: Standard & Poor’s RatingsDirect
RATING
ANTICIPATED RECOVERY
RR1
91-100%
RR2
71-90%
RR3
51-70%
RR4
31-50%
RR5
11-30%
RR6
0-10%
Source: Standard & Poor’s RatingsDirect
So, given the limitations of credit ratings, what, if any, value are they to plan sponsors? Ultimately, a credit rating is only an opinion. It should be viewed as a useful tool, but never as a substitute for informed analysis. With respect to developing statements of investment policy, trustees should consider the use of recovery ratings to control risk, whereas credit ratings should be used to tailor the portfolio to the manager’s skill set. When selecting a manager for portfolios where some risk will be assumed — particularly those that will include bonds rated BBB or lower — make sure that there is an internal credit analysis team with demonstrated ability to assess credit risk. Relying solely on credit ratings will leave you more vulnerable to being stuck with the next illiquid ABCP issue, the next Enron bond or an issue that has been rated using an obscure model with incorrect assumptions. And as always, the old adage also remains true for bond buyers: Caveat emptor — buyer beware! —E.B.N.C. Heather Mason-Wood is VP of Canso Investment Counsel Ltd. in Toronto. She can be reached at heathermw@cansofunds. com. Mike Swan is an investment analyst at Canso Investment Counsel Ltd. He can be reached at mikes@cansofunds.com.
18 November/December 2008 • Employee Benefit News Canada
Health
Managers play important supporting role in workplace mental health By Ingrid Taylor
J
• Addressing relevant performance issues with a well-thought-out action plan. • Promoting fair application of comprehensive policies. • Remaining flexible to accommodate an employee’s special circumstances. • Mitigating negative effects on the team. Failure to intervene appropriately can put a troubled employee at risk for personal harm, physical ailments and, ultimately, job loss. Lack of action can also destroy a positive working environment, resulting in lower team productivity, poor morale and even resentment toward the supervisor.
ohn, typically an enthusiastic top-performing employee, is demonstrating a noticeable decline in work performance and negative behavioural changes. Once a positive force who consistently delivered over and above expectations, John is irritable, explosive, anxiety-ridden and aggressive, and seems disconnected from his role. He has recently failed to meet many important deadlines and when his projects are completed on time, they are of mediocre quality. Most noticeably, although he was once very engaged in his work and a true team player, John is having trouble working cooperatively with colEAPs can help leagues and is missing work on a regular basis. Employee assistance programs were initially If John seeks support from his company’s Emdesigned as a confidential resource for employees ployee Assistance Program, he could be referred to a dealing with any personal or professional challenge. counsellor or other medical resources in his comHowever, today’s comprehensive EAPs also include munity, but in many cases this does not occur. support and services tailored to manager’sdistinct John is certainly not alone. needs,including dealing with the emotional needs of According to Health Canada, 20% of Canadians employees and workplace mental health issues. will experience a mental illness during Examples of EAP services for mantheir lifetime, and incidence is highest agers include: amongst younger populations, parIndependent learning: By making ticularly among 18-to-24-year-olds just available educational resources such embarking on their careers. as articles, CDs, online tools, training But of graver concern is that only modules and more, EAPs can increase 25% of those suffering from mental illgeneral awareness of mental health ness seek help, and just 6% actually get issues among managers. Managers proper treatment. Even if an employer is can gain a clear understanding of how committed to wellness, preventive meato mitigate the effects of stress and sures can truly only be effective when overwork, the impact of mental health managers lead the way and know how to issues on individuals and the workIngrid Taylor address mental health needs. place, and how to recognize important warning signs. The manager’s role Access to specialized knowledge: Through management consultations, Undeniably, the manager’s role in the managers gain access to professionals with specialsupport of their team’s mental wellness is complex ized experience in work issues, mental health, and and challenging. Yet, sadly, this group is rarely trained corporate and small business environments, as to respond to the emotional needs of their workforce. well as general knowledge of HR-related topics. The Managers must be aware of their role, responsiconsultant will assess the manager’s unique circumbilities and limitations, which include: stances and offer direction on how to handle the • Walking the talk — creating and contributing to employee or workplace situation. a healthy environment that respects work-life balance and emotional needs. Taking the right approach: EAP professionals can • Supporting troubled employees with expressupport managers preparing to confront troubled sions of care and concern without presuming a employees in ways that are consistent with the diagnosis or forcing an employee to reveal personal organization’s HR policies. details about emotional experiences they may be Confronting an employee can be an uncomfortgoing through. able and difficult task, but when the discussion is • Recognizing the symptoms of mental illness, well-planned and appropriately conducted, the conwhich can surface as noticeable behavioural changcern shown for their well-being can serve as a strong es or often as performance difficulties known as source of motivation to troubled employees. “workplace indicators.” These typically fall into four Support for the employee/support for the mancategories: lowered productivity and job efficiency; ager: Once a manager has confronted a troubled increased absenteeism; impaired personal skills; and employee and taken the step of making a suggested changes in physical appearance. or mandated referral, his/her commitment to the • Documenting an employee’s observed declining employee’s recovery must continue. performance. EAPs, just as they do for all employees, can then
Tips for managers At the employer level, preventive measures to combat stress, presenteeism, burnout and other mental illnesses include: • Leading by example by backing wellness initiatives, encouraging a culture of selfcare and rewarding effectiveness - not simply hours of work. • Adopting an EAP that combines traditional, action-focused counselling with innovative work-life/wellness resources delivered in a variety of ways. • Offering a comprehensive benefits plan that effectively provides for those employees experiencing a mental health issue and takes into account tracked benefit trends to enhance and target prevention efforts. • Developing and applying fair and comprehensive policies. • Reducing stigma through education and awareness. • Designing work to eliminate high-demand/low-control and high-effort/ low-reward roles, which have been proven to lead to increased stress. • Providing appropriate training and skills development to reduce stress and increase resiliency. SOURCE: Ceridian Canada
provide ongoing emotional support, tools and guidance to a manager dealing with a tough and ever-changing situation, and potentially facing the rebuilding of a demoralized or dysfunctional team. Next steps: If the employee’s situation demands a disability leave, the EAP can support the manager in learning how to manage the consequences with remaining team members. The EAP can also provide valuable guidance on how to stay in touch with the employee without overstepping the boundaries of privacy and how to prepare for the employee’s return to work. Through the resources of an EAP and the expertise of management consultations, combined with important policies and processes implemented by the employer, managers can be armed with the tools they need to understand, champion and effectively address mental health issues in the workplace. —E.B.N.C. Ingrid Taylor is director of clinical and organizational services with Ceridian Canada’s EAP. Her responsibilities include managing a team of 400 professional trauma affiliates who deliver critical incident response and crisis management services to clients across Canada, as well as Ceridian’s team of management consultants. She can be reached at ingrid_taylor@ceridian.ca.
