Wed, Mar 1, 2023 5:00 PM GMT
1 - Employers can leverage choice, education to help close pension gap among BIPOC workers
Employers can leverage choice and financial education to help close the retirement gap among the Black, Indigenous and people of colour community, says Janice Holman, a principal at Eckler Ltd.
A 2021 study by the Canadian Centre for Policy Alternatives, which analyzed data from the 2016 census, found racialized seniors were most reliant on public pensions, accounting for 40 per cent of their income, compared to 34 per cent for white seniors and 25 per cent for Indigenous seniors. And according to a Statistics Canada labour force survey from September 2020, low-income employees accounted for an above-average share of all workers in most of the population groups designated as visible minorities.
Defined benefit and defined contribution pension plans are locked in and are the least flexible plans on the market due to mandated contributions in many cases, says Holman, noting a group tax-free savings account is a much more flexible option for low- and moderate-income earners because individuals can access the funds when needed. If a person remains at a fairly low income for their lifetime and doesn’t accumulate much in the way of retirement savings, she adds, a group TFSA won’t affect their government subsidized benefits in retirement.
Another savings vehicle that’s becoming more prevalent is a retirement savings plan with a student debt repayment option. In this arrangement, either the employer or employee contribution goes towards paying down the student loan, while the other is directed to retirement savings. Holman notes many people in the BIPOC community may not benefit from intergenerational wealth transfer so they’ve amassed student debt in order to pay for post-secondary education.
“Now that there is a broader array of plans available, employers are re-evaluating their [options] to see what works best for their workforces. Helping employees meet their current financial needs, while also [helping them] save for their retirement . . . will get them to a much better financial position.”
If employers can create good savings behaviours among their employees early, they’ll continue that behaviour throughout their working career. “Yes, they might use some [TFSA savings] for something other than retirement, but maybe that’s the best use of their resources at this point in time. . . . If [employers] can get people to . . . learn how to save and build an emergency fund, . . . they will be on a better path to financial wellness than if [they] offer a pension and [employees] decide they can’t contribute . . . because they may need the ability to access their money.”
Tyler Downey, secretary treasurer of the Service Employees International Union Healthcare, agrees. The union’s MY65+ plan is a group TFSA available to all of its employees and union members. Over the last two years, he’s aware of only two withdrawals out of the hundreds of members enrolled in the plan. “What that tells me is . . . get them in, start them small and just let them go.”
Financial education is also key, says Holman, adding these programs should be inclusive to all employee groups and approached from a diversity, equity and inclusion perspective. “Trust in the financial system is a huge barrier to people absorbing and taking action on the financial planning information they might gather.”
Simplicity is important, says Downey, suggesting employers focus the conversation on the importance of retirement security and how saving $30 or $40 a month for the next 20 to 30 years can help them reach their retirement goals. “It’s really [connecting it] to the individual [to] help [them] get over their fears of starting [to save]. . . . Once they . . . pick up the habit, it becomes a longer-term [behaviour].”
When employees can’t afford to retire, workforce management becomes a real struggle for companies, says Holman, noting it poses a morale risk to younger workers when older employees can’t vacate senior positions. It could lead to increased benefits costs and disability leaves, as well as absenteeism and presenteeism stemming from the mental-health impacts of financial stress.
“It’s one of the biggest issues employers are going to be dealing with for the next 10 to 15 years, especially in these difficult economic times.”
Changes to Ontario’s policy on the use of biosimilars in its public drug plan could result in savings for private benefits plans if they choose to follow the provincial model, says Theresa Tran, a principal in group benefits at Eckler Ltd.
Starting March 31, Ontario Drug Benefit recipients who are on an originator biologic will begin to transition to a Health Canada-approved biosimilar version. Ontario is the seventh province or territory to announce a biosimilars switching policy, after Northwest Territories, British Columbia, Alberta, Saskatchewan, Quebec, New Brunswick and Nova Scotia.
Where insurers integrate provincial biosimilars strategies into their group benefits plans, plan sponsors and members can benefit from cost savings, says Tran, noting one insurer reported more than $20 million in cost avoidance after nearly all of its B.C.-based plan sponsors transitioned to the provincial policy.
“The cost avoidance would encompass those patients taking a biologic transitioning to a biosimilar, plus new patients being prescribed a biosimilar rather than the originator biologic.”
As more benefits plan sponsors look to adopt these policies, it will be key for the health-care industry to provide awareness and education about biosimilars, says Tran. “Educating patients, physicians and other health professionals about biosimilars, their safety and efficacy and how they fit into the provincial policies can be challenging. If that’s been achieved, plan sponsors will experience less of an impact from integrating biosimilars into their plans.”
More than three-quarters (78 per cent) of employers in Ontario believe supporting employee mental health and well-being is important for their organization’s success, according to a new survey by the Ontario Chamber of Commerce.
