1.1 The Commission and Its Work
1.1.1 The establishment and membership of the Commission
The Ontario Expert Commission on Pensions was established in November 2006 by the Hon. Greg Sorbara, then Minister of Finance, to “examine the legislation that governs the funding of defined benefit plans in Ontario, the rules relating to pension deficits and surpluses, and other issues relating to the security, viability and sustainability of the pension system in Ontario.” In October 2007, Mr. Sorbara was succeeded by the Hon. Dwight Duncan, whose interest in and support for the Commission's work is much appreciated.
The Commission's mandate and guiding principles, the factors it was directed to consider, and the specific issues it was invited to address are all found in its terms of reference, reproduced in Appendix One.
As sole Commissioner, I accept full responsibility for the preparation of this report and for the form and substance of its recommendations. However, I am eager to acknowledge the great assistance and wise counsel provided by my four distinguished expert and representative advisors: Bob Baldwin, Kathryn Bush, Murray Gold and Ian Markham. Their insights — shaped by their different disciplinary backgrounds and roles in the pension community — were instructive, influential and indeed, indispensable to the work of the Commission. Their résumés are found in Appendix Two. As well, the Commission's small but dedicated and capable staff cheerfully bore the main burdens of the Commission's work, providing me with research, analysis and guidance — and occasionally sceptical questions — at each stage of the undertaking. Their names and backgrounds are also recorded in Appendix Two. Finally, the Ministry of Finance and the Financial Services Commission of Ontario (FSCO) provided the Commission, respectively, with logistical support and with access to information required by the Commission.
1.1.2 The Commission's work process: public consultation, engagement with the stakeholders and research
The work of the Commission began with the preparation of a discussion paper that was issued in February 2007. This paper translated the terms of reference into a series of propositions and questions designed to launch a conversation about pension policy, which all Ontarians — stakeholders, experts and interested citizens — were invited to join. That conversation continued throughout 11 days of public hearings in October-November 2007 in five Ontario cities at which 74 organizations and individuals presented formal briefs. A further 53 individuals or groups made submissions, either informally to Commission staff at the hearings, electronically or by letter. All of the briefs and submissions were informed by the presenters' experience with the pension system; many involved extensive research and proposed imaginative solutions; and none failed to contribute to the Commission's overall understanding of the issues it was mandated to consider. A list of all briefs and submissions is found in Appendix Three.
In addition, as Commissioner, I provided informal briefings to an array of key actors in the pension system: unions; retirees' and seniors' organizations; representatives of different types of pension plans; organizations of small, medium and large employers in the public and private sectors; service providers; professionals; regulators; and policy makers. The participating organizations are identified in Appendix Three.
These briefings, which occurred both prior and subsequent to the public hearings, were designed to ensure that the Commission was addressing issues of concern to the full array of stakeholders; that the stakeholders were in turn aware of the Commission's modus operandi and its general approach to the substantive issues; and that so far as possible, the Commission's report and recommendations would be, and would be seen by stakeholders to be, informed, balanced and practical.
While the stakeholders' views were often partisan and strongly held, virtually all of them voiced support for the efforts of the Commission and offered cooperation in the search for outcomes that would be beneficial and acceptable not only to themselves but also to all interested parties. Indeed, in several cases, stakeholders contributed directly to the Commission's work. Morneau Sobeco, a consulting firm, generously shared with the Commission its concordance of Canadian pension legislation. The Pension and Benefits Section of the Ontario Bar Association, whose members represent both employers and unions, supplemented this concordance and produced as well a brief containing many technical suggestions designed to facilitate the administration of pension plans. FSCO kindly convened a forum on funding issues, involving its own representative advisory committees. And four actuarial firms — Hewitt Associates, Mercer, Morneau Sobeco and Towers Perrin — undertook pro bono to model various proposals contained in submissions to the Commission; the last firm must be singled out for particular recognition given the immense time commitment its staff made to the project. Two individual actuaries, Shiraz Bharmal and Brian FitzGerald, also devoted time pro bono in support of the Commission's research. These gestures of goodwill from members of the pension community not only facilitated the work of the Commission in practical ways, but they also reinforced its conviction that the stakeholders are indeed anxious to cooperate in building a better pension system for Ontario.
