Shifting Public Sector DB Plans to DC – The Experience so far and Implications for Canada
Research paper finds conversion to defined contribution pensions comes with higher costs
The research paper, Shifting Public Sector DB Plans to DC – The Experience so far and Implications for Canada, examines the claim that converting public sector DB plans to DC is in the best interests of taxpayers and other stakeholders by studying the experience of other jurisdictions, including Australia, Michigan, Nebraska, New York City, Saskatchewan and Texas and applying those lessons here.
Shifting Public Sector DB Plans to DC – The Experience so far and Implications for Canada is written by Robert L. Brown, retired professor from the University of Waterloo and president of the International Actuarial Association, and Craig McInnes, a business journalist and writer. The research paper explores the implications of converting large public sector DB pension plans to individually controlled and pooled DC arrangements.
While the subject of the research paper is primarily a comparison of DB and DC plans, the authors note that many public sector plans have already evolved to the point where they are no longer pure DB plans in which only employers own the risks. Most large provincial and sector-based plans have already moved towards more risk sharing with plan members.
“We ask what are we trying to achieve through converting large public sector pension plans from DB to DC and then look at whether those goals would be achieved, not just for public sector employers but for everyone who would be affected either directly or indirectly.”
The paper concludes: “after examining the literature on the experience in other jurisdictions and modelling what the ramifications would be in converting a large Canadian DB plan to DC, we found that none of the stakeholders would ultimately be better off.”
Funding for the research paper was made possible by the CPPLC, a non-partisan group of public pension plans from across the country working together to help inform the debate about income security in retirement.
Backgrounder: About the authors
ROBERT L. BROWN
PhD, FCIA, FSA, ACAS
Robert is retired Professor of Actuarial Science and Director of the Institute of Insurance and Pension Research at the University of Waterloo. He retired in 2010.
He is currently the President of the International Actuarial Association (IAA) and served as President of the Canadian Institute of Actuaries (CIA) in 1990/91 and the Society of Actuaries (SOA) in 2000-2001. Robert also was the Research Chair for the Ontario Expert Commission on Pensions 2007-08.
He has authored seven books has published more than 50 articles in refereed journals. His research focus is the evolution of financial security programs in times of rapidly shifting demographics.
Professor Brown lives in Victoria, B.C.
CRAIG MCINNES
Craig is a Victoria-based journalist, writer and researcher who specializes in translating difficult and technical subjects into language that is accessible and compelling for ordinary people.
Until 2013, he wrote about pension issues, among other social and political topics, for the Editorial Board of the Vancouver Sun, as well as writing thrice-weekly columns and feature articles for the paper. He has written about both the financial and political context of pension issues in Canada with an emphasis on the implications for future generations and why young people should care and get involved in the debate.
During his 18 years at The Globe and Mail he opened the Victoria Bureau after serving as the Queen’s Park Bureau Chief in Toronto and was a beat reporter covering municipal affairs, the environment and health care.
