CFOs less concerned about pension plan crisis: Watson Wyatt

By Bryan Borzykowski | April 25, 2008 | Last updated on April 25, 2008
2 min read
If Canadian CFOs seem to be walking a little taller these days, it could be due to the weight of the pension plan crisis being lifted from their shoulders.

In a new Watson Wyatt/Conference Board of Canada report, just 26% of 168 executives surveyed feel the problems with pension plans will be long-lasting. That’s down from 61% in 2006 and 48% in 2007.

“While pension risk continues to be a hot button issue for many organizations, this year’s survey reveals that respondents are less likely to see the situation as a long-term crisis,” says Gilles Rhéaume, the Conference Board’s vice-president of public policy.

The survey also found that 43% of vice-presidents of human resources felt the pension plan crisis was long-lasting — that’s down from 67% in 2006, though up slightly from 40% in 2007.

Ian Markham, director of pension innovation for Watson Wyatt, says that with CFOs more at ease, human resource departments can start playing a greater role in pension plan development. “The extent to which respondents believe that CFOs must be heavily involved in making plan design decisions seems to be on the decline,” he says. “The role that HR plays in making plan design decisions is expected to increase in five years.”

Right now, 50% of those surveyed said that financial considerations outweigh HR issues when it comes to plan design, but only 30% of respondents said that will be the case in five years. Nearly 60% of respondents believe HR and financial functions will play an equal role in plan design decisions come 2013.

Watson Wyatt also found that the trend to convert defined benefit plans to defined contribution is slowing. Less than 3% of those surveyed reported that they’re implementing some form of DB-to-DC conversion in the next year, down from 9% in the last 24 months.

Giving HR more control over pension plan design will allow companies to better attract and retain employees, says David Burke, Watson Wyatt’s Canadian retirement practice director. He adds that most respondents prefer DB plans for employee retention, as they have concerns with the ability of DC plans to properly provide for retirement.

Despite the positive news in the survey, 68% of people still place funding contributions as a top concern for DB plans, while 63% said the next biggest threat was asymmetry between risk and reward.

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Bryan Borzykowski