Finally, the Commission made every effort to ensure that its work would be informed by high-quality research, and that the insights derived from that research would be as free from partisanship as possible. After consulting some 60 experts in the field at three meetings in February, March and April, 2007, it devised a research program comprising 17 studies by independent experts from across Canada and in several other countries. The studies were designed to be objective, to bring the Commission and the pension community up-to-date on relevant developments, and to be user-friendly, in the sense that they would be easily accessible not only to the Commission but also to other readers. They were, in fact, almost all delivered in timely fashion and in accordance with these criteria. Executive summaries of the commissioned research studies are posted on the Commission's website and the full text of each study is available upon request. A list of those attending the expert consultations and of those who undertook studies can be found in Appendix Four.
The Commission's report has therefore not only been informed, but also definitively shaped by the careful research, shared experiences and expert advocacy of scores of stakeholder representatives, pension professionals, academics, consultants and administrators; by the expertise of the Commission's advisors, staff and researchers; and by the views of ordinary Ontarians who provided formal briefs, participated in the consultations and public hearings, or simply told us of their experiences and concerns. As well, the report reflects suggestions made by the many stakeholders who worked with the Commission to ensure that it offers a balanced response to the many complex issues confronting Ontario's pension system.
1.2 Ontario's Occupational Pension System in Historical and Constitutional Perspective
Ontario workers have been receiving “occupational” pensions, provided by their employers, since the middle of the 19th century. Reports and studies on the pension system can be traced almost to its inception, but at least as far back as 1889. A central theme of these studies, of pension policy debates throughout the 20th century and of current discourse has been the issue of whether pensions should be provided directly by the state; by employers under a legal obligation to provide them; or by employers acting either “voluntarily” out of charity to faithful, long-serving employees, to aid the recruitment and retention of workers, or to satisfy the collective bargaining demands of their unionized employees. At stake, of course, were — and still are — issues such as whether pensions should be available to everyone, how the pension system should be financed, and by what means and to what extent it should be regulated.
By the mid-20th century, occupational pensions were becoming more common in large unionized workplaces, especially in the public sector, and were increasingly available in large, non-unionized enterprises. Nonetheless, the controversy over who should provide pensions continued. In this province, it reached a crucial stage in 1960 when the Conservative government of the day appointed the Ontario Committee on Portable Pensions. The Committee's reports in 1961 and 1962 made clear its conviction that no system, short of a universal, contributory system, would achieve desired levels of coverage or solve the problem of pension portability. However, instead of a state-administered scheme, the Committee proposed that all employers with 15 or more employees be required to provide pension coverage to their employees, funded by contributions from both parties. To facilitate the operation of this scheme, it proposed the enactment of a Pension Benefits Act, and the establishment of two bodies. The first, the Pension Commission of Ontario (PCO), was to exercise regulatory oversight of the pension system. The second, the Central Pension Agency, was to be a federally chartered privately funded corporation, with a mandate to provide administrative and investment services in support of employer-sponsored plans and to facilitate pension portability.
The Committee's recommendations were accepted and the legislation it proposed was enacted in 1963. But before the Pension Benefits Act could be implemented, the introduction in 1965 of the compulsory, contributory and universal Canada Pension Plan (CPP) radically altered the policy landscape. While CPP pensions were relatively modest (as were other age-related social supports), from this point forward it was generally assumed that, for better or worse, “voluntary” occupational pensions would continue to exist alongside the CPP rather than be replaced by it. Consequently, Ontario's pension system came not to be a “system” at all, but rather a number of independent plans sponsored by individual employers or groups of employers, governed by these sponsors either alone or in collaboration with workers and their representatives, and sometimes funded by member as well as sponsor contributions.