November/December 2008 • Employee Benefit News Canada
19
Walking a global marathon
Corporate challenge combats sedentary lifestyle By McLean Robbins
T
he average white-collar employee moves a mere 3,500 steps per day — only slightly more than one mile. Yet experts recommend a minimum of 10,000 steps, or 3.2 miles, of walking and moving per day. Since 2005, Australian company Global Corporate Challenge has been combating sedentary lifestyles and resolving health issues by creating a team-based fitness challenge using two simple things: pedometers and employees. This year, Employee Benefit News and Employee Benefit News Canada signed on with The Benefat Burners, based in Washington, D.C., and The Virtuosos, telecommuters including EBNC Editors Sheryl Smolkin and Carly Foster, who pledged to walk the talk for the duration of the challenge, which ran from May through September.
The Benefit Burners team gather before a weekly lunch walk. Since members of The Virtuosos telecommute, a team picture is not available.
We tracked the progress of The Benefat Burners and the team from Mercon Business Services in Edmonton, Alberta. Follow their journey and see what they accomplished.
Neat swag, no spandex
The program “is bringing organizations together through communication, fun and obviously healthy competition,” says Robert Burke, vice president of North America GCC. Another perk? “You don’t have to wear spandex,” he jokes. Companies sponsor teams of seven employees — $99 per person or $693 per team — who pledge to track their steps for 125 days, via inexpensive pedometers, in an effort to improve health and employee morale. The starter packs for each team member include blue backpacks filled with GCC swag such as pedometers,
Some GCC success stories Winner Overall: Goodman Fielder, Australia How they did it: Three-hour daily walks, six days per week. Any member opting out of the walk had to pay a $5 fine daily. Many team members also played on company soccer teams in addition to the daily walk. Charity Donator: Vtech Communications, multiple U.S. locations How they did it: On Aug. 2 and 3, five Vtech teams gathered in a 24hour marathon for cancer research. Some of the most competitive teams actually walked as a unit for 24 straight hours, posting over 130,000 steps for a single day. Making Healthy Count: Donna Green, buyer for Alcan Compositories USA How she did it: Green, who was diagnosed with diabetes two years ago, started the challenge at 235 pounds. On average, the team walked six to seven miles per night, three days per week. She’s since lost 40 pounds and moved her biometric data into “healthy” categories. “This event has been a huge blessing,” she says. socks and water bottles. Every day the Web site has new interactive flash tools, internal message boards and cool calculators offering inspiration by showing how many burgers, sodas or candy bars we burned in our daily walks.
Virtual global marathon
As employees log their steps, they join a virtual global marathon, moving forward in a journey around the world. At each login point, participants can see real-time weather information, photographs of their location, cultural facts, economic information and traditional customs.
This year’s challenge attracted 50,000 employees, on 7,077 teams from 55 countries. GCC 2008 participants walked more than 61 billion steps, for a total of 24.5 million miles, 2.4 billion calories and more than 10 billion kilojoules of energy burned. As part of a charity outreach component, the program also includes a subset called The Footprint Initiative, where participants can become directly involved with the communities shown on the GCC sites through support for projects that positively affect people living in these communities, like environmental disaster relief and (see Walking on page 20)
Health
20 November/December 2008 • Employee Benefit News Canada
Walking (From page 19) food distribution. The Benefat Burners team
started in May with a variety of goals in mind: EBN Editorin-Chief Kelley Butler wanted to lose 30 pounds after having given birth to her second child,
Mia, only a few weeks prior. Other staffers wanted to tone up, slim down or simply increase their daily movements. By the end of week one, the ver-
dict was in: For a desk-bound employee, getting 10,000 steps per day was HARD, especially on days we worked from home. To boost step averages, team
members tried a variety of tactics. Associate Editor Lydell Bridgeford walked as many as two miles out of his way during his 45-minute walk to and from the office. It paid off — his step average was over 18,000 steps per day, and he was Team Benefat’s overall step leader. To try to keep up with Bridgeford, other team members gathered for weekly lunch-hour walks, frequently charting new courses.
Rose Krupka of Mercon Benefits says despite the cold winter weather in Alberta, her office remains positive that they can exercise indoors.
Each walk was about four miles and netted participants many of their necessary steps per day. In addition to the physical benefit, team members reported feeling more connected to each other, sharing stories about upcoming vacations and even planning after-hours activities. “There were certainly hard days, but overall I enjoyed the camaraderie of the event and the tangible personal challenges and goals I could set and meet for myself,” Butler says about her participation. She lost 20 pounds, just 10 pounds short of her goal. But, as she says, “this is only the beginning.” Team Finish: Benefat Burners: 852; Virtuosos: 5,344. Step Average: Benefat Burners: 13,482; Virtuosos: 7,960.
Mercon Benefit Services
Edmonton, Alberta firm Mercon Benefit Services sponsored three teams. Rose Krupka and Cindy MacDonald each joined a GCC team to lose weight. “I wanted to feel like I could chase after my dog without being out of breath,” says MacDonald. Krupka wanted to shed pounds but admits that moving house during the challenge took a bit more of a toll on her step averages than she would have
Health liked. While she didn’t lose any weight, she did realize that a half-hour of additional walking per day was necessary. MacDonald set the goal of achieving 10,000 steps per day and ultimately lost four pounds. As an added incentive, she gave the extra pedometers to her mother and mother-in-law, who averaged 20,000 and 10,000 steps per day, respectively. MacDonald was “very inspired” by her 60-year-old comrades. Like Butler, she admits that there were hard days, but that the office was very supportive. “The change has been that I’m not as lazy. I am getting off the couch more, and my dogs appreciate it so much.” As for the long-term success, she says, “I haven’t stopped the walking, and I don’t intend to.” The change hasn’t ended with the challenge, Krupka says. “A few of us girls in the office have started a weight-loss program, including an exercise program to do at our lunch hours, diet support and just plain ‘let’s see if we can shed some pounds before Christmas.’” Despite the cold winter weather in Alberta, she says, her office remains positive that they can exercise indoors, perhaps while holiday shopping at the local mall. “Just wait to see me next year,” says Krupka. Finish: Team 1: 882; Team 2: 3343; and Team 3: 4783. Total Step Average: Team 1: 13,429; Team 2: 10,418; and Team 3: 8,878.
