CPBI Workshop: Pension Governance

The following notes were taken at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) held June 5-7 at the Delta Hotel in Winnipeg with the theme: “Thriving In a Climate of Change”.

Presenter: Zaheed Jiwani, Senior Consultant, Eckler

Key Points

What are the key success factors of an organization?

  1. Attract good people.
  2. Manage their careers.
  3. Keep them productive.

A pension plan is obviously important to helping attract and retain good people. But even with a pension plan, a problem arises if the pension is insufficient for retirement or if the members don’t full understand how much pension they need to retire.

In both scenarios, workers typically stay around longer than they need to, which blocks the career growth of younger workers. Or they waste time and productivity worrying about money.

Everyone assumes that 70-percent of your final income is needed for retirement. In fact, academic studies show this is not correct, as many factors affect retirement living standards.

The LSRR (Living Standard Replacement Rate) is an individualized metric. Every worker needs counseling to help them make the best choices for their unique situation.


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CPBI Workshop: Pension Regulator Panel Discussion

The following notes were taken at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) held June 5-7 at the Delta Hotel in Winnipeg with the theme: “Thriving In a Climate of Change”.

Panel: Paul Owens (Deputy Superintendent of Pensions, Alberta) / Lester Wong (Deputy Superintendent of Pensions, Ontario) / Jennifer Sutherland Green (Superintendent of Pensions, New Brunswick) / Moderator: Tyler Smith (Senior Consultant, Coughlin & Associates)

Key Points

In Ontario,

  • All new plans in past few years are DC.
  • Currently, plans are split 50/50 DB/DC.
  • 85-percent of members are covered by DB.
  • 95-percent of money is in DB.

As a result, regulators are paying attention to make sure DC is better managed so that members are better served and employers have a better handle on liability and risk. Sometimes people have too much choice and not enough direction.

In Alberta,

  • There are 750 pension plans, of which 500 are DC.
  • 95-percent of money is in DB plans.
  • DB plans are popular with Alberta workers. Half the DB plans are still fully open and a few brand-new DB plans have been launched in the past few years.

The regulators are concerned that average plan members do not have the tools or knowledge or experience to make good investment choices.


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CPBI Workshop: How and Why to Take Care of Your Employees’ Sleep

The following notes were taken at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) held June 5-7 at the Delta Hotel in Winnipeg with the theme: “Thriving In a Climate of Change”.

Presenters: Josee Dixon, Desjardins / Bradley Smith, HALEO Preventive Health Solutions Inc.

Key Points
Sleep disorders such as insomnia cost employers an average of $5,000 / year in lost productivity for each employee who has such a disorder, and yet treatment only costs an average of $500 / year, which points to a huge untapped ROI for employers.

An employee with sleep apnea, for example, can wake up over one hundred times in a single hour, making restful sleep impossible.

Sleep problems lead to higher rates of absenteeism and presenteeism (when an employee is present but not actually contributing or doing their job). People who suffer from sleep problems also have higher rates of hypertension, diabetes, mental health problems, and stress.

The medical community is not equipped to address sleep issues. GPs are not trained to treat sleep issues, and Canada has one sleep specialist for every 25,000 people with sleep problems.

Some employers encourage employees to take short power naps. For example, a 3-5 minute power nap before 3:00 pm has been demonstrated to reduce stress, reduce errors, and increase productivity. It also has as much benefit as a 20-minute nap. But it is obviously better to help people get a better night’s sleep if possible, making napping unnecessary.

Millions of people use medications to address sleep problems, but there are drug-free therapies that do the job just as well.

HALEO is a Canadian start-up that helps employers support better employee sleep. Their approach is:

  • Evidence-based: they work with professionals and a major clinic to deliver cognitive behavioural therapy.
  • Supportive: they ensure clients have support throughout the care pathway.
  • Accessible: they have developed a mobile app to support clients directly.
  • Simple: ERs can seamlessly roll this solution out to their entire workforce.

The HALEO solution begins with an app-based survey to identify employees with sleep problems. This sub-group then receives telephone support and diagnostic treatment plans via the Sleep Health Institute. Diagnosis and treatment then follow via secure video conferencing with a therapist and secure private sleep coaching.

Early results are very promising with an ROI as great as $20 for every dollar spent.


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CPBI Workshop: Benefiting in the Platform Economy

The following notes were taken at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) held June 5-7 at the Delta Hotel in Winnipeg with the theme: “Thriving In a Climate of Change”.

Presenter: Lisa Callaghan, Manulife

Key Points

Disruption is coming to the group benefits landscape in the form of platform-based exchanges offered by technology companies rather than insurance companies.

Insurers are typically well-established, stable, and low in volatility. Insure-techs (tech companies offering insurance platforms) are none of these things, which gives them a potential opening to be nimble and innovative.

