CIA Pension Seminar April 15, 2009 Colloque sur les régimes de retraite de L’ICA Le 15 avril 2009Innovation: The Pension Industry’s Best Hope for the Future Christopher A. Brown Alberta/BC Joint Expert Panel on Pension Standards Osler, Hoskin & Harcourt LLP, Calgary

Setting the Stage for Innovation CIA Pension Seminar/Régimes de retraite de L'ICA

Approach to Recommendations  “Fundamental re-think” needed  Attempted to “find a balance” Something for everyone, but no one will like everything  Recommendations intended as a package  Important to move the process forward  Consider the big picture! CIA Pension Seminar/Régimes de retraite de L'ICA

Objectives of the Legislation  Comprehensive re-write of legislation needed, based on clear objectives  Key recommendations: Expansion of private sector pension coverage should be stated government policy objective Governments should consider incentives Legislation should reflect objectives, but not state them Legislation should be comprehensive code CIA Pension Seminar/Régimes de retraite de L'ICA

Principles-based vs. Rules-based Legislation  Legislation should apply “principles where possible, rules where necessary”  Key recommendations: Acts should house principles of general application to all plans; rules in regulations Regulator should have necessary discretion and resources to operate in such a system Regulatory interpretation and future policy development should be carried out in conjunction with a policy advisory body CIA Pension Seminar/Régimes de retraite de L'ICA

New Structures  Regulator cannot be expected to both regulate and promote the system  “Checks and balances” and pension community input needed  Key recommendations: Joint Pension Tribunal to review regulator decisions Joint Pension Advisory Council to provide input into policy development Pension Advocate to chair JPAC and actively promote the system CIA Pension Seminar/Régimes de retraite de L'ICA

Plan Design Innovation CIA Pension Seminar/Régimes de retraite de L'ICA

Alternative Plan Designs  All existing plans should not operate under identical rules  New plan types should be encouraged  Key recommendations: Different rules for different types of plans Permit flexibility in the development of new plan types, subject to principles of general application New governance structures should also be permitted, subject to certain limitations CIA Pension Seminar/Régimes de retraite de L'ICA

The “ABC Plan”  A simple, cost-effective, non- burdensome alternative is needed to encourage coverage  ABC Plan concept designed to address this need, through professional management and economies of scale  A single plan for Alberta and BC most likely to achieve the objectives CIA Pension Seminar/Régimes de retraite de L'ICA

ABC Plan: Key Attributes  A registered plan, open to all employers and employees, and the self-employed, in Alberta and BC  To operate at arm’s-length from government  “Double opt-out” participation mechanism CIA Pension Seminar/Régimes de retraite de L'ICA

ABC Plan: Key Attributes, cont.  Governance by a board consisting of a majority of pension experts with employer and member representation  Administration and investment to be tendered, until internal expertise developed  Acknowledged communication challenge CIA Pension Seminar/Régimes de retraite de L'ICA

ABC Plan: Proposed Design  DC design, with contribution “tiers”  No investment choice for members  Portability limited when moving between participating employers  Locking in subject to same rules as other plans (prefer “no unlocking” option)  Immediate vesting  Auto-annuitization to minimize end-date risks CIA Pension Seminar/Régimes de retraite de L'ICA

ABC Plan: Implementation  Much detail still needs to be worked out  A Steering Committee should develop design and consider implementation issues, including: How to obtain information necessary to make “double opt-out” work Communication challenges to ensure buy-in and take-up  Committee to also consider expansion to other provinces CIA Pension Seminar/Régimes de retraite de L'ICA

ABC Plan: Recent Developments  March 13, 2009 – Premiers of BC, Alberta and Saskatchewan announce agreement to “work on developing and considering a new regional voluntary pension plan”  March 23, 2009 – BC government introduces Bill 11 amendments to the BC PBSA to facilitate the new plan CIA Pension Seminar/Régimes de retraite de L'ICA

Other Legislative Innovations CIA Pension Seminar/Régimes de retraite de L'ICA

Legislative Innovations  Role of the Regulator – give tools and discretion needed to approve new designs, with or without conditions  Governance – Flexibility increases focus on good practices, e.g. governance and funding policies, education and training  Fiduciary Protection –create “pension judgment rule” defence CIA Pension Seminar/Régimes de retraite de L'ICA

Legislative Innovations, cont.  DB Funding and Surplus – Permit “Pension Security Funds” and “ring- fencing” of historical plans  SCTB Plans – expand MEPP treatment, use “going concern plus” funding standard  ITA –changes needed to facilitate innovation and funding proposals CIA Pension Seminar/Régimes de retraite de L'ICA