Results and rewards
”We aim to make people healthier and smarter,” says Burke. Scientists on behalf of the GCC found that the four-month period of the challenge was enough to break old habits and learn new routines, but not so long that participants would burn out. Data from the program’s records shows a $3.26 return on investment for every dollar spent. Sick days were reduced by an average of 41%, and participants also averaged 10,500 steps per person — 500 more than the daily recommended amount. Among other benefits: • A 2006 study conducted by the Heart Disease & Diabetes Prevention Centre in Australia found that female participants decreased their risk of diabetes by 32.8% and increased their
November/December 2008 • Employee Benefit News Canada
steps by 53%. They lost an average of 8 cm from their waists. Men’s risk dropped by 23.3%, and they increased their steps by 70.4%. They lost an average
of 5 cm from their waists. • A 2007 survey conducted by Sustainability Victoria during the 2007 GCC found that there were approximately 50% fewer
instances of car driving and 250% more instances of walking during the Challenge. • In theory, the challenge eliminated 550 tons of carbon
21
dioxide, the equivalent of removing 183 cars from the road. For more information on the 2009 Challenge, visit www. gettheworldmoving.com. —M.R.
22 November/December 2008 • Employee Benefit News Canada
Quality of Life
Working around the clock
The impact of shift work on employees and how employers can help of 7 a.m. and 6 p.m., Monday through Friday. Typical shift-work industries include emergency service personnel (police, fire and ambulance workers), hotel/food workers, and health care employees. Statistics Canada finds 66% of those working in protective services, 50% of those in the accommodation/food industry, and 45% of doctors and nurses, work shifts. In contrast, industries where shift work is the least prevalent include business, finance and administration (12%), natural and applied sciences (9%), and educational services (10%). Yet, the variable, rotating hours, and the nature of these occupations can make it difficult for employers to offer coping strategies and programs. And the experts agree: Those working shifts do need help to stay healthy and happy in and out of the office. “There’s been a lot of lip service paid over the generations to the [impact of shift work],” Robertson says. “It’s simply been seen as inevitable. But I think what’s happening more recently, with more research on [the effects], ... is we can deal with it.”
By Carly Foster
O
ur 24/7, fast-paced, instant gratification economy means more than 30% of Canadians don’t work the 9-to-5 hours immortalized by Dolly Parton in the Grammy-winning soundtrack of the 1980 comedy. Today’s world of shift work affects every industry and can mean working evenings, nights, being oncall and other irregular working arrangements. Workers balancing these odd hours wrestle with a multitude of physical, mental and social issues, including sleep disturbances, poor eating habits and less time with their families. “There’s an acceptance of a 24/7 economy, and operations having to be going all the time — truck drivers, warehouse workers, hospital nurses at 3 a.m.,” says David Robertson, director of work organization and training for the Canadian Auto Workers union. “The frustration is, at a time when we know the most about the impact of shift work on family, community and worker well-being, it’s also when we seem to be the least effective at making the changes we need to make [to help them].”
Who are they?
According to the Institute for Work and Health, the number of people working shifts has grown over the last 20 years due to the increased demand for provision of services around the clock. The Institute defines shift-working employees as anyone working outside the “regular daytime hours”
Sleep, home life, eating most impacted
A recent Statistics Canada study, “Work-life balance of shift workers,” found that shift workers were more dissatisfied with their work-life balance, compared to regular-day workers, and complained of “role overload” — the feeling of too much to do and not enough time to do it. The report found 70% of evening-shift workers and 63% of rotating-shift workers cut back on sleep in order to fulfill responsibilities at home. “Cutting back on sleep in order to gain time is one way to find time to accomplish more in a day, but if done regularly, it can have negative health implications,” the study reads. “This may be particularly problematic for shift workers, since they may already be having difficulty with sleep time.” The primary health effect of working shifts is its impact on a body’s circadian rhythm, says Jan Chappel, senior technical specialist for the Canadian Centre of Occupational Health and Safety. This “24-hour clock” regulates our sleep patterns and is greatly impacted by light and temperature changes throughout the day. So changes such as sleeping less or during the day, as opposed to the night, have big consequences. “Fatigue becomes a huge issue,” she says of shift workers, who also exercise less and have poorer eating habits than daytime-working employees. “It leads to reduced decision-making abilities, productivity, ability to handle stress, and increases tendencies for risk-taking. Accident rates go up.” The Statistics Canada study also found shift
workers were more likely to worry about not spending enough time with family or friends. “Especially when you work evenings or nights, you don’t get the connection with your family,” Chappel says. “It interferes with many things [the rest of us] take for granted, including after-work activities such as sports or community volunteering, kids’ homework and school functions.” However, some employees say there is an upside to shift work. Colleen O’Reilly, a paramedic living in Oshawa, Ont., actually finds her four-week rotating schedule of three or four days/nights in a row, with multiple days off in between, gives her more time with her 2.5-year-old daughter, Reagan. “Yes, I work nights seven of the 28 days of the month, but the rest of my life is mostly days,” she says. “As opposed to [her daughter] having to be in daycare Monday to Friday, and only get[ing] time together on the weekends, I do get more quality time with her.” But it is a “nightmare” to find childcare for the times O’Reilly, her ex-husband — also a paramedic — and other family members can’t look after Reagan. And she does worry what will happen if her shifts ever change — something she has little control over— and when her daughter starts school. “In this field, there really aren’t other options,” she says, admitting shifts do mess with sleeping, and that she has stayed up all day to get work done. “I have adapted after doing shift work for 10 years. But there are a lot of guys on the road who’ve been doing this for 20-plus years, and they see it in their health and sleep patterns. It’s definitely cumulative over time.”
