Ask employees what matters most to them in their compensation package and chances are only a few will point to their pension. Yet many of Canada's top employers see the pension plan as an important part of their commitment to their workers' well-being.
"We see pension as an important portion of the larger package of benefits we provide to attract and retain our team members," says Sandy Innes, vice-president of compensation and benefits for Vancouver-based Telus Corporation, Canada's second largest telecommunications company.
While retirement programs that go beyond government-mandated pension contributions are alive and well in Canada's best companies, there are variations in how pension plans are designed. In recent years, in particular, a number of employers have switched from defined-benefit pensions to defined-contribution plans.
Defined-benefit pensions pay a retirement income based on a formula that typically considers employees' years of service and salary. With a defined-benefit pension, the asset is managed by the employer - through an external pension fund manager - and retirement income is not affected by market performance.
A defined-contribution pension is funded by employer contributions based on each worker's salary, with employees sometimes required to make matching contributions. Unlike defined-benefit pensions, defined-contribution plans let employees decide how they would like their pension funds invested.
"Because of declining interest rates, employers have had to find ways to continue providing benefits that are sustainable and valuable to employees," says Paul Forestell, retirement market business leader for central Canada at Mercer LLC, a consulting firm in Toronto that provides HR and financial advice, products and services. "So many of the companies that remain committed to their retirement program have moved to defined-contribution pension and are asking their employees to share accountability in their own retirement."
Whether they're offering a defined benefit or defined contribution pension plan, Canada's top employers have built choice and flexibility into their retirement programs.
At Toyota Motor Manufacturing Canada in Cambridge, Ont., the defined-benefit pension plan includes voluntary early retirement with reduced benefits, several options related to survivor benefits, and the ability to enhance retirement income through flex pension contributions.
"It's a good plan that offers members flexibility," says Stephanie Pollard, human resources general manager for Toyota Motor Manufacturing Canada. "And all contributions are funded by us, our employees do not need to contribute to their pension."
In companies that provide a defined-contribution pension, plan members can usually choose from a set of investment combinations defined by the company or structure their portfolio as they wish within predetermined parameters.
At Montreal-based Yellow Pages Group Co., for example, employees can either go à la carte or pick from nine investment combinations. There is also a default mix of investments for plan members who choose not to take an active role in managing their pension fund, says Nathalie Leblanc, director of compensation and benefits for Yellow Pages.
"But we have tools and communications to ensure that every employee will visit the pension plan website at least once to make their initial selection," Leblanc says. "So far, the majority of our employees choose from the nine combinations while maybe 10 per cent are doing their own selections."
To help employees make educated decisions about their pension fund, Yellow Pages provides access to a website with resources such as an investment profile assessment tool. Employees can also call specialists who can answer questions about investing and retirement planning, Ms. Leblanc says.
"We also organize lunch and learn sessions with our pension plan provider," she adds.
Robert Vandersanden, a Calgary-based senior retirement consultant with Aon Hewitt, a human resources consulting and outsourcing solutions firm, says the best pension plans are those that take care of employees' needs while aligning with the company's business strategy.
This is why companies need to ensure their retirement programs are always in step with their business objectives, Mr. Vandersanden says. For example, if companies are focused on retaining employees, it makes no sense to offer generous early retirement options.
"You need to align rewards with your business strategy," Mr. Vandersanden says. "That's the best way to ensure your pension plan works for you and for your employees."
Mr. Innes at Telus says it's important for employees to understand that the company pension plan is only one part of their compensation package. And at Telus, this package includes competitive salaries, paid vacations, performance bonuses and such perks as personal concierge service and work-life balance allowance.
"We want to make sure we are addressing all our people's needs, and pension is just one component of that," he says.