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No wonder companies are quickly moving to Defined Contribution Pension Packages

  • Last Updated:
  • Oct 23rd, 2017 7:46 pm
[OP]
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Apr 21, 2004
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No wonder companies are quickly moving to Defined Contribution Pension Packages

The DB pension becomes a huge liability especially when trying to fire someone that is about to attain full DB pension in a few months / years' time. Multiple this number if the company is right-sizing.

https://nelligan.ca/article/severance-p ... yee-whole/

Employees entitled to damages for loss of pension benefits

In Taggart v. The Canada Life Assurance Co. [2006] O.J. No. 310, the Court of Appeal confirmed that employers are liable for loss of pension benefits during the reasonable notice period. Taggart involved the termination of a 30-year employee who was let go shortly after Canada Life was purchased by another insurance company. The employee was provided with a 24-month notice period severance offer, which consisted of two months working notice and a 22 months’ pay in lieu of notice. However, his pensionable service and credits were only continued for the two month working notice period.

Canada Life refused to provide Taggart with anything for loss of pension growth over the remaining 22 months. Credit for the 22-month period would have provided Taggart with more than 30 years of pensionable service and entitled him to an unreduced pension. As a result, Taggart refused to accept the severance package and commenced an action. All issues were resolved prior to trial except for the pension claim. Canada Life argued that terms of the pension plan only allowed accrual of pensionable service during active employment. Both the trial judge and the Court of Appeal rejected this position. The Court of Appeal stated that in approaching the issue it was first necessary to consider Taggart's common law rights to damages for breach of contract over the notice period and then to consider whether the terms of the pension plans alter or remove that common law right. The court expressly found that Taggart was entitled at common law to be kept whole throughout the notice period and as such was entitled to receive damages for the loss of pension benefits that would have accrued over that time. Furthermore, the court noted that because pension plans are unilateral contracts in nature, in order to remove the entitlement to pension losses during the notice period, the plan requires clear and unequivocal language that expressly removes the entitlement before a court will disallow damages for pension loss. The court found that the language of the pension plans in question was at best ambiguous and therefore Taggart was entitled receive damages for the loss of pension benefits.
39 replies
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Aug 18, 2005
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Seems logical to me. Look at what's happening with the big US auto makers. People are living a lot longer than they expected, leading to way higher benefits than expected due retirees. The US government should have let them go into Chapter 13 bankruptcy (not Chapter 7 - research the differences before you flame me) to bust these contracts. But the auto unions are so deeply tied into government that it didn't happen.

What are individual people supposed to do, to protect their retirements? You put aside investments every month, in your own name, and you'll be fine. Treat pensions you don't own like gravy.
Sr. Member
Aug 19, 2016
866 posts
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The "Feeding People for live" plans are so outdated. I don't think I see them anywhere these days (except for grandfathered ones).
These are legacy costs that companies are trying to get rid of.
These pensions are usually underfunded due to bad asset management in most cases.

I even opted out of my company's DCP in favour of a higher salary. We did the calculations and met at mid way. The reason I opted out is because I don't get to control what to invest. Sure, I get to pick a fund here and there, but they are mutual funds with high fees (yes, anything over 0.50% is high). Don't get me started on the horror stories of mutual funds.

I started to plan my retirement at age 25 (now 33), and I think I am doing okay but not great because I missed the run up in the Toronto real estate.
Penalty Box
Dec 27, 2013
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CollegeGraduate wrote:
Oct 8th, 2017 1:42 pm
The "Feeding People for live" plans are so outdated. I don't think I see them anywhere these days (except for grandfathered ones).
These are legacy costs that companies are trying to get rid of.
These pensions are usually underfunded due to bad asset management in most cases.

I even opted out of my company's DCP in favour of a higher salary. We did the calculations and met at mid way. The reason I opted out is because I don't get to control what to invest. Sure, I get to pick a fund here and there, but they are mutual funds with high fees (yes, anything over 0.50% is high). Don't get me started on the horror stories of mutual funds.