Shifting to wellness
Keyano College, in Fort McMurray, Alta., has trained more than 15,000 shift-work employees and their managers on leading healthier lives through its innovative “Shifting to Wellness” program. Their trainers across Canada have worked with companies such as CP Rail, Molson Breweries, Suncor Energy and Nova Scotia Hospital to help shiftwork families better manage stress, time constraints, sleep, nutrition and communication. Jennifer Deane is the former program coordinator, and she now educates the program’s trainers. She offers these tips to employers: • Include employees and consult experts in shift design. • Minimize the number and frequency of night shifts per employee. • Target health promotion to shift-work employees and their families. • Make healthy food options available at all hours. • Promote healthy lifestyles through subsidized fitness passes and nutrition education. • Look into a healthy napping program to help prevent the impact of fatigue. —C.M.F. Carly Foster, a freelance journalist and the former managing editor of Employee Benefit News Canada, lives outside of Toronto.
November/December 2008 • Employee Benefit News Canada
23
New grads (From page ) When considering full-time employment with an organization, just over half (51%) of students cite good health benefits as very influential in their decision. “They see work as an enabler that enables them to live exciting, full lives,” says Meerkamper, adding that young people recognize that pension and benefits “are things that need to be taken care of, because without them they wouldn’t have a lot of money left to do those other things they like.” When marketing pensions to this generation, include the plan as part of a larger discussion around longterm career development. “Don’t position it as ‘This is what you get paid out at the end,’ but ‘This is what you can do to build a career that allows you to achieve the things you want,’” says Meerkamper.
What GenY wants
When considering full-time employment with an organization immediately following graduation, 56% of respondents cite work-life balance as very influential in their decision-making. Just over half (55%) cite good people to work with and a good initial salary level. “Work-life balance is an issue for the young people we hire,” says Carolyn Clark, senior vice-president, human resources, with Fairmont Hotels & Resorts in Toronto. The
organization is one of the top 40 companies designated by university and college students in the campus recruitment report, and it also ranks as one of Canada’s Top 100 employers. “Their philosophy is ‘We’ll give you 200% during the eight hours that we’re here, but it’s important to us to have time to spend on recreational activities.’” Per Scott, vice-president of human
The percentage of college and university students who ranked the following issues as being very influential in their decisionmaking when considering full-time employment with an organization immediately following graduation: Work-life balance Good people to work with
56% 55%
55%
Good initial salary level Good health benefits plan
55% 51%
Opportunities for advancement
50%
Good training/opportunity to develop new skills
50%
Job security
50%
Source: DECODE
resources with the Royal Bank of Canada in Toronto, another company on both lists, says his engagement surveys show that work-life balance and flexibility are issues of importance to all demographics, not just the younger one. “The baby boomers approaching retirement need flexibility, but maybe in a different way than the Gen Y coming out of school,” he says. “They both need it, and we need to equip our managers to explore what’s good for individual employees, as opposed to thinking that a policy solves it all for everybody.” Half of those surveyed in the campus recruitment research say opportunities for advancement are very influential in their decisionmaking when they are considering full-time employment. Fifty percent cite good training and/or the opportunity to develop new skills, and 50% cite job security. The majority (72%) of university and college students say they would accept a job that is not ideal, but a good starting point. Only 3% say they would accept nothing less than their ideal job. “If you can show them where this [job] fits into their overall career plan, and they like the ending point, they are interested in that,” says Meerkamper. “They’re very rational.”
Marketing to Gen Y
In a competitive labour market, becoming known as an employer of choice has advantages. “We receive a lot of applications that specifically say ‘I’m applying to you because you’re one of the Top 100 companies to work for,’” says Fairmont’s Clark. About one-third of Fairmont’s
“Work-life balance is an issue for the young people we hire,” says Carolyn Clark, senior vice-president, HR, with Fairmont Hotels & Resorts.
Young people recognize that pension and benefits “are things that need to be taken care of, because without them they wouldn’t have a lot of money left to do those other things they like,” says DECODE’s Eric Meerkamper.
(see new Grads on page 24)
Quality of Life
24 November/December 2008 • Employee Benefit News Canada
New grads (From page 23) 11,500 employees in Canada are between the ages of 18
and 25. Clark cites four areas — culture, career growth, development opportunities and environmental leadership — as key features that help sell
Fairmont to Gen Y. At RBC, the percentage of Gen Y employees has jumped from a little over 5% of the employee population to over
10% in the last three years. “They’re an important part of our workforce, and they’re the fastest-growing demographic we’ve got,” says Scott.
Making the grade Here are the companies that get top marks from new grads, as well as appearing on the Maclean’s Top 100 Employers list: • Boeing • Canadian Security Intelligence Service • Fairmont Hotels & Resorts • KPMG • L’Oréal Canada • Procter & Gamble • Pricewaterhouse Coopers • Research in Motion • Royal Bank of Canada • Shell Canada • TD Bank Financial Group • Toyota When asked in an employee engagement survey why they stay with the company, the top four reasons cited by Gen Y employees at RBC were: career advancement, learning new skills, the people they work with and flexible work life. “When marketing to Gen Y, we play up the fact that we are a large, diverse organization with multiple career streams,” says Scott. “Couple that with strong training programs and access to learning materials, and that is the leading card we play with Gen Y.” Meerkamper believes companies are shortchanging themselves if they don’t have conversations with young employees about long-term career objectives. His research shows that over half of university and college students say they are interested in staying with one company for their entire career. “Students think companies don’t offer jobs for life anymore, and companies are saying they don’t talk about it because students don’t want it,” he says. “But what this [survey] is saying is that students are actually open and interested in the idea of a career and what that would look like going forward. That should be good news for companies.”—A.D.