Naturally enough, pressures arose to regulate those plans with a view to ensuring that they delivered the promised pensions. New regulatory measures were enacted to strengthen the financial integrity of the various independent plans. The PCO, established in 1963, was originally given a broad mandate to “promote the establishment, extension and improvement of pension plans throughout Ontario,” and later acquired some policy-making capacity and extensive regulatory powers commensurate with its mandate.
However, it soon became clear that not all problems relating to occupational pension schemes had been laid to rest by the enactment of the 1963 Ontario statute or the advent of the CPP in 1965. On the contrary; in 1977 the Commission on the Status of Pensions in Ontario (the Haley Commission) was appointed to address, among other things, the very concerns identified by the 1960 committee — coverage and portability. The Haley Commission ultimately endorsed the analysis of the earlier committee and recommended that Ontario adopt a universal, compulsory and contributory pension scheme — but its recommendations were not accepted.
On the other hand, during the 1980s more pragmatic legislative initiatives were undertaken to protect the interests of active and retired members under occupational pension plans. These included the introduction of “grow-in” rights for employees nearing the age when they would be eligible for early retirement arrangements, the establishment of the Pension Benefits Guarantee Fund, which would provide beneficiaries with partial compensation in the event of plan failure, and expanded powers for the pension regulator. A revised Pension Benefits Act consolidated these changes in 1987, the last occasion on which the legislation was comprehensively reviewed and amended.
During the mid-1980s, attention shifted from regulatory issues to the effects on pensions of significant and sustained inflation. Based on a number of commissioned studies, the Friedland Task Force, in its 1988 report, recommended partial indexation of pensions. Its recommendations were incorporated in legislation in 1990 that, however, has neither been proclaimed in force nor accompanied by implementing regulations.
In addition to concerns about inflation and indexation, controversies concerning funding began to dominate the policy agenda in the 1980s, and continue to do so to the present day. Sponsors and active and retired plan members have asserted conflicting claims to ownership or control of surplus funds; debated the propriety of contribution holidays; and expressed widely differing views on how rapidly, by what means and to what extent funding deficits ought to be made good. Some of these controversies were resolved by ad hoc amendments, consolidated into the Pension Benefits Act, 1987 and regulations, whose overall effect was to make funding rules and reporting requirements more stringent. Additional funding controversies were provoked by the restructuring of Ontario's public and private sectors during the 1990s, which triggered mergers and acquisitions, full and partial plan wind-ups, asset transfers, insolvencies and near-insolvencies, and the often involuntary relocation of active members from one plan to another, or from a job with pension coverage to one without. Finally, turbulence in financial markets, especially in the years following 2000, has raised many difficult questions concerning the funding status of plans and the adequacy of regulatory oversight and intervention.
These controversies have had to be addressed within a legal—regulatory framework that itself was experiencing rapid change.
In 1998, the PCO was replaced by FSCO, which (unlike its predecessor) regulates not only pension plans but also credit unions; cooperatives; and insurance, loan and mortgage companies. The result, some contend, is that pension law, policy and adjudication now reside within a regime whose primary focus is the regulation of financial markets. At the same time, the PCO's adjudicative functions were transferred to a quasi-independent body, the Financial Services Tribunal (FST), whose mandate tracks that of FSCO. The result, many in the pension community believe, has been a loss of expertise in and focus on specialized pension problems.
To some extent, however, the PCO's dominant role in the elaboration of pension law and the interpretation of pension legislation had come to be shared with the courts. This occurred both in the context of judicial review proceedings brought against FSCO and the FST and — following the Dominion Stores case (1986) — in the context of civil proceedings based primarily on the general law of trusts. Furthermore, over the past two decades, insolvency litigation has acquired increasing significance for pension plans, as many Ontario companies with plans have found themselves in difficulty in the new global economy.
Judicial rulings have been seen by some as conferring new rights on plan members and imposing new obligations on sponsors, and by others as clarifying rights and enforcing obligations that had existed all along.