Insurers offer a risk pool and price their products via underwriting. Insure-techs look to offer choice to market places and are comfortable with upsetting the risk model.

The Canadian healthcare market sees healthcare as a right and the insurers govern themselves accordingly. Insure-techs see only consumers and seek to disrupt the current paradigms.

Consumers are beginning to warm to platforms and are starting to have e-commerce expectations. Insure-techs are looking for ways to offer choices.

Investment in Insure-techs by VCs has grown 7-fold over the past two years. Big changes are coming.

Insure-techs look to enter the market in the following ways:

  • micro-insurance / on-demand insurance (e.g., insure your camera for the ten days you go to Thailand for a vacation)
  • peer to peer products
  • leverage data to unlock efficiencies. EG use AI for underwriting and risk profiles.
  • low-margin / high-volume
  • automatic administration
  • digital platforms to reach consumers
  • B2B P&C packages
  • corporate platforms (instant quotes / no need for advisors / automatic enrollment / HR integration / member payments / member inquiries and communications via Smartphone)

One drawback of platform products is that more choice is not always better, and informed choice is more difficult to attain as people often choose based on price not value.


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CPBI Workshop: DB Pension Plans – Is Sustainability a Myth?

The following notes were taken at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) held June 5-7 at the Delta Hotel in Winnipeg with the theme: “Thriving In a Climate of Change”.

Presenter: Paul Lai Fatt, Partner, Morneau Shepell

Key Points

Sustainability is simply about making adjustments.
-change the money coming in,
-change future benefits (e.g., water down benefits for future cohorts)
-change past benefits

If you do all of these, almost any DB plan can be sustainable. However, that does not mean the stakeholders will all be happy!

The fact is, pension plan members all have different expectations about what payments they will be required to make and what benefits they will receive, but in the real world, nothing is carved in stone.

Therefore, the key is “right process”, where you adequately explain the risks and changes to stakeholders. It is not about measuring risk, but planning for it.

There are still a few new DB plans coming online from time to time, but most plan sponsors are moving to Target Benefit Plans.


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CPBI Panel: Rethinking Drug Plan Strategies

The following notes were taken at “Rethinking Drug Plan Strategies” panel at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) held June 5-7 at the Delta Hotel in Winnipeg with the theme: “Thriving In a Climate of Change”.

Panelists: Stephen Frank (Canadian Life and Health Insurance Association) / Barb Martinez (The Great-West Life Assurance Company) / Tanya Potashnik (Canadian Competition Bureau) / Moderator: Kim Siddall (Aon Hewitt)

Key Points
In the good old days, drugs were released at a cost of $20/pill. Those days are mostly gone, as new medications can cost over $50,000 per pill with annual prescriptions costing over $1 million per person.

Doctors are now comfortable with generic drugs and have no problem to prescribe them, which helps keep costs down. But doctors are not yet comfortable prescribing “bio-similars”, drugs which are nearly identical but are not generic duplicates. While bio-similars are usually cheaper, there is actually very little penetration in the drug market yet, but we expect to see more of these drugs in the years to come.

Plan designs are changing from 100 percent coverage to more like 80 percent. The goal is to get patients to put some skin in the game, so that they will be more conscious about seeking the lowest cost treatments available. Many union plans remain at 100 percent coverage. Fully insured plans are under stress and may not be sustainable due to the rising costs of drugs.

Carriers (i.e., insurance companies) are moving towards common definitions. For example, what defines a “critical illness”. This standardization will enable clients to more easily pick and choose the benefits that are right for them.

Canada is one of the only advanced economies that does not have national negotiations on drug prices. As a result, Canadian drug prices are amongst the highest in the world. The UK has twice the population of Canada and spends the same amount on drugs.

Drug companies are introducing patient assistance programs to ensure that patients fill and continue their prescriptions/treatments as per the doctor’s orders.


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CPBI Keynote: The Great ReWrite

The following notes were taken at a Keynote Session at Forum 2017, the annual convention of CPBI (Canadian Pension and Benefits Institute) with the theme: “Thriving In a Climate of Change”.

Speaker: Leonard Brody
Mr. Brody is an entrepreneur and business visionary involved with tech start-ups and concert promotion.

Key Points
We are rewriting the planet from the ground up. Every human activity and endeavour is being assessed, evaluated, and transformed. Even the new pope is rewriting a 1,700 year old institution, the Catholic Church.

We live in a time of unprecedented change, as we see institutions, governments, financial systems, and power structures melting down around us. As an example, for the first time in history, a single individual can now reach millions or even billions of people instantly via online technologies, without any form of mediation.

We have gone from being receivers of media to being nodes of media, and in doing so, we have each bifurcated into two separate identities, physical and virtual.