Global Watch
November/December 2008 • Employee Benefit News Canada
25
Soft benefits of expat assignments hard to track Companies struggle to measure ROI for global jobs by Andrea Davis
C
ompanies are increasingly using mobility as a tool to create a global mindset within their workforce, yet many are not tracking the return on investment of international assignments. A study released by Mercer shows that 44% of companies do not measure the effectiveness of their international assignments. Mercer’s “2008 International Assignments Survey,” which surveyed over 200 multinational firms, reports that companies have only a fair estimation of the cost of their international assignments. Most firms cannot accurately measure their ROI, with 71% of them saying that measuring the financial benefits of international assignments is a challenge. Only 3% of companies report having a process in place to track the ROI of their international assignments. “It’s hard for a company to really measure the ROI of their global assignments, particularly if they’re actively globalizing,” says Rebecca Powers, principal with Mercer in San Francisco. “So many of the advantages [of global assignments] are not concrete. Most of the formulas I’ve seen for measuring the return on assignments are ones that haven’t quite figured out how to capture the softer value of them.” The way organizations use international assignments has changed significantly over the last 30 years, yet many have not updated their expatriate
Women’s work Mercer’s “2008 International Assignments Survey” reveals that about 14% of expatriates are women, with the proportion of female expatriates increasing at a rate of about 1% per year. With the increase in dual-career families over the past 30 years, companies may need to revisit their spousal policies. If the spouse is unable to work in the host country, “the potential loss of income is significant,” says Powers. Organizations may offer a significant payment to offset the spouse’s loss of income, but few companies have this formalized in their expatriate policies. Just over one-quarter of companies surveyed foresee an increase in single-status assignments in which employees leave their families at home while they move abroad for the duration of the assignment.
policies to reflect the new global realities. “The reasons for people being sent overseas are much broader than they used to be,” says Powers. “It’s not just that they’re opening an office or filling a skills gap, although those are still valid reasons. International assignments are a career development piece, a way of keeping high-potential employees engaged and getting them accustomed to being able to operate more effectively for the company on a global basis.” Three-quarters of respondents to the survey say that employees with international experience benefit from accelerated promotion, but 41% say they do not know how many employees leave the company within two years of repatriation.
The numbers
Survey respondents say the primary reasons they don’t measure the ROI of their international assignments are the lack of appropriate measurement tools, decentralized data and time constraints. Only 17% of organizations have reasonably accurate figures to calculate the cost of their international assignment program, and 21% say they are not in a position to provide any figures. Nearly three-quarters of companies say that their information on assignment costs is dispersed throughout different countries or business units. Only 28% say that all costs are compiled in a central database. About 60% say they could obtain a fair estimation of the costs. The majority of firms (93%) say the element most frequently taken into account when projecting the costs of international assignments is the cost of the expatriate package, including salary, premiums, allowances and benefits. Relocation support costs, including a preassignment trip, language training, relocation agency, moving expenses, and tax assistance, are cited by 84% of companies as elements they use to project the cost of their international assignments. Administration costs linked to the management of expatriate compensation are considered by 77% of the companies. Some costs incurred, but less typically taken into account, are the possible departure of the assignee during or after the assignment (37%), the breakup or discontinuity of functioning teams in the home country (13%) and the cost of mentoring programs (4%). A lack of centralized financial control systems is
cited by 46% of companies as the main difficulty in measuring the ROI of their international assignment programs. Inadequate or missing software tools are reported by 45% of participants as the main issue with measuring the ROI of their international assignments. Just over one-quarter of organizations could either provide a rough estimate of the benefit of their international assignment program in terms of its revenue impact or provide accurate figures on the benefits generated.
Improving measurement
Most companies are taking steps to improve the ROI of international assignments, the survey reveals. Seven in 10 have taken measures to improve the clarity and communication of objectives for their expats, and over half have improved the selection process for international assignments. Forty-three percent have made progress in improving or reinforcing the follow-up process with expats throughout the assignment, and the same proportion of companies has improved post-assignment management. “It’s clear that a lot of companies are taking a look at how they handle mobility. There’s quite a bit of policy review going on,” says Powers, adding that the first piece of any policy review should include getting a handle on international assignments — whom you have where and what their terms are. Companies are also using more short-term international assignments, rather than the traditional model of sending an employee overseas for a number of years. Furthermore, the study reveals an increase in the number of assignments between subsidiaries, with over half of companies reporting an increase in subsidiary-to-subsidiary transfers. “Companies are beginning to use mobility much more as a tool in their global staffing and workforce planning around the world,” says Powers. —A.D.
November/December 2008 • Employee Benefit News Canada
Cover Story
27
Healthy Workplace Month highlights affordable wellness (From page ) Healthy Workplace Month is managed by the NQI in collaboration with the Canadian Centre for Occupational Health and Safety, and is presented by The Great-West Life Assurance Company. Other industry sponsors at various levels include Sun Life Financial, Desjardins Financial Security, Buffet & Company and Industrial Alliance. This was the first year for the monthlong event, which began in 2001 as Canada’s Healthy Workplace Week. “When it was only a week long the feedback we received said that was not long enough to do certain challenges. A lot of people said they would like more time for the initiative,” notes Walker. The theme for 2008 was “Take the Healthy Workplace Challenge.” Each week, organizations were challenged to participate in an activity based on NQI’s Healthy Workplace elements. The weekly challenge themes were:
• Healthy habits: Fit@Work. • Healthy culture: Support@Work. • Your physical environment: Green@Work. • Keep it going all year round: Champions@Work. The fourth week’s challenge was a little different, Walker adds. “It’s not a checklist, it’s a mini-assessment so organizations can see where they are.” Companies were able to register at www. healthyworkplacemonth.ca, chart their progress and compare their efforts with other organizations across Canada. Organizations accumulated points and winners were announced on the site. NQI’s web site gives information not only about how to participate in wellness activities, but why: “NQI studies show that health care costs are increasing at twice the rate of inflation. In Canada, more than 50,000 strokes and 75,000 heart attacks
(see worKplaCe on page 3 )
Health & wellness tune-up For Purolator Courier, Healthy Workplace Month has been a kind of tune up. Wellness and safety are important ongoing concerns that are addressed all year long, according to Jim Peeples, VP of quality, engineering and environmental safety for the Mississauga, Ontario-based company. Purolator is a benefactor of Canada’s Healthy Workplace Month. Purolator sees its healthy workplace program as an integrated part of its business excellence model, comments Peeples. The program includes an ongoing assessment of the work environment to make it safer, an action plan to make improvements, and a number
top left photograph by Scott Kleinman/gettyimages
of what he called “change the world” projects. All of these initiatives, targets and action plans involve employee participation, he adds, “to make sure they come to fruition.” For example, he continues, “When we designed a new automated facility, employees helped figure out how to modify the processes. We needed a safe, ergonomically designed environment. We were upgrading the material-handling equipment. We were spending millions and millions of dollars to introduce automation that eliminated some of more strenuous work that could cause injuries.”