However, quite apart from their substantive merits and precedential effects, some observers fear that increased recourse to the courts to determine pension rights has introduced new litigation-related costs and uncertainties into pension plan administration and regulation.
The recent development of pension policy is further complicated by its intertwining — beginning early in the 20th century — with income tax policy and administration. On the one hand, the federal Income Tax Act (ITA), by treating contributions as a deductible business expense, provided incentives to employers to establish and maintain occupational pension plans. On the other, by sheltering their deferred income from taxation until they retired, it provided incentives for workers to participate in such plans. Indeed, for some years, until 1991 when it “levelled the playing field,” the ITA provided more favourable treatment to retirement savings based on defined benefit (DB) plans than to other savings vehicles such as individual retirement savings plans.
However, pension policy has paid a price for its dependence on tax incentives. Over time, provisions of the ITA became a major determinant of pension fund design and of contribution and benefit levels. But despite the fact that provisions of the ITA sometimes require sponsor action that might be deemed contrary to good pension policy, Ontario — for constitutional reasons explored below — lacks the power to alter or neutralize those provisions. This has resulted in something of a policy impasse. A similar impasse exists with respect to the effects of federal bankruptcy and insolvency law on provincial pension policy.
Finally, the development of pension policy has been affected by norms, which emanate neither from legislatures nor courts, but from professional bodies. To cite two prominent examples, actuarial standards establish how pension fund valuations are conducted and how the results are viewed for regulatory purposes, and accounting standards determine how the assets and liabilities of pension plans will appear on the books of the sponsoring employer.
This brief history of pensions and pension regulation in Ontario reminds us that, while the system we know has some continuities with the past, a good deal has changed. For one example, occupational pensions have come to be seen less as largesse conferred by employers and more as entitlements earned by workers as part of the total compensation promised them in the wage bargain. This altered perspective has led to pension plans achieving the status of virtual financial subsidiaries of the sponsoring firm, whose financial well-being may be intimately intertwined with that of the plan. And of course, in unionized workplaces, it has led to pensions becoming the focus of intense negotiation and, occasionally, conflict. Another example: pensions are increasingly perceived not just as a series of bargains struck in individual workplaces, but as a quasi-system whose fate has significant implications for the province's social policy and economic well-being. And one more: the role of law and legal-regulatory institutions has become much more prominent. In 1961, the Ontario Committee on Portable Pensions could dismiss the issue in a few lines, saying that while lawsuits arising out of pension trusts had occurred in the United States, it was “not aware of similar litigation in Canada.” I could hardly say the same today.
On the other hand, some things seem never to change. Two important examples make the point. First, debate continues on the fundamental issue of whether income security in retirement is a matter of personal responsibility to be addressed (if at all) by some combination of voluntary, employer-provided pension plans and/or personal savings by workers, or by contrast, a matter of social justice to be resolved through some combination of state pensions, pensions provided by employers under requirement of law, and mandatory or incentivized savings by workers. Issues such as the extent of pension coverage and pension portability are closely related to this critical point of contention, and are dealt with later in this report on the assumption that Ontario will continue to have a voluntary pension system. However, I must note that this assumption was seriously challenged by many briefs to the Commission, from a variety of stakeholders, with a variety of concerns and of proposals for new policies. While, given my mandate, I am unable to contribute much to this debate, I do return to it later in this report.
Second, debate also continues over how to deal with the constitutional division of powers, which prevents the creation of a unified body of national pension law coextensive with the boundaries of Canadian corporate structures, labour markets and pension plans. From their inception, occupational pensions — like most employment-related concerns — were characterized for constitutional purposes as matters involving “property and civil rights” and as matters of a “local and private nature” — both heads of provincial legislative authority. However, the Constitution was amended in 1951 to permit the federal government to legislate “in relation to old age pensions and supplementary benefits.” This is the constitutional foundation of today's public pension systems — notably the Canada/Quebec Pension Plan (C/QPP) and the Old Age Security (OAS) program. But the older view was only modified, not erased. The 1951 amendment contained a specific proviso to ensure that federal pension legislation would not “affect the operation of any law present or future of a provincial legislature in relation to any such matter.”