Amazingly, people are 4X more trusting of someone’s virtual identity than their actual physical self. To amplify this, 66 percent of marriages originate online, on a medium that didn’t even exist 25 years ago. And more amazingly, these marriages are 20 percent more successful than marriages that originate the old-fashioned way (eg bar, work, gym, blind date).

In this world of change, it is now possible to finance new ideas from a crowd rather than crossing a moat into the realm of venture capitalists.

There is a rising “entrepreneurial class”. People say they desire control, but in reality many are starting their own business out of necessity rather than accepting low paying jobs.

A suggestion for business people is to engage in “parallelism”, where you build a new business alongside your current business with the goal of destroying your current business and replacing it with the new one. Invest 10-25 percent of your time and resources into the parallel venture with the goal of bringing in at least 10 percent of your revenue from new products every year.


Leonard Brody









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NAFTA By The (Surprising) Numbers

The US has made their intention known to re-open NAFTA. These discussions will unfold over the next few months, so it will be helpful to understand some of the numbers behind the deal.

The following article (click the link below) gives a clear overview of the overall balance of trade and some of the other key issues to keep in mind. The entire topic has become highly politicized in the US, but the surprising reality is that, according to the numbers, this is not a bad deal for the US. In fact, the US might be getting more out of the deal than their northern neighbor.


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Has Disaster Been Averted in Cdn Mortgage Market?

Home Capital Group Inc. seems to have dodged a bullet that many feared could be the first crack in the Canadian mortgage and real estate market, which has been described as a bubble ready to burst.

Home Capital announced today that it has secured a commitment from a lender to provide them with a $2 billion line of credit in the face of a dangerous decline in deposits at their banking subsidiary, Home Trust. The deposits at Home Trust are a source of capital for mortgages, a primary business, so any drop in deposits limits their ability to lend to home buyers.

Shares of Home Capital dropped nearly 65% on Wednesday as depositers bolted in something of a run on the bank this week, with deposits declining from $1.4 billion down to just $814 million.

Bloomberg reports that the lender behind the line of credit is the Healthcare of Ontario Pension Plan (HOOPP), whose CEO sits on Home Capital’s board and is a shareholder. While Home Capital did not confirm the identity of the lender, they did advise that the terms of the loan will cause them to miss their financial targets. According to DBRS Ltd., the $2 billion loan has an initial interest rate of 10% and a $100 million setup fee.

News of the line of credit caused shares to rally and close at $8.02 on Thursday, up 33% from Wednesday but still down significantly from the $17.09 trading price on Tuesday.

Home Trust is known as an “alternative mortgage” provider, which means they provide mortgages at higher interest rates to borrowers with poor credit, and in fact they are Canada’s largest provider of such mortgages. Their current travails have caused other alternative mortgage providers in Canada to be downgraded on Thursday. For example, Jaeme Gloyn, an analyst at National Bank of Canada Financial Markets, issued the following note to clients on Thursday: “The combination of rapid deposit redemptions and the now elevated cost to replace said deposits has caused us to change how we view the world of alternative mortgage lending. As a result, we are downgrading Equitable Group to Underperform from Outperform and Street Capital Group to Sector Perform from Outperform.”

Shares of Equitable Group and Street Capital Group and other lenders were off over the past two days.

To compound the challenges facing Home Capital, they hold roughly $13 billion in fixed GIC deposits. As they mature at the rate of approximately $600 million per month, there is risk that they will not be able to replace these deposits, which could further undermine their ability to provide mortgages.

Home Capital also indicated on Thursday that the group is exploring “strategic options”, which is commonly used code for exploring the sale of the company.

How these events will impact Canadian real estate markets remains to be seen, but it is logical that the market will probably cool if fewer people have access to mortgages.



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Do Pension Funds Warp Ag Real Estate Values?

Reuters is reporting that, according to their sources, the CPP Investment Board (CPPIB) has started to get out of investments in farmland both within Canada and internationally.

The problem, it appears, began in Saskatchewan. The CPPIB bought over 100,000 acres in the province and was looking to buy more. This didn’t sit well with local farmers, who felt that the Canadian government, via the CPP, should not be in the business of speculating on farmland and driving up prices. The provincial government pushed back and actually banned sales of farmland to some institutional investors. The CPPIB reviewed their plans and decided to start getting out of farmland speculation not just in Canada but worldwide, where they were in the process of building up a sizable portfolio.

Pension funds and sovereign wealth funds around the world, representing over $2 Trillion dollars of investment capital, naturally see farmland and agricultural related industries as a relatively safe harbor for investments due to the projected need for humans to continue eating food in the future. The CPPIB will continue to invest in agri-business, such as their $2.5 billion investment in Glencore Plc in 2016. Other national pension schemes are reportedly still investing in farmland, but they can count CPPIB out of the game.

Whether this move will lower prices of farmland in Saskatchewan remains to be seen.


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