{"id":16774,"date":"2019-09-12T09:15:49","date_gmt":"2019-09-12T13:15:49","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/telus-shares-journey-moving-from-db-to-dc-pension-135650"},"modified":"2019-09-12T09:15:49","modified_gmt":"2019-09-12T13:15:49","slug":"telus-communications-shares-journey-moving-from-db-to-dc-pensions","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2019\/09\/12\/telus-communications-shares-journey-moving-from-db-to-dc-pensions\/","title":{"rendered":"Telus Communications shares journey moving from DB to DC pensions"},"content":{"rendered":"\n
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Yaelle Gang<\/span> | September 12, 2019 <\/p>\n

Since Telus Communication Inc.\u2019s journey from defined benefit pension plans to defined contribution  began in 1996, it\u2019s come a long way, but it\u2019s far from over.<\/p>\n

During a session at the Association of Canadian Pension Management\u2019s annual conference on Wednesday, Carol Craig, Telus\u2019s director of benefits and pensions, and Dave Lawson, vice-president of investment management, noted the DC option was introduced in 1996. Its contribution structure mirrored the DB plan\u2019s design, added Craig, with the company match increasing with service. <\/p>\n

Read: Coca-Cola wins big for successfully communicating complex pension transition<\/a><\/strong><\/p>\n

\u201cTeam members could choose to go over to the defined contribution pension plan,\u201d she said. \u201cNew team members to Telus also had the option. They could choose either defined contribution or defined benefit. If they didn\u2019t make a choice, they were defaulted into the defined benefit pension plan because they always had a choice afterwards to move to DC if they wanted to. We didn\u2019t want to default them into an option that they couldn\u2019t have any more choices left.\u201d<\/p>\n

In 2007, the company closed its DB plans to management employees. Before the plan closure, Telus put together a team of employees from across Canada to look at the current DC plan it offered. \u201cWith input from team members across Canada, we changed our plan design and we took out that \u2018you get the most money after you have more service,\u2019\u201d said Craig. \u201cPeople could start to accumulate the money in the early stages, which we thought was extremely important, especially if we were actually going to think about retirement income adequacy at all.\u201d<\/p>\n

In 2011, the company closed its DB plans to unionized members through the collective bargaining process. However, four legacy DB plans, with about 4,000 employees still accruing service, were left open, noted Craig.<\/p>\n

Telus also has two DC plans, one regulated provincially and one federally. The bulk of staff are in those plans. The main challenges with the DC plan, according to Craig, are communications, engagement, assessing retirement outcomes and attraction and retention.<\/p>\n

Read: Pension communication errors can lead to surprise costs for plan sponsors<\/a><\/strong><\/p>\n

Telus also recently took its retirement plans to market, noted Craig. \u201cWe did this because we hadn\u2019t been to market for over 20 years.\u201d<\/p>\n

Through the process, it changed its record-keeper and looked closely at the investments on offer. This led to a total revamp of the investments, with a move from 18 options to six. During the change, Telus hosted pension sessions for employees across Canada. Across four weeks, 6,800 plan members attended these sessions, making 5,200 active investment decisions, said Craig, noting more than 1,000 employees increased their contribution levels.<\/p>\n

\u201cThrough all of the pension weeks that we\u2019ve done over the years, the most we\u2019ve ever had on contribution level changes was 300, so we were thrilled.\u201d<\/p>\n

While Craig was building up and refining the DC plan, Lawson worked towards retiring the company\u2019s DB plans. \u201cWe have a number of legacy defined benefit plans through our history of mergers and acquisitions and evolution, but we have four larger ones that make up the majority of our assets,\u201d he said. \u201cThey\u2019re all federally regulated plans and they\u2019re all fairly well funded \u2060\u2014 at least on average.\u201d<\/p>\n

Read: Could solvency reform in Canada lead to a DB pension revival?<\/a><\/strong><\/p>\n

He noted the four plans are quite different, in terms of their closure date, plan design, funded statuses and levels of maturity. \u201cWe have to try to find a way to get scale with the assets of those plans, but also recognize that we need to have a unique solution for them as well \u2060\u2014 recognizing the characteristics of each.\u201d<\/p>\n

Some 4,000 plan members are still accruing service in Telus\u2019 DB plans, so they\u2019re mature with roughly 80 per cent retirees or deferred members, said Lawson. \u201cThe contributions in are negligible. It\u2019s real money if we\u2019re talking $50, $60 million, but relative to [a] roughly $10 billion asset base, the contributions don\u2019t make much of an impact.<\/p>\n

\u201cAnd the benefit outflows are meaningful. So about 4.5 per cent of the assets is cash out the door. It\u2019s about $35 million a month that the plan has to support and kick out to pay what we\u2019re here for, which is to pay pensions that people are counting on.\u201d<\/p>\n

This means the DB plans can\u2019t take drawdown risk the way they used to because they don\u2019t want to be in a position where they\u2019re forced to sell assets in a bad market, noted Lawson. As well, the plans changed how they manage assets to remove risk. \u201cWe\u2019ve taken out the drawdown risk by reducing the asset risk. We haven\u2019t yet fully matched off and taken out the interest rate risk, but that\u2019s coming.\u201d<\/p>\n

Read: How Husky Energy included active members in its DB plan annuitization<\/a><\/strong><\/p>\n

Lawson said he also spends a lot of time thinking about liquidity risk because of the plans\u2019 large outflows and their legacy portfolio of private assets. \u201cWe have to be very on top of both short-term and long-term liquidity.\u201d<\/p>\n

One of the company\u2019s plans has guaranteed indexing to the consumer price index. \u201cWe\u2019ve hedged that off on the asset portfolio with a large inflation-linked bond portfolio, but that\u2019s a place we\u2019ll look sooner than the other places in terms of an actual risk transfer, because we think the longevity risk we carry is a lot higher when we have guaranteed benefit enhancements \u2060\u2014 guaranteed CPI \u2060\u2014 because one, people can live longer, and if we get an inflation environment and then the cost of those pensions is also higher,\u201d said Lawson.<\/p>\n

Ultimately, Telus is aiming to pay its pension promise and exit the pension business, he added, noting it will de-risk and wind up all the DB plans. \u201cBut we think we\u2019re somewhere in the 10-15 year time horizon to actually get to the finish line.\u201d <\/p>\n

Read: Pension legislation should balance DB sustainability with pension promise: CIA<\/a><\/strong><\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Yaelle Gang | September 12, 2019 Since Telus Communication Inc.\u2019s journey from defined benefit pension plans to defined contribution  began in 1996, it\u2019s come a long way, but it\u2019s far from over. During a session at the Association...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/16774"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=16774"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/16774\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=16774"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=16774"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=16774"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}