Thus, despite the existence of the CPP, each province retains jurisdiction to regulate occupational pensions and almost all have now done so. But that does not dispose of constitutional controversies. The federal government also has paramount power to legislate in regard to “any mode or system of taxation” as well as “bankruptcy and insolvency,” even when the effect of doing so may be to interfere with or supersede provincial pension laws. As will be seen, many significant proposals for reform of Ontario's pension system therefore depend on the changes being made to the Income Tax Act, the Bankruptcy and Insolvency Act, or the Companies' Creditors Arrangement Act — all federal statutes.
Further constitutional complications arise from the fact that the provinces and the federal government may each legislate with regard to the pension rights and obligations of employers and employees who fall within their respective jurisdictions. About 10% of the Canadian workforce — those in the federal civil service; the armed forces; and federally regulated industries such as transportation, banking, broadcasting and telecommunications — falls under federal pension legislation of some sort. The remaining 90% is, in principle, governed by the pension law of the province in which the worker resides or works. However, not only do workers move from one jurisdiction to another, but pension plans also often cover workers in several jurisdictions. Because the federal government, the provinces and the territories have somewhat different laws — sometimes for no discernible reason — this constitutional division of regulatory authority can cause considerable administrative difficulties for mobile workers, nation-wide plan sponsors, and service providers and pension regulators.
These difficulties might be alleviated in several ways. The first is for the various governments to agree to establish a single national pension regulator. This seems unlikely to occur any time soon. The second is for each government to agree to harmonize its pension legislation with that of the other jurisdictions so that compliance with one statute would, in effect, ensure compliance with all. This project has been pursued sporadically over the years, but it too seems a distant prospect.
A third, more pragmatic, approach is the one that has in fact been pursued. The provinces, in 1968, agreed among themselves that whichever province is the place of work of a plurality of active plan members has jurisdiction to regulate the plan for all of those members and for almost all purposes. This solution at least localizes regulatory responsibilities and, as a by-product, avoids the risk of serious regulatory competition among the provinces. However, it is by no means perfect. Provincial common, civil and statute law continues to apply in litigation over pension rights and, as noted, federal legislation applies to workers in federally regulated enterprises and federal public employment. Plan documents must therefore take account of local legal and regulatory requirements — sometimes in a dozen jurisdictions. Moreover, if the balance of the plan population shifts from one province to another, perhaps as a result of corporate merger or divestment, regulatory authority shifts, too, and the plan must reconfigure itself to meet the requirements of its new “home.” And finally, the absence of uniform legislation creates difficulties for workers who want to carry their pension to a new job in another jurisdiction.
Frustration with these constitutional and jurisdictional difficulties was frequently and justifiably expressed during the Commission's hearings. However, I obviously have no authority to make recommendations to the persons or bodies who would have to cooperate to resolve these difficulties: the federal Ministers responsible for taxation and for bankruptcy and insolvency legislation; the federal and provincial Ministers responsible for pensions (who have not met together for many years, perhaps because responsibility for pension policy resides with different ministries or agencies in various Canadian jurisdictions); and the Canadian Association of Pension Supervisory Authorities (CAPSA). I will not be the first person to call on Ontario's Minister of Finance to use all available means to bring these jurisdictional issues to the attention of his federal and provincial counterparts with a view to solving the common problems of Canada's pension systems — but I would be happy to be the last.
1.3 What Are Occupational Pensions For?
As noted earlier, this report concerns occupational pensions provided by employers to their workers, and not pensions provided to everyone by the state. The obvious purpose of all such pensions is to ensure that workers have greater means to support themselves after they leave the workforce than are provided by the C/QPP and OAS. However, not only do different types of occupational pensions provide such support in different ways and to different degrees, but they also fulfil a number of other important social and economic functions. What follows is a brief review of these pension types and of the functions they fulfil, both of which are dealt with in greater detail in succeeding chapters.