During Healthy Workplace Month Peeples says the first week was devoted to developing healthy habits such as exercising and eating nutritious food. The second week was devoted to promoting a healthy culture by identifying risk areas and safety needs. The third week focused on ergonomics. The final week was for communicating a lot more to all employees, and reinforcing activities. We reminded people about the things that are in place” to keep them safe and healthy throughout the year, Peeples says. “If a company were doing something this month, but did not follow up, it would be anti climactic.”
28 November/December 2008 • Employee Benefit News Canada
ACS BUCk ı CUMIS LIFE ı DESjARDINS FINANCIAL SECURITY ı INDUSTRIAL ALLIANCE INSURANCE AND FINANCIA CO-OPERATORS LIFE INSURANCE COMPANY ı GREAT-WEST LIFE ı FIDELITY INVESTMENTS CANADA ı INTEGRA CAPITAL
Great-West Life purchases Fidelity’s DC recordkeeping business By andrea davIs
consulting, tax and legal consulting, and communications services. $6.8 billion assets under administration, 36 plans, 268,000 members (as of June 30, 2008).
T
he big news in the Canadian DC arena this fall was the purchase of Fidelity’s recordkeeping business by Great-West Life. The transition is expected to be complete by June 2009. The purchase increases Great-West Life’s recordkeeping assets by 10%, and the company expects to absorb at least some of the Fidelity employees whose jobs will be impacted, says Bill Kyle, senior vice-president of group retirement services with Great-West Life in London, Ont. “As we bring over the Fidelity business, we anticipate adding the appropriate number of Fidelity staff to our team, both on the relationship side and the administration side,” says Kyle. “Initially there will be a few people [Fidelity employees] impacted by this,” says Michael Barnett, executive vicepresident with Fidelity Retirement Services in Toronto, adding that approximately 70 people work in the DC recordkeeping business at Fidelity. The majority will be involved in transitioning Fidelity clients to Great-West Life. “And then we will wait and see at the end,” he says. The agreement includes approximately 100 plan sponsors, 470 group retirement plans, and 95,000 plan members. “We anticipate very little impact to the plan sponsors themselves,” says Barnett. “One of the most important things we agreed to with Great-West Life was to work very closely with our clients during the transition so there wouldn’t be an interruption to the service level that they’re getting.” Fidelity’s funds, including its ClearPath target-date retirement funds, will continue to be available to plan members. “We’re still going to be involved in the DC business, focusing on the investment management of the defined contribution plans,” says Barnett. “In addition to being able to look after the existing Fidelity plan members and sponsors, we’ll also be able to offer these [Fidelity] funds to our existing client base,” says Kyle. “There’s an increasing demand for target-date funds in the marketplace and with the addition of the ClearPath funds, that will give us four offerings in target-date funds.” The decision to exit the DC recordkeeping business was made about six months ago, says Barnett. With its share of the recordkeeping market sitting at about 2%, Barnett says Fidelity “did not have the scale that we believe you need to have in order to be successful in Canada with the recordkeeping business.” While Fidelity may have exited the DC recordkeeping arena, there are still plenty of other companies out there vying for your business. To keep you informed about the many financial institutions offering recordkeeping, administration and investment products for your DC retirement programs, EBNC presents its third annual DC Plan Providers Directory, based on information provided by the organizations listed. If you are not listed and want to be, next year, please contact sheryl.smolkin@ sourcemedia.com or andrea.davis@sourcemedia.com.
Co-operators Life Insurance Company Contact: Dale Ruttkay, manager, group sales, business development Tel: (519) 767-3005 Fax: (519) 827-9632 E-mail: dale_ruttkay@cooperators.ca Address: 1920 College Ave., Regina, SK S4P 1C4 Web: www.cooperators.ca Description: Online Internet access, bilingual, toll-free call centre, member statements, newsletters, packages and education sessions, and a variety of investment options, including variable and guaranteed rate options (GROs) and 31 pooled funds. $880 million assets under administration, 132 plans, 14,816 members (as of June 30, 2008).
CUMIS Life ACS Buck Contact: Marina Scassa, director, communication and sales support Tel: (416) 644-9296 Fax: (416) 865-1301 E-mail: marina.scassa@buckconsultants.com Address: 95 Wellington St. W., Suite 1500, Toronto, ON M5J 2N7 Web: www.acsbuckcanada.com Description: Buck Consultants provides innovative solutions to the challenges employers face in retirement consulting and actuarial services, defined benefit, defined contribution, benefits administration (outsourced, co-sourced, insourced), health and productivity consulting, investment
Contact: Ken Richards, manager, national sales and service Tel: (800) 263-9120, ext. 5004 Fax: (905) 631-4887 E-mail: ken.richards@cumis.com Address:P.O. Box 5065, 151 North Service Rd., Burlington, ON L7R 4C2 Web: www.cumis.com Description: Full-service DC plans, group RRSPs, DPSPs, DB plans and investment services. $400 million assets under administration, 424 plans, 12,500 members.
Desjardins Financial Security Contact: Michel Desmarais, VP, product development & marketing
November/December 2008 • Employee Benefit News Canada
29
inancial Services ı Morneau Sobeco ı Open Access Limited ı Standard Life Assurance Company of Canada Management ı Manulife Financial ı SEI Investments Company ı Sun Life Financial Canada ı TD Asset Management
EMPLOYEE BENEFIT NEWS CANADA DC PROVIDERS DIRECTORY Tel: (877) 750-8700 Fax: (514) 285-3186 E-mail: michel.desmarais@dfs.ca Address: 1 Complexe Desjardins, South Tower, 19th Floor, Montreal, QC H5B 1E2 Web: www.desjardinsfinancialsecurity.com Description: Participant education, plan management services, investment solutions, DC plans, group RRSPs, DPSPs, non-registered plans, simplified pension plans, individual pension plans, single premium annuities, TFSAs, and RIF/LIF/annuities. $1.7 billion assets under administration, 2,139 plans, 66,014 members (as of June 30, 2008).