I started to plan my retirement at age 25 (now 33), and I think I am doing okay but not great because I missed the run up in the Toronto real estate.
you chose a higher salary than a defined benefit pension plan?... do you know what a defined benefit plan is? Because a DCP is a defined contribution plan.. It's completely different thing....

LOL yeah, you don't know what you're talking about.
Deal Addict
Apr 21, 2014
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daivey wrote:
Oct 9th, 2017 7:21 pm
you chose a higher salary than a defined benefit pension plan?... do you know what a defined benefit plan is? Because a DCP is a defined contribution plan.. It's completely different thing....

LOL yeah, you don't know what you're talking about.
He said He opted out of the DCP NOT a Defined Benedit plan in favour of a higher salary because then he has more control over the funds. If the company automatically contributes say $5k annually into the plan, he probably negotiated a 2.5k or something higher salary.
Penalty Box
Dec 27, 2013
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abc123yyz wrote:
Oct 9th, 2017 7:50 pm
He said He opted out of the DCP NOT a Defined Benedit plan in favour of a higher salary because then he has more control over the funds. If the company automatically contributes say $5k annually into the plan, he probably negotiated a 2.5k or something higher salary.
this thread was about DBB's.
Sr. Member
Aug 19, 2016
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daivey wrote:
Oct 9th, 2017 8:03 pm
this thread was about DBB's.
I don't think DBP still exist these days. I know, the public sector still has it. It is hard to opt out of DBP if I wasn't offered that.
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Oct 16, 2013
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CollegeGraduate wrote:
Oct 9th, 2017 8:10 pm
I don't think DBP still exist these days. I know, the public sector still has it. It is hard to opt out of DBP if I wasn't offered that.
Some of the Big Banks still have/ grandfather DBP and I heard Rogers have them.
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Oct 16, 2013
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OP there is a difference between Defined Contribution and Defined Benefits.
[OP]
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raichu1 wrote:
Oct 10th, 2017 3:13 pm
OP there is a difference between Defined Contribution and Defined Benefits.
That is why many companies are moving to DCPP from DBPP, as per OP.
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Mar 16, 2010
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I feel like i'm the only person in the world who likes DC plans. I get 100% control of what I invest in and no chance of a Nortel fiasco.
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Sep 20, 2014
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Dpack22 wrote:
Oct 11th, 2017 9:55 am
I feel like i'm the only person in the world who likes DC plans. I get 100% control of what I invest in and no chance of a Nortel fiasco.
aren't you generally constrained to the pension providers funds? e.g. Sunlife, Manulife, etc?
[OP]
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2009M5 wrote:
Oct 11th, 2017 7:23 pm
aren't you generally constrained to the pension providers funds? e.g. Sunlife, Manulife, etc?
And there's day trading penalties with those DCPP's too so it's mostly set and forget but with the market hitting all time highs, I just set mine in cash for the time being. Just contributed enough to max out my employer's matching. Unless QE is permanent, I don't see equities going up 10% yoy in the next 10 years but I could be dead wrong.
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Mar 15, 2005
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raichu1 wrote:
Oct 10th, 2017 12:33 am
Some of the Big Banks still have/ grandfather DBP and I heard Rogers have them.
RBC and Scotia have dropped their DB pension plans (but existing staff were grandfathered)

CIBC still has their DB plan

Unsure about BMO / TD.

Anyway, DB pension plans are huge liabilities these days because the market isn't quite as hot. There was a time when companies preferred DB pension plans, and often forced their employees into them because interest rates were high so the plans could stay funded and were actually profitable to manage, not to mention had less responsibility to keep solvent.
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2009M5 wrote:
Oct 11th, 2017 7:23 pm
aren't you generally constrained to the pension providers funds? e.g. Sunlife, Manulife, etc?
Sorry I meant in the way that I can select asset allocation (Canada, US, Intl, whatever other funds). I've got mine 100% (33 CAD, 33 USD, 33 INTL) equity right now at virtually no cost. Basically just straight index tracking funds.

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