By: Kathy Bergstrom
Target benefit plans (TBPs) remain a hot topic in the discussion around pension reform in Canada.
They’ve been around for many years in the form of multi-employer pension plans, but now the federal government and many provinces are considering and passing legislation that would allow TBPs for single employers, including those in the public sector.
Looking to better understand TBPs? Here are some of the basics.
What Are TBPs?
The federal government describes them as establishing a “middle ground” between defined benefit (DB) plans and defined contribution (DC) plans.
Employer and/or member contributions are predetermined like DC plans, but they offer a more predictable stream of benefits payable over the retiree’s lifetime like DB plans. TBPs provide a “targeted” pension benefit that may be variable based on plan funding levels, because benefits can be adjusted to respond to the plan’s funding position. Contribution rates may also be changed, although it’s generally expected the changes will be within a small range.
Much of the controversy about the plans surrounds whether employers should have the option of converting accrued benefits to a TBP and whether they should be able to change benefits for existing retirees. Critics are concerned that accrued benefits may be reduced despite previous employer guarantees that they would not be. Supporters say the plans are a better option than shifting plans to a DC model because of the DB-like benefit.
Want to Know More?
The International Foundation has a number of resources where you can find additional information on target benefit plans. Plans & Trusts magazine, Pension Reform Central and Benefit Bits videos have recently featured helpful information on TBPs. Check each regularly for updates in the future.
Plans & Trusts Magazine
This bimonthly Canadian magazine provides an in-depth look at benefits issues and reviews federal and provincial legal decisions and legislative developments.
“Intergenerational Equity in Target Benefit Plans,” by Barbara Sanders, Plans & Trusts, July/August 2014, pp. 18-22.
“Balancing Risk: Key Considerations for Target Benefit Plan Governance,” by Karen Hall, Claude Lockhead and Roy Stuart, Plans & Trusts, May/June 2014, pp. 12-16.
“Pension Innovation: New Brunswick’s Shared Risk Model,” by Jana Steele and Laura Stefan, Plans & Trusts, May/June 2014, pp. 18-22.
“Target Benefit Plans: A New Approach for Sustainable Retirement Income,” by Barry Gros, Karen Hall and Claude Lockhead, Plans & Trusts, January/February 2013, pp. 6-10.
Pension Reform Central
This resource offers the latest news on pension reform, regular updates on federal and provincial pension-related legislation and links to federal government resources.
Federal government consultation paper on TBPs:
Pension Innovation for Canadians: The Target Benefit Plan
Benefit Bits Videos
Industry thought leaders share their insights in brief, topical videos.
Target Benefit Plans
Brendan George, CFA, FCIA, FIA,, FSA
Shared-Risk Pension Plans
Have a question about a benefits topic and no time to research? We’d love to help! The International Foundation’s Information Specialists research member questions and provide customized information on any employee benefits topic.