Fidelity Investments Canada Contact: Michael Barnett, executive VP, Fidelity Institutional Services
Description: Great-West and its subsidiaries, London Life and Canada Life, provide group retirement and savings plan services for the capital accumulation plan market: namely, group RRSPs, money purchase pensions, profit-sharing and savings plans. A wide range of investments, member education programs (including third-party financial planning) and CAP guidelines support is offered. $32 billion assets under administration, 16,900 plans, 1.2 million plan members (as of June 30, 2008).
Industrial Alliance Insurance and Financial Services Contact: Frédéric Tremblay, coordinator, actuarial services and marketing Tel: (418) 684-5000, ext. 4248
Tel: (416) 217-7584
Fax: (418) 684-5187
Fax: (416) 307-5511
E-mail: frederic.tremblay@inalco.com
E-mail: michael.barnett.toronto@fmr. com
Address: 1080 Grande Allée Ouest
Address: 483 Bay St., North tower, Suite 300, Toronto, ON M5G 2N7
Web: www.inalco.com
Web: www.fidelity.ca/retirementsolutions Description: Full complement of investment solutions for CAPs. Fidelity Funds are available for both trust and recordkeeping platforms within registered and non-registered plan structures. Product line-up includes lifecycle and balanced, Canadian equity, U.S. equity, international and global equity, and fixed income investment funds. DC investemnt-only assets $1.9 billion (as of Sept. 30, 2008).
Québec, QC G1K 7M3
Description: All CAP products, including non-registered plans and RCAs. Recordkeeping and investment management, assistance with enrolment, an enrolment kit, online transactions via Internet, automated (IVR) system, investor profile questionnaire, call centre services, including information on investment funds. $1.91 billion assets under administration, 4,245 plans, 138,391 plan members (as of Sept. 30, 2008).
Description: A complete array of recordkeeping and administrative/ communications services for DC plans, including MPPPs, Group RRSPs, DPSPs, EPSPs, stock purchase plans and taxable savings plans. As well, we provide services for flexible components for DBPPs. $450 million assets under administration, 88 plans, 12,054 plan members.
Manulife Financial Contact: Nancy Campbell, director, marketing and education services Tel: (519) 747-7000, ext. 37414 Fax: (519) 747-6182 E-mail: nancy_campbell@manulife. com Address: Del Stn KC-6, P.O. Box 396, Waterloo, ON N2J 4C6 Web: www.manulife.ca/gro Description: A range of group savings programs including DC pension plans[dam1], registered and non-registered savings plans, employee stock purchase plans and investment-only services for DB programs. An online governance support centre, industry-leading member statements and the awardwinning Steps Retirement Program are also available. $12.9 billion assets under administration, 4,911 plans, 600,070 plan members (as of June 2008).
Morneau Sobeco Contact: Greg Hurst, national DC practice leader Tel: (778) 327-5385 (direct line) Fax: (604) 632-9930
Great-West Life
Integra Capital Management
Contact: Jeff Aarssen,VP, group retirement services distribution
Contact: Joan Johannson, president & managing director
Address: One Morneau Sobeco Centre, 895 Don Mills Road, Toronto, ON M3C 1W3
Tel: (519) 435-7038
Tel: (905) 829-7284
Web: www.morneausobeco.com
Fax: (519) 435-7800
Fax: (905) 829-2726
E-mail: jeff.aarssen@gwl.ca
Email: jjohannson@integra.com
Address: 255 Dufferin Ave., London, ON N6A 4K1
Address: 2020 Winston Park Dr., Suite 200, Oakville, ON L6H 6X7
Web: www.grsaccess.com
Web: www.IntegraGRS.com
Description: Fully integrated recordkeeping and administration for DCRPPs, group RRSPs, group TFSA plans, DPSPs, and non-registered savings and stock plans, retirement modeling tools (which can also be integrated with
E-mail: ghurst@morneausobeco.com
DB and hybrid plan administration), CAP consulting (design, governance, investment, communications and administration), investment performance monitoring and employee retirement/financial planning seminars. $2.4 billion assets under administration, 101 plans, 146,000 plan members.
Open Access Limited Contact: Steve Elioff, senior VP, sales Tel: (416) 364-5103 Fax: (416) 364-6677 E-mail: selioff@openaccessltd.com Address: 120 Adelaide St. W., Suite 1202, Toronto, ON M5H 1T1 Web: www.openaccessltd.com Description: A simplified, yet highly effective, retirement solution using actively managed investment portfolios that reduce the sponsor’s administration and potential fiduciary liability under the CAP Guidelines. Plans available include Group RRPSs, DPSPs, DCPPs and non-registered plans. $209 million assets under administration, 356 plans.
SEI Investments Company Contact: David Lester, director, national accounts Tel: (416) 847-6370 Fax: (416) 777-9093 Email: dlester@seic.com Address: 70 York St., Suite 1600, Toronto, ON M5J 1S9 Web: www.seic.com Description: SEI, a leading provider of manager-of-managers solutions, offers our DC clients an investment-only and a fully bundled solution. By drawing on 30 years of asset allocation expertise, SEI offers a more sophisticated approach to DC investment portfolios. $648 million assets under administration, 16 plans (as of Sept. 30, 2008).
(see Directory on page 30)
Directory
30 November/December 2008 • Employee Benefit News Canada
Directory (From page 29)
Standard Life Contact: Claude Leblanc, senior VP, group savings & retirement Tel: (514) 499-7999, ext. 7552
Fax: (514) 841-2860
Web: www.standardlife.ca
E-mail: claude.leblanc@standardlife.ca
Description: Recognized industry leader in recordkeeping, member communications, and education (award-winning
Address: 1245 Sherbrooke St. W., Montreal, QC H3G 1G3
“Plan for Life” program) and investment services for DC/DB arrangements such as pension, savings, stock and profit-sharing plans, and IPPs. $14.4 billion assets under administration, 5,657 plans, 620,890 plan members (as of Sept. 30, 2008).
Sun Life Financial Contact: Lynn MacAdam, national VP, national accounts sales Tel: (416) 408-7963 Fax: (416) 595-6295 E-mail: lynn.macadam@sunlife. com Address: 225 King Street West, Toronto, ON M5V 3C5 Web: www.sunlife.ca Description: Defined contribution pension plans, group registered retirement savings plans, deferred profit-sharing plans, non-registered savings plans, stock purchase plans, tax-free savings accounts and specialized investment solutions for defined benefit plans. $32 billion assets under management, 7,411 DC plans, 975,000 plan members (as of Sept. 30, 2008).