However, the survey, which polled more than 1,900 organizations across the province, also found just over a third (37 per cent) said they have a formal strategy for employee mental health and well-being, a percentage that has remained largely unchanged since 2017 (40 per cent).
Nearly two-thirds (64 per cent) of respondents said they offer paid sick leave to their permanent employees, with the number of paid days varying depending on the size of the business. For instance, among the small businesses surveyed, 40 per cent said they don’t offer paid sick days, while 21 per cent offer between one and three days, 20 per cent offer four to six days and 18 per cent offer seven or more days.
By contrast, just two per cent of large businesses don’t offer any paid sick days at all, while 12 per cent offer between one to three days, 37 per cent offer four to six days and 49 per cent offer seven or more paid sick days.
The survey also found 60 per cent of respondents called diversity, equity, accessibility and inclusion important to their organizations’ success, with 44 per cent saying they have strategies in place.
When it comes to remote working, fewer than half (44 per cent) of respondents currently do business fully onsite, compared to 64 per cent that did so prior to the coronavirus pandemic. Meanwhile, more than half (56 per cent) currently work either fully remotely (six per cent) or in a hybrid model in some capacity (50 per cent).
According to the survey, hybrid work remains considerably more common in predominantly urban regions (Toronto, London, Ottawa and the Kitchener-Waterloo-Barrie region) and least common in the Stratford-Bruce Peninsula, where there is a larger share of skilled trades and tourism- related work.
The Canadian Employee Ownership Coalition is urging the federal government to introduce an employee ownership trust in the next federal budget and to remove tax barriers to employee ownership by adopting the U.K.’s approach to a capital gains tax exemption.
The federal government pledged to study the barriers to employee ownership in its 2021 budget and committed last year to introduce an employee ownership trust to give retiring employers more incentive to sell to their employees. However, it’s yet to release any draft proposals or legislation.
“In the U.K. and U.S., they’ve had this policy in place for [a while now] and it’s been positively benefiting workers,” says Tim Masson, chief executive officer of Raise Recruiting and a member of the coalition’s steering committee.
“So I think what this group identified and what we’re seeing in these countries is business owners need to come up with succession plans and it’s not easy. Families don’t necessarily want to take over the business, so they need to figure out what their exit strategy will be.”
Toronto’s Juno College of Technology is one organization that’s planning to move to a 100 per cent employee-ownership model. Heather Payne, its CEO and a member of the coalition’s steering committee, says while it was easy to get a lot of supporters involved from the business community, individual voices can only do so much.
While the coalition is meant to be a short-term project created solely to achieve its goals with the upcoming budget, some members plan to continue offering support and resources to employers once those objectives are met, she notes.
Masson believes Canada is missing out on an opportunity for the generational shift that’s coming with so many Canadians nearing retirement. “[Having] the option to sell the business to your employees feels like an opportunity to sell the business without selling your soul. The other options, at least for my business, are to sell to a multinational competitor or private equity — and both of those paths start with Canadian job cuts.”
Canada requires clear, consistent guidance on the integration and reporting of sustainability factors into investment decisions, according to a new report from the United Nations-based principles for responsible investment.
“There are currently no consistent regulatory requirements for sustainability reporting that apply to all investors and issuers across Canada,” noted the report. “Without such a tool, the risk of greenwashing by issuers is high; investors may also be led to believe they are investing responsibly when they are not.”
According to the PRI’s findings, Canadian law permits institutional investors to incorporate sustainability-related factors to improve investment outcomes, though it’s unclear if fiduciaries are required to incorporate them. “Our own analysis shows that many Canadian investors may be interpreting their legal duties in ways that discourage them from considering sustainability impact goals even where pursuing such goals can help them discharge their duty to achieve financial returns.”
The ambiguity is due to the existence of conflicting language in rules from five federal and 21 provincial regulatory bodies. To clarify this, the report recommended the proposed guidelines be underpinned by a taxonomy built on science-based criteria to define what is and isn’t referred to by sustainable economic activity.
The report also recommended that regulators settle the question of whether pension plan sponsors should or must be required to consider sustainability-related factors. “In the absence of clearer regulation and direction from regulators, Canadian asset owners and asset managers will remain hesitant to use investment decisions, stewardship and policy engagement to pursue positive sustainability impacts — even if doing so is in line with their duty to prioritize investment returns.”
The PRI proposed that new guidelines require the assessment of sustainability risks in the investment process and also require a pension plan’s statement of investment policies and procedures to provide annual updates on how this is being done. “Regulators should clarify that the actions available to investors are not limited to asset allocation decisions and should encourage the use of stewardship, including collaborative engagement, by investors.”
Reference: Benefits Canada
