Definedbenefit pension plansHow much cash is enough外文翻译.docx
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Definedbenefit pension plansHow much cash is enough外文翻译.docx
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DefinedbenefitpensionplansHowmuchcashisenough外文翻译
原文:
Defined-benefitpensionplans—Howmuchcashisenough?
ByJohnDeinumandWinstonWoo
Recentattentiontopensionissuesprovidesawindowofopportunityforpolicymakerstotakedecisiveactionstoimplementstable,orderlyandsustainablefundingmeasuresfordefined-benefitpensionplans.
AccordingtoCFOInsights(publishedbyDeloitte),availabilityofcashisoneofthetopconcernsforeveryCFO.Whilethefinancialcrisismaybeabating,reducingcostsandincreasingcashflowremaintopprioritiesin2010.Thechallengetobalancestrategicoroperationalinvestmentsagainstshort-termmanagementofcashiscritical.Forcompaniesthatofferdefined-benefit(DB)plans,thechallengeismagnifiedsincepotentiallysignificantpensioncontributionsmaylimitacompany’sabilitytomakebusinessinvestmentsthatfostergrowth.Asaresult,pensionbenefitscouldbeatriskbecauseaviableDBplanrequiresaviablesponsor.
Canada’sretirementincomesystemranksfourthintheworld,accordingtotheMelbourneMercerGlobalPensionIndex.ThestudypointsoutthatCanada’ssystemcouldbeimprovedbyincreasingthelevelofcoverageofemployeesinoccupationalpensionschemes.Itstates:
“TheprevalenceofprivatepensionplansinCanadacontinuestodecreaseforemployeesworkingintheprivatesector.”Toincreasepensioncoverage,plansmustbeaffordableandfundingmethodologiesmustbeimprovedfirstinordertoensurestable,orderlyfunding.
Byadoptingflexibleandinnovativefundingrules,thelikelihoodofDBplan’ssurvivalandexpansionofcoverageinthefuturewouldbeimproved.Otherwise,pressurestofreezeDBplansorconverttoadefinedcontribution(DC)planwillremain.
TheFederalgovernmenthaslongrecognizedthattheregulatoryframeworkforDBplansneedstobestrengthened.Finance’sconsultationpaperacknowledgedthat:
1.Thecombinationofasignificantdeclineinlong-terminterestrates,whichcorrespondtohigherpensionliabilities,andpoorinvestmentreturnshaveledtohigherpensiondeficits
2.Excessivelevelsofcashflowarebeingdirectedtopensionfundingratherthantoinvestmentexpendituresthatcouldbenefitthegrowthofcompaniesandtheeconomymoregenerally;
3.Forfinanciallyvulnerablecompanies,theseincreasedcashdemandscouldhavesignificantimplicationsregardingtheirviability;
4.Byfundingthedeficitsoverashortperiodoftime,wheninterestratesandinvestmentreturnsimprove,theplanmaybeoverfundedanditcouldleadtosurplusesthattheplansponsorscannotutilize.
In2006,temporarymeasureswereannouncedforsponsorsoffederally-regulatedpensionplans,including:
1.Consolidationofallexistingsolvencydeficienciesandreamortizationoverthesubsequentfiveyearperiod;and
2.Extendingthecontributionschedulefromfiveyearsto10years,withconsentfrommembersoftheplanorwiththeusealetterofcredit.
TheFederalgovernmenthaslongrecognizedthattheregulatoryframeworkforDBplansneedstobestrengthened.
ThereliefwasonlyavailabletosponsorswhofiledvaluationreportswithTheOfficeoftheSuperintendentofFinancialInstitutionsCanada(OSFI)before2008.
In2008,companiesfacedunprecedentedfinancialturmoilthatsawanearcollapseofthefinancialsystem,steepdeclinesinequitymarkets,recessionandlowinterestrates.Thecrisis
severelyhurtrevenuesandledtosignificantdownsizingsandbusinessfailures.Inresponse,governmentstookactionstoprovidefundingrelief.InOntario,temporarymeasureswereannouncedinDecember2009thatallowedcompaniestoconsolidateexistingsolvencypaymentschedulesintoanewfiveyearscheduleandtoextendthesolvencypaymentscheduleto10yearswithplanmemberconsent.
Whilethereisnoshameinintroducingtemporaryfixeseverytimeacrisisarises,well-thought-outandlonger-termsolutionsarecriticaltotherevitalizationofDBplans.Thesolutionsmustaddressbothrisksandaffordability.Withthisinmind,belowarerecommendationsforconsiderationbythestakeholders—financialexecutivesandgovernmentpolicymakers.Therecommendationsaimtoreducethelevelofsolvencyfundingcontributionsrequiredwiththegoalthatcashsavingsmaybeinvestedelsewhereinthebusinessforgrowthandtosecurefuturebenefitaccruals.WhiletheconceptsdescribedarespecifictoOntarioplans,theyhavebroadergeneralapplicationtofederally-regulatedandotherprovincially-regulatedplansaswell.