1.3.1 Types of occupational pension plans
Not all occupational pension plans are calculated, funded, paid out and regulated in the same way. They come in two basic models: defined benefit plans and defined contribution (DC) plans. At present, perhaps 90% of Ontario retirees and 80% of active plan members receive or expect to receive pensions classified for regulatory purposes as DB pensions; the rest receive or expect to receive pensions classified as DC pensions. However, “pure” DB and “pure” DC plans are constantly mutating into variant forms, many of which combine elements of both. Indeed, variants — notably multi-employer pension plans (MEPPs) — now enrol in the aggregate more members than either “pure” model.
The Pension Benefits Act treats DB plans as paradigmatic; the mandate of this Commission mentions them specifically; and many of the regulatory and funding problems I was asked to resolve are unique to DB plans. A brief description of these plans, and of the DC alternative to them, is therefore necessary.
Under DC plans, employers (“sponsors”) agree to contribute a fixed percentage of salary or dollar sum per week or month toward an employee's pension; hence, “defined contribution.” The accumulated contributions are invested on behalf of that employee; the total proceeds — contributions and investment earnings — are then used to provide the employee with a pension on retirement. Some DC plans require or permit contributions from the employee as well.
By contrast, “true” DB plans commit the sponsor to provide retirees with pensions of a fixed or ascertainable amount; hence, “defined benefit.” The level of the pension benefit is calculated by reference to a specified benchmark — most commonly some combination of the level of the employee's earnings and his or her length of service. In some cases, DB pensions are calculated as a proportion of the wages the employee earned during the final or best-paid years of their employment; in others, as a percentage of average earnings across their whole career; and in still others, as a “flat” or fixed sum payable on retirement in respect of each month of employment.
Unlike DC plans, DB plans do not earmark specific accounts for the support of individual retirees. Rather, the plan's entire assets are available to meet all of its obligations. If funds are inadequate at any point to meet those obligations, the sponsor must contribute additional funds to make good the deficiency. As a result, the risks that retirees will live longer than anticipated, or that the plan's investments will perform below expectations, are largely assumed by the sponsor, not by the plan members.
However, in contributory plans where the employees themselves are joint “sponsors,” they ultimately bear some part of those risks as well. Indeed, it is sometimes claimed that, in effect, they do so in all DB plans, contributory or not. This controversial claim is investigated in subsequent chapters.
It is widely believed that DB plans produce better financial outcomes for retirees than DC plans, though they are likely to cost sponsors more. Moreover, because workers can predict what a DB pension will yield with relative accuracy, they can plan for their own retirement with greater certainty that they will not experience a dramatic decline in their living standards. And because these pensions are sometimes (not always) linked with other features (more aggressive investment strategies; partial or ad hoc indexing to mitigate the effects of inflation; additional non-pension benefits, such as extended health care coverage), DB plans have tended to be especially popular with workers. Finally, several types of DB plans, such as multi-employer plans and jointly sponsored plans, offer members and their union or other association a role in plan governance.
DB and DC plans, and all their many variants, have a significant impact on Ontario's social policy and economy. An extended account of this impact is found in Chapters Two and Three; what follows is a brief summary of the findings in those chapters, which will help to explain the nature and importance of the issues confided to the Commission.
1.3.2 Income security for older Ontarians
Occupational pensions represent an important source of income support for retired Ontarians. Other sources include publicly funded programs such as the C/QPP, OAS, Guaranteed Income Supplement (GIS) and other social welfare programs; special programs for seniors such as assisted housing or subsidized prescription drugs; individual registered retirement savings plans and other private investments; and post-retirement full- or part-time work.
At a rough estimate, more than one in four Ontarians (3.0 to 3.5 million out of a total population of 12.0 million) is directly involved with the occupational pension system as a plan member — a proportion that rises if we include their dependants and domestic partners. Occupational pensions account for, on average, 20% of the total income received by retirees, although the percentage varies greatly depending on the individual's work history and overall economic situation.
