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Morneau Shepell experts define, discuss and debunk target benefit pension plans myths

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Corporate / Pension/Retirement / Canada

Morneau Shepell experts define, discuss and debunk target benefit pension plans myths

Paul Lai Fatt and Kevin Sorhaitz present at International Foundation of Employee Benefit Plans Conference, November 22-25, 2015

TORONTO, ON, November 22, 2015 – Two partners in Morneau Shepell’s Retirement Solutions practice are to present on the topic of “The Truth About Target Benefit Plans and Shared Risk” at the  International Foundation of Employee Benefit Plan (IFEBP) 48th Annual Canadian Employee Benefits Conference in Las Vegas, November 22 to 25. Paul Lai Fatt and Kevin Sorhaitz will examine the pros and cons of target benefit plans (TBPs) and other shared risk pension arrangements to provide attendees with a better appreciation of when it makes sense to use TBPs or similar types of plans.

“In these uncertain economic times, what we all really want – whether we’re a plan sponsor, plan member or other stakeholder – are pension plans that are sustainable,” said Lai Fatt. “History has shown us that sustainability means different things to different stakeholders, and that’s where the debate begins.” TBPs address this concern by allowing both benefits and contributions to vary within a predetermined range. “In order to remain sustainable, a pension plan and its supporting structure need to be able to absorb the economic shocks that are a natural part of being invested in the financial markets,” added Sorhaitz. “If not enough money is coming in through contributions from active members and/or investment earnings to cover the cost of benefits and expenses, then contributions have to increase, benefits have to decrease, or both.”

It is this “shared risk” aspect of TBPs that has made them unpopular with some plan stakeholders who would prefer accrued benefits remain protected under legislation. “A negative response to certain aspects of TBPs from some parties is perfectly understandable,” said Lai Fatt. “The security level of benefits under a defined benefit pension plan, however, is dependent on the financial stability of the plan sponsor. Increased funding is very difficult to implement. If stakeholders don’t work collaboratively to plan for and manage risk, history will repeat itself and some pension benefits will be in danger.”

A TBP can be more appropriate in some scenarios than others, depending on the financial and demographic realities of the plan. “In order to determine if a TBP should even be a consideration, all parties need to participate in some challenging discussions, starting with agreement on the definition of ‘sustainable’,” said Sorhaitz. “If the current plan design doesn’t meet that definition, then a custom-designed TBP may be the answer.”

Lai Fatt and Sorhaitz will be presenting on both Monday, November 23 from 2:00 to 3:00 pm PT, and Tuesday, November 24 from 2:15 to 3:15 p.m. PT. For more information about the 48th Annual Canadian Employee Benefits Conference, please visit the IFEBP website at

About Morneau Shepell Inc.

Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With almost 4,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit

For further information: Cathren Ronberg, Morneau Shepell, 416-355-5632,