Legal case sets example of strong governance practices for defined contribution pension plans
An in-depth look at this and other subjects in the current issue of the Morneau Shepell News & Views
TORONTO, Oct. 24, 2019 /CNW/ - Morneau Shepell has released the October 2019 issue of its monthly newsletter, News & Views, in which the company looks at the following topics:
- Legal case demonstrates best practices for pension committees – A recent legal decision by a U.S. District Court provides a framework for governance best practices, particularly as they apply to defined contribution pension plans. In Wildman v. American Century Services LLC, plaintiffs claimed that fiduciaries had breached their duties of loyalty and prudence under the Employee Retirement Income Security Act of 1974. Although decided by an American court, the case sets out best practices for Canadian pension plan fiduciaries seeking to meet their duties and manage potential conflicts of interest.
- Saskatchewan court rules beneficiary designation invalid – A recent Saskatchewan court case demonstrates the complexities involved in making and changing beneficiary designations in pension plans. The decision should encourage pension plan members to use the forms provided by pension plan administrators in order to make, alter and revoke beneficiary decisions. In this case, a member of a Saskatchewan pension plan passed away after attempting in a handwritten will to change his beneficiary from his former spouse to his daughter. The court ruled that, since the designation was not made in the form provided by the pension plan administrator, his former spouse would remain the beneficiary.
- Annual Salary Projection Survey forecasts salaries will increase in 2020 – Morneau Shepell released the results from its 37th annual survey on salary projections, finding that base salaries in Canada are expected to increase by 2.7 per cent in 2020. Across Canada, the report predicts Newfoundland and Labrador is expecting the highest average increase, while increases are expected in British Columbia, Alberta, Ontario and Quebec at or above the national average.
- Tracking the funded status of pension plans as at September 30, 2019 – Morneau Shepell describes the funded status of pension plans over the first nine months of 2019 based on three typical investment portfolios. A graph shows the changes in the financial position of a typical defined benefit plan since the end of 2018. A table shows the impact of past returns on plan assets and the effect of interest rate changes on solvency liabilities of a medium duration pension plan.
- The impact of pension expense under international accounting as at September 30, 2019 – Morneau Shepell has shown the evolution of the pension expense for a typical defined benefit pension plan. Since the beginning of the year, the pension expense has increased by 33 per cent (for a contributory plan) due to the decrease in the discount rates, despite the good returns on assets (relative to the discount rate).
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SOURCE Morneau Shepell Inc.