RBC will stop offering new Canadian hires access to its defined benefit plan, a move that Canada’s biggest bank hopes will result in more stable costs down the road.
Companies across the country are phasing out defined benefit plans in favour of defined contribution plans to mitigate their pension funding risks. The potential future savings are significant for a company like RBC, which has more than 50,000 employees in Canada.
The bank’s chief human resources officer Zabeen Hirji recently sent an internal memo to the bank’s employees announcing the changes, which are the result of a large review of the bank’s retirement program.
Effective January 1, 2012, the defined benefit plan will no longer be available to new employees, the note says. Current employees who are already in the defined benefit plan can remain in it, or can opt to switch to the company’s defined contribution plan, which it is beefing up.
On July 1 of next year the defined contribution plan will be bolstered by the introduction of an automatic RBC contribution, higher matching contributions and higher annual RBC contribution limits, Ms. Hirji said in her memo.
A spokeswoman for the bank said that the changes are being made to ensure more predictable pension costs in the future. “There is no cost savings for us in the near term,” she said.