Accounting changes for benefits and pension plans; new ways to manage drug plan costs
An in-depth look at these and other subjects are covered in the current issue of the Morneau Shepell News & Views
TORONTO, Jan. 18, 2017 /CNW/ - In the January 2017 issue of its monthly newsletter, News & Views, Morneau Shepell looks at the revised approach by the Canadian Institute of Actuaries (CIA) on accounting standards for corporations on how they report the cost and value of their employee benefit programs, including pension plans.
- The CIA Approach (Fiera Capital) and Morneau Shepell's approach – In October 2016, the CIA Task Force on Pension and Post-employment Benefit Plans presented a new approach to help plan sponsors select an appropriate discount rate to value their benefit plan liabilities in their financial statements. Morneau Shepell updated its own discount rate methodology as well.
- Pharmacoeconomics: new way to manage drug plan costs – The continuous market entry of new drugs can put significant upward pressure on health plan costs. Pharmacoeconomics (PE) is a scientific discipline that evaluates the economic value of a drug therapy and it's the job of the PE specialist to compare the cost-effectiveness ratio of a new drug to existing treatments, and evaluate the budgetary impact on health insurance plans based on the anticipated use of the drug.
This comes into play in health plans that limit coverage to a set list of eligible drugs known as a formulary, which is one way to limit and control rising costs.
- Manitoba: More solvency funding relief – On December 19, 2016, Manitoba amended its regulations to permit Manitoba-registered pension plans with a defined benefit component to extend the regular solvency amortization period from five to 10 years. Read this news item to confirm the requirements for being able to take advantage of this temporary solvency funding relief.
- Alberta: Dental fee guide reintroduced – The Alberta government has completed a review of dental fees charged in the province and announced that it will create a dental fee guide. An analysis of the dental fees currently charged found that in Alberta, a sample basket of procedures costs up to 25% more than in Ontario and 44% more than in British Columbia. Since the Alberta Dental Association discontinued publishing a provincial dental fee guide in 1997, insurers processing claims have created their own fee guides for the province to use as the basis for reimbursement. Still no word on when the fee guide will be announced.
- Tracking the funded status of defined benefit pension plans as at December 31, 2016 – Morneau Shepell shares the changes in the financial position of a typical defined benefit pension plan with an average duration since December 31, 2015. Over the last year, the variation in solvency ratio stands between 2% and 6%.
- Impact on pension expense under international accounting as at December 31, 2016 – Morneau Shepell shows the expense impact for a typical pension plan that starts the year at an arbitrary value of 100 (expense index). Over the last year, pension expense has increased by 9%.
About Morneau Shepell
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, as well as 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 approximately 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 morneaushepell.com.
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