A.Grow-inbenefits
UnderOntariopensionlegislation,apensionplanmemberwhoseageplusserviceisatleast55isentitledtoreceive“grow-in”benefitsonplantermination.Forapensionplanthatoffersearlyretirementsubsidies,“grow-in”providesthesebenefitstoamemberonplanterminationthatmightnototherwisebeavailabletothememberonregulartermination.Essentiallywithgrow-inrights,thememberwillbecomeentitledtoanunreducedpensionasifthemember’smembershipintheplanhadcontinuedpastthedateoftermination.NovaScotiaandOntarioaretheonlytwoprovincesthatprovidegrow-inrights.
Grow-inbenefitsshouldbeeliminatedfromanylegislativerequirements.
B.Pre-fundingofgrow-inbenefits
Ontarioistheonlyprovincetorequirepre-fundingofgrow-inbenefitsaspartofthesolvencyvaluation.Thecostofprefundingcreatesasignificantcashflowburden,acostnotsharedbyDBplansponsorsinotherprovinces,puttingOntarioplansponsorsatacompetitivedisadvantage.
NovaScotiaremovedtherequirementtopre-fundgrow-inbenefitsaspartofamandatedsolvencyvaluation.Asaresult,grow-inbenefitsarepaidfromtheDBplan’sexistingassetsontermination.Iftheplanisnotfullyfundedattermination,thenthegrow-inbenefitsarenotpaid.
Thesefundsmaybetterbedirectedtocorporateinvestmentsandensuringtheemployerisviableoverthelong-term,therebyincreasingthesecurityofpensionsaccruedtodateandfuturepensions.
Ifgrow-inbenefitsmustbemaintainedunderrevisedlegislationinOntario,theNovaScotiaapproachshouldbeadoptedwherebythe“grow-in”benefitsarenotpre-funded.
C.Solvencyvaluation
SolvencyvaluationprovidesafinancialpositionforaDBplanbasedonthepremisethattheplanisterminatedonthevaluationdate.WhensolvencyvaluationswereintroducedinOntario,virtuallyallpensionplanshadsolvencyliabilitiessubstantiallylowerthangoingconcernliabilities,reflectingtheinterestratesavailabletosettlebenefits,expectedinvestmentreturns,andinflationatthattime.Today,manyprivatesectorplanshavesolvencyliabilitiessubstantiallyhigherthanfundingliabilities,reflectingthecurrentfinancialclimate.Pensionsarebynaturealong-termliability,and,assuch,thefundingobligationsshouldreflectthatreality.Along-termoutlookenablesstableplanmanagementandreasonablecontributions.Theoriginalintentofafive-yearamortizationperiodforsolvencydeficitsisnolongerrealisticgivencurrentfinancialrealities.ThegovernmentneedstoappreciatethatDBplansrepresentaverylongundertakingandpensionbenefitsarelongtermobligations;thereforemoretimemustbegiventofundsolvencydeficitswhicharereallya“bestestimate”atonepointintimeassumingplanterminationwhichisworstcasescenario.
Fundingofpensiondeficitsdeterminedatasinglepointintimewillbesubjecttosignificantswingscausedbyuncontrollablemarketevents(suchasassetreturnsandchangesininterestrates).Allowanceforsuchvolatilityshouldbeprovidedbytheuseoflonger-termaverageratesandamortizationperiods,ratherthanshort-termmarketratesandthecurrentfive-yearamortizationperiod.
Linktheminimumfundingrequirementsandamortizationperiodtothelevelofinterestrates:
maintainthefive-yearamortizationperiodforanysolvencydeficiencydeterminedusinga“normalizedinterestrate”ortheactualsolvencyinterestrate,ifhigher,andincreasetheamortizationperiodto15yearsforanyadditionalsolvencydeficiencies;andestablishthe“normalizedinterestrate”at6.0percentperannum.
D.Solvencydiscountrate
TheBankofCanadasignificantlyloweredinterestratestostimulateeconomicrecoveryandincreasecreditinthefinancialmarkets,resultinginasubstantialdeclineingovernmentbondrateswhichserveastheproxyfordeterminingDBplansolvencyliabilities.Lowerinterestratescreatesignificantlyhigherpensionsolvencyliabilities,andhighercontributionsforplansponsors,offsettingbenefitsoftheproposedrelief.
Useoflonger-termaveragediscountrateswillstabilizeplancontributionsforsolvencypurposesandbetterreflectthelongtermnatureofDBplanliabilities.
Table1showsthelowest,average,andhighestyieldoflong-termgovernmentbondspublishedbytheBankofCanada.ThetablewascreatedbasedontheDecember2009yieldonbondseriesV122487(orequivalentasdeterminedbytheBankofCanada)from1919to2008.Averageyieldsfor15,20,25,30and35yearperiodsendingfrom1947to2008werecalculated.
Theobservationsrangefrom5.96percentto6.60percentandsuggestthatuseofaninterestrateofsixto6.5percentwouldbeappropriate.
Useofastableinterestrate,basedonlong-termobservations,todeterminesolvencyliabilitiesandcontributionsoverafive-yearamortizationperiod,combinedwithadditionalfundingovera15-yearperioddeterminedasaresultofmarketinterestrateswouldprovidesignificantsolvencycontributionreliefandpotentiallyenhancebenefitsecurityinthelongterm.
A“normalizedinterestrate”of6.0percentperannumshouldbeusedtoestablishsolvencyliabilitiesandadditionalliabilitie
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