TD Asset Management Contact: Robin Lacey, managing director Tel: (416) 944-6313 Fax: (416) 308-9816 E-mail: robin.lacey@tdam.com Address: 161 Bay St., 34th Floor, Toronto, ON M5J 2T2 Web: www.tdassetmanagement. com Description: TD Asset Management believes clients’ investment needs are best served by progressive solutions that seek to deliver optimal risk-adjusted outcomes. Increasingly, these solutions are moving beyond the conventional asset-only focus into liability-based approaches employing traditional, alternative and structured investments. $5 billion assets under administration, 22 DC plans.
Cover Story
Workplace (From page 27) occur every year. Eight percent of workers are taking medication to treat depression and other mental health conditions. Mental illness costs the Canadian economy $51 billion each year.”
Engaging activities At Great-West Life Assurance Company offices in Winnipeg, Regina, London and Toronto, “a series of informative and entertaining seminars and events were held to celebrate the inaugural Healthy Workplace Month,” according to Wes Jones, director of group product development for Great-West Life. Staff in those locations were able to attend “seminars on nutrition, fitness, health and emotional well being, and participate in a variety of physical activities, including group walks and stair climbing challenges,” he says. The initiatives were supported through “The Key to Giving,” the national corporate citizenship program of Great-West Life, London Life and Canada Life. GoodLife Fitness, the official fitness provider for the Healthy Workplace Month, hosted a kick-off party and sponsored an open house Oct. 6 -10 at all of its facilities across the country. In addition, GoodLife Fitness created a new healthy workplace resource on its web site to educate people and to promote “Healthy workplaces . . . all year round.” The resource includes activities and tools for individuals and for company managers and teams.
Putting a toe in the water President and CEO of Buffett & Company Ed Buffett hopes that Healthy Workplace Month will “open the gateway for those organizations
November/December 2008 • Employee Benefit News Canada
Healthy workplace calendar The Nova Scotia Public Service Commission created a calendar featuring successful wellness programs to encourage healthy behavior throughout the year. ”Last year we put out a calendar for employees and we’re doing it again this year and will deliver it during Healthy Workplace Month,” says Joan Parks-Hubley, healthy workplace coordinator for Joan Parks-Hubley nearly 20 government departments across Nova Scotia. The “healthy workplace calendar” is designed to increase awareness about the elements of a healthy workplace and to inspire individuals and teams to make changes that promote both employee and organizational health. ”During the summer we asked committees to submit success stories so that we could make them part of the calendar,” she adds. The criteria for inclusion in the calendar were stories of successful initiatives that could be replicated by other departments. Government teams from across the province submitted everything from novel ways to do problem solving to promoting healthy eating to green initiatives to ways to build leadership. ”We got 32 stories. We chose the best 12 for the 2008-2009 Healthy Workplace Employee Calendar,” Parks-Hubley says. Stories that didn’t make the calendar may be highlighted later on the commission’s Healthy
President and CEO of Buffett & Company Ed Buffett says he hopes Healthy Workplace Month will open the gateway for organizations that have not been focusing on wellness initiatives. taken the position that the government pays for health care. People have come to realize that the government pays for it, but with your money. We have a stake in managing the cost of
Workplace web site or in its newsletter @ The Window. ”The calendar takes Healthy Workplace Month beyond the month. It’s a way to celebrate and recognize the groups that are doing good work and to give tips so that other employees will be more engaged by seeing real life examples,” she says. The Nova Scotia Public Service Commission has also promoted other activities during Healthy Workplace Month, including breakfasts in both Halifax and Sidney to honor and celebrate the efforts that workplace committees make all year long. 08 The theme of the 09 “breakfast of champions” was promoting workplace health through story telling, Parks-Hubley says. “We had Shauntay Grant, the poet and spoken word artist. We had storytelling, and drumming, and talking about storytelling as a method of promoting health. We had local committees telling their own stories.” During the final week of Healthy Workplace Month, the wellness committees in the various departments were concentrating on launching the healthy workplace plan for rest of the year. “We have a good foundation in place and we’re working on growing it,” Parks-Hubley concludes.
think seriously about wellness.” He also believes the event is especially important for companies with 50 to 1,000 employees because they often don’t have human resource professionals and wellness gets overlooked. “I think the focus on wellness for a month makes it easier to talk with an organization’s general manager who has the HR responsibilities. This month will be reminder and reinforce that [wellness] message.” A particularly important concept the event imparts is that “wellness programs are very inexpensive. It’s not a big ticket item and it can give employees a positive experience,” he notes. “There are a lot of solid business reasons for wellness. There’s research that clearly demonstrates that wellness programs do have a return on investment.”
The event is especially important for companies with 50 to 1,000 employees because they often don’t have human resource professionals, and wellness gets overlooked. that have not been focusing on or entertaining wellness initiatives.” That could be a lot of organizations, because, according to Buffett, “The vast majority of Canadian employees are doing nothing or not enough.” ”Too many companies have naively
31
provincial health care,” he says. For companies that have put “a toe in the water or are up to their knees,” Buffet suggests that Healthy Workplace Month will be a way to impart information and focus on educating people. “I think it’s going to take reinforcement to really get people to
In addition, with the revocation of mandatory retirement Buffett believes companies must look carefully at what can they can do to keep some of these older employees who are productive and want to keep working. ”Companies have to be seen offering a lot of innovative programs. Wellness
SUCCESS STORIES FROM OUR HEALTHY WORKPLACES
A Calendar for Nova Scotia Government Employees
At Great-West Life Assurance Company offices “a series of informative and entertaining seminars and events were held to celebrate the inaugural Healthy Workplace Month,” according to Wes Jones, director of group product development for Great-West Life.
Lori Walker, healthy workplace coordinator for the National Quality Institute says, “When it was only a week long the feedback we received said that was not long enough to do certain challenges.”
initiatives fit in nicely because they attract and retain employees and that should motivate employers to invest in such initiatives,” he says. —E.B.N.C.