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“Employers face challenges like tough accounting rules and solvency funding, but they still want to offer an attractive and competitive benefits package. So, we are open to all sectors, public and private. All parties have to do their due diligence, but we are really raising awareness that people don’t need to be shy about approaching us. It’s really about whether the employer can pay their contributions on time, do they want to be a competitively advantaged employer, do they believe in DB – and those types of things.” – Derek Dobson


With a successful merger in the books, the Colleges of Applied Arts and Technology (CAAT) pension plan is eager to begin a new chapter in its provision of adequate retirement income.
The introduction of the Royal Ontario Museum (ROM) pension plan into the CAAT fund received final provincial approval last December, from the Financial Services Commission of Ontario (FSCO), but active members of the museum plan began to contribute to CAAT on Jan. 1, 2016.
Based on the support, 97 per cent of active, retired and deferred members said yes to the move, it didn’t seem like that hard of a sell.
“Quite simply, employees get a secure defined benefit pension plan … a lifetime guaranteed income with some inflation protection,” Derek Dobson, CAAT CEO and Plan Manager, told ARIA during a recent conversation.
It’s a benefit Canadians want, he continued, citing a recent survey from the Canadian Public Pension Leadership Council (CPPLC) that showed “by far, Canadians want DB features: predictable, secure, inflation-linked with early retirement protection, and that they are willing to pay for that.”
The ROM experience proved such a positive one for CAAT, its board of directors and sponsors began a discussion exploring the possibilities of expanding the plan to private sector employers, as well as education-based public sector employers such as universities.
“We have become more open to being a pension provider (regardless) of what stripes you have on. It’s just about making a good benefits promise,” says Dobson. “This is now an opportunity to bring more Canadians into something that is working well. It’s what they want.”
Established in 1967 when Ontario’s college system was launched, CAAT is a jointly sponsored, multi-employer plan originally designed to manage pensions for college employees. It has 44,700 active and retired members from 38 employers across the province. The plan manages assets that totalled $9.4 billion as of Dec. 31, 2016, is 113.3 per cent funded and returned 8 per cent net of management fees last year, outperforming its policy benchmark by 1.2 per cent.
For a number of years discussions have been held with universities about merging their plans with CAAT, a process that began with the 2012 Ontario budget that suggested single-employer plans, like those run by universities, find ways to become more efficient and better manage their pension risks.
“We are definitely open to allowing any employer to join us, whether they have an existing pension plan or not, and whether it is DB or not. So they can join CAAT and earn defined benefits on a going-forward basis, and that definitely includes the universities,” says Dobson.
“CAAT’s interest isn’t solely towards the universities but we are certainly open to them joining us as we think there is a good alignment in terms of risks, the types of employees we serve. We think we have a lot of value to offer the university sector overall.”
The benefits an employee would see from being a member of a plan like CAAT include retirement security through a reliable stream of lifetime income, but what does an employer get by having CAAT run their pensions? According to Dobson, it’s the best of both worlds, for employee and employer.
Costs and regulations related to the provision of pensions, he continues, have driven many employers to switch to defined contribution schemes, widely disparaged as inadequate builders of adequate retirement income, and others to not offering any type of retirement plan. Joining CAAT would relieve employers of the responsibilities, fiduciary and otherwise, of providing pensions.
“Employers face challenges like tough accounting rules and solvency funding, but they still want to offer an attractive and competitive benefits package. So, we are open to all sectors, public and private. All parties have to do their due diligence, but we are really raising awareness that people don’t need to be shy about approaching us.
“It’s really about whether the employer can pay their contributions on time, do they want to be a competitively advantaged employer, do they believe in DB – and those types of things.”
When it comes to DC or DB over the provision of adequate retirement income, the verdict is in and DB is the clear winner, says Dobson. The proof is in the details, and numerous studies, including this one from the CPPLC, show that DB has a clear advantage in effectiveness and efficiency.
As such, the movement of employers, public or private, single-employer or no plan at all, to a multi-employer plan like CAAT can only ease the crisis of inadequate retirement income, says Dobson.
“Employees and employers are almost getting twice the benefit for the same cost in DB, so I think it’s not only adequate but it’s also efficient. Not a lot of employers or members have extra cash lying about to throw at something that’s half as efficient as what you get from DB. “It’s a good alignment, not only on adequacy but also efficiency.”
CAAT is celebrating its 50th anniversary with a model that’s “pretty simple,” he continues. Employers match employee contributions, a commitment that shows workers their employer has “skin in the game.” Employers appreciate the model because they get the recruitment/retention benefits associated with DB, while having professional managers run the plan.
Celebrations associated with the anniversary are purposely low-key.
“No big events planned, but we are definitely being more vocal about our success. We are 113 per cent funded, and we are celebrating that. Our members and employers see great value in their contributions, and 91 per cent of members say the plan delivers reasonably good or excellent value.”
The plan continues its advocacy measures, including its Be a Pension Champion program, designed to promote the successes and value of the DB model. Fifty years of success have equipped CAAT with the means and ways of doing that, says Dobson.
“We have worked out the concept of a modern DB plan: the joint governance, the conditional inflation protection, looking at benefits security, making sure we have really strong communications programs to all our stakeholder groups … this is what makes DB relevant today.”
Other plans have made the case that remaining fully funded is far more important to the provision of retirement benefits than annual returns, a viewpoint with which Dobson agrees. So much so that when the plan released its 2016 results, it did not include its investment return but rather focused on its funded status “to make sure that is what got covered.”
Its investment news was recently released separately “for the curious.”
And while he supports initiatives like the increase in Canada Pension Plan (CPP) benefits, the CAAT chief says the goal of retirement-income provision should be more than trying to keep people out of poverty. It should be about maintaining a standard of living in retirement of the type provided by the three-legged stool of retirement: public pensions, private savings and workplace pensions.
“Canada’s three-pillar system is still very much important and the lack of coverage on the workplace pension pillar is really a problem because CPP and personal savings are not meant to work on their own … they really do need that third pillar.
“Pension promises last for 70 years between contributions and the payout phase … that’s a big risk for an employer. The real sweet spot for pensions is in that multi-employer space.”
The Canadian model of pension provision continues to receive praise and attention from around the world. Dobson points to three main reasons for that:
• an independent governance model that discourages political interference and one that should be emulated by “jointly sponsored and multi-employer pension plans.”
• a mindset that targets a funded status of 100 per cent or more, with steps taken “to make sure that happens.”
• the drive among Canadian plans to seek the best expertise possible.
“It’s clear that when you review the facts about the very efficient Canadian DB model and examine what it is that employees want and employers need, we are on the side of the angels.”

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