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19 Canadian Lab. & Emp. L.J. 23 (2015-2016)
The Economic Impact on Plan Members of the Shift from Defined Benefit to Defined Contribution in Workplace Pension Plans

handle is hein.journals/canlemj19 and id is 29 raw text is: The Economic Impact on Plan Members of the Shift from Defined Benefit to Defined Contribution in Workplace Pension Plans Bob Baldwin* The overarching theme of this paper is whether future retirees are likely to have an adequate standard of living in retirement, and related policy issues. The author begins by outlining Canada's three-pillared retirement income sys- tem, and by identifying the similarities and differences between defined benefit (DB) pension plans and defined contribution (DC) pension plans. Given the relative imprecision of these terms, the author cautions against treating pension plan design as a binary choice between DB and DC. The dimensions of the ongoing shift from DB to DC plans are measured by reference to information from Statistics Canada. The paper goes on to consider the capacity of DB and DC plans to generate pension income, through an examination of comparative data on contributions, rates of return and expenses. The paper also asks whether participants in DB plans enjoy an advantage over participants in other types of plans, in terms of accumulation of retirement wealth. As a corollary to this question, the author reviews several studies that attempt to map the range of benefit outcomes in DC plans. In sum, the author concludes that the switch from DB to DC increases the unpredictability of retirement income, manifested as both unpredictable retirement ages and unpredictable levels of income. Recent attempts have been made to enhance the predictability of contributions and benefits by creating plan designs which incorporate elements of both DB and DC, i.e. target benefit plans. However, the author points out, of almost equal importance to the issue of plan design is the issue of identifying appropriate organizational platforms for the delivery of pension benefits. 1. INTRODUCTION This paper assesses the economic impact on workplace pension plan members of the shift from defined benefit (DB) plans to defined * Bob Baldwin is an Ottawa-based consultant who has worked on pension issues for more than thirty years. He worked for the Canadian Labour Congress for all but three years from 1976 to 2005, the last ten as the Director of Social and Economic Policy. Mr. Baldwin was a member of the expert panel that advised the Ontario Expert Commission on Pensions, and he prepared a research report for the Government of Ontario on the retirement income prospects of Canadians as part of the federal, provincial and territorial dialogue among Ministers of Finance on this issue.

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