Retirement Plan Changes in the Face of the COVID-19 Pandemic

The COVID-19 pandemic has had dramatic implications for workplace retirement programs in Canada. Volatile market conditions have organizations and individuals reviewing their financial options. At the same time, these conditions have led to interruptions in employment as employers contemplate early retirement offerings, hiring freezes, hour reductions and even layoffs. What retirement-based actions are employers and workers making due to the COVID-19 pandemic?

In June 2020, the International Foundation conducted a benchmarking survey to capture a snapshot of current conditions in Canada. The survey, Impact of COVID-19 on Pensions and Benefits in Canada: June 2020 Survey Report, addresses these topics as well as staffing changes, training and professional development, and more. The following results are from 226 benefits practitioners across Canada.

Retirement Plan Changes in the Face of the COVID-19 Pandemic

Plan Member Questions

The uncertainty facing retirement plan changes was evident in survey responses. Responding organizations were asked which benefits topics were seeing an increased number of inquiries. Some of these retirement topics with an increased number of questions include financial and retirement planning benefits (20%), early retirement options (19%), DB pension plans (18%), and DC plan withdrawals (7%).

Investments in Today’s Climate and Beyond

Staffing Levels

As mentioned, changes in service can leave gaps in worker income while interrupting contributions to retirement plans. To give context to actions taken, respondents from the corporate and public employer sectors were asked about staffing changes being made at their organizations. About two in five single and public employers (38%) have implemented a temporary hiring freeze. In addition, 28% have laid off workers or reduced their workforce. While less common, responding organizations have reduced worker hours (20%), required workers to take temporary unpaid leave (17%) and offered early retirement incentives (5%) to workers.

Defined Benefit (DB)/Target Benefit (TB) Pension Plans

On the employer side, respondents were asked about specific changes made to their offerings. More than three in five (62%) responding organizations have a DB or a TB pension plan. Those offering these plans were asked whether they were taking or considering taking specific actions due to the COVID-19 pandemic. About one in four (23%) have conducted an actuarial valuation due to the pandemic, with an additional 18% considering doing so. Similarly, one in nine (11%) has reviewed their actuarial plan assumptions/plan designs, with an additional 27% considering doing so. In addition, 6% have updated their investment policies, while an additional 23% are considering doing so. Small proportions of responding organizations have closed their plans to new members/hires (2%), discontinued offering benefits to some or all categories of active workers (2%) and/or changed their plan investment managers (1%).

Defined Contribution (DC) Retirement Plans

About one-half (47%) of responding organizations offer a DC retirement plan. Of those, about 9% of responding organizations that offer DC plans are noticing a greater share of their participants making changes to their contribution/deferral levels compared with pre-COVID-19 levels, while 8% are noticing a smaller share making changes. Nearly three-quarters (74%) of the responding plan sponsors allow DC plan withdrawals, and of those, most (64%) have not seen a change in the number of withdrawals compared to pre-COVID-19 withdrawals. However, 8% of plans that allow plan withdrawals reported an increase in withdrawals, with 2% reporting a decrease. More than one in four responding organizations (26%) reported that it was too early to tell. As for the number of interfund transfers, 16% of plans have noticed an increase and 84% have noticed no change due to the COVID-19 pandemic.

Learn More About the Impact of COVID-19

Download the full report: Impact of COVID-19 on Pensions and Benefits in Canada to learn more about how employers are reacting to the COVID-19 pandemic. The report is available free to International Foundation and ISCEBS members.

Find more coronavirus-related resources for employers on the Foundation’s Coronavirus (COVID-19) Resources page.

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Justin Held, CEBS

Justin Held, CEBS
Senior Research Analyst at the International Foundation 

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