Consequently, significant changes in the coverage and quantum of occupational pensions will almost certainly significantly affect the overall system of financial security for older Ontarians.
1.3.3 Labour markets
Pensions were once regarded as a form of gratuity used to reward “good and faithful servants” at the end of their useful working life. However, they soon became a device employers could use to attract and retain the skilled and semi-skilled workers they needed. These “golden handcuffs” bound workers to the employer who originally invested in recruiting and training them and who wanted to amortize that investment over the full duration of their working lives, or to ease transition to early retirement when their services were no longer required. Finally, the success of unions in securing pensions for their members to insulate them from poverty in their old age is rightly regarded as one of their most significant achievements. In addition, unions have learned to use pensions to mediate the competing preferences of their younger and older members and, sometimes, to influence business decisions — not just by the sponsor-employer but by other corporations in which their pension funds are invested.
That said, economists have observed that pensions — especially DB pensions that are not easily portable from one job to another — may inhibit the mobility of workers and create inefficiencies in the labour market. They also note that the increasing cost of pensions represents additional labour costs, which many sponsor firms can ill afford in an era of intense global competition.
Labour markets are undoubtedly changing, in ways that are examined in greater detail in Chapter Three. Some of these changes may put pressure on employers to reinvigorate the pension system; others may have the opposite effect.
1.3.4 Capital markets
Pension plans, after the chartered banks, have become the largest single source of investment capital in Canada and, almost certainly, in Ontario. Moreover, while the evidence is somewhat unclear, pension plans seem to be particularly important suppliers of capital for infrastructure and similar long-term projects. If active and solvent occupational pension plans were not available to invest in infrastructure, or to make the other kinds of strategic investments increasingly made by pension plans today, it would be necessary to find an equally attractive alternative source of capital. This would not be easy and the results could be harmful to Ontario's economy.
1.3.5 General economic effects
Ontario's economy generally benefits from a healthy occupational pension system. The ability of retirees with reasonable incomes to pay for goods and services, for example, generates jobs for those who supply them. The fact that retirees can pay for these goods and services from their own resources rather than from government-provided pensions helps to reduce the need for higher taxes, which in turn contributes to a more positive environment for business investment. The province's ability to hold the line on taxes and to maintain the spending power of seniors will be increasingly crucial to the future health of its economy, as a higher and higher proportion of its adult population retires from the workforce and retirees spend longer and more active lives in retirement.
1.3.6 Conclusions and implications
For all of these reasons, it is important that Ontario should have a healthy occupational pension system. Unfortunately, that system — especially its dominant sector, DB plans — has been in gradual decline for at least 30 years. For all of the reasons that the growth of occupational pensions is widely regarded as positive, their decline must be regarded as potentially negative for Ontario, its workers and employers, its seniors, and the communities and markets they inhabit. That, no doubt, is why the Commission's mandate is driven by concerns relating to “the security, viability and sustainability of the pension system in Ontario.”
1.4 The Challenges Confronting the Commission
The first challenge confronting this Commission is to better understand the causes of the decline in Ontario's pension system; the second is to propose strategies by which to arrest and, if possible, reverse it; and the third is to identify for future consideration alternative approaches that might fill the gap — if indeed, the occupational pension system as we know it cannot be fixed or cannot provide all of the social and economic benefits of a more comprehensive pension system.
1.4.1 Understanding why the pension system is in decline
As explained in Chapter Three, I have encountered no shortage of explanations for the decline of Ontario's pension system. Some hold that the DB system was fatally flawed from its inception during the post-war period when, like many social experiments, it was built upon assumptions concerning endless economic growth. The falsity of these assumptions (they argue) becomes evident in times of financial or political crisis. Others hold that labour market developments — declining union density, disemployment in economic sectors where pension enrolment has historically been concentrated, and changing workforce demographics — are to blame. Still others hold that the system suffers from self-inflicted wounds: an excess of expectations, regulation, litigation, rigidity and cost; an insufficiency of fairness, oversight, asset security and benefits; and an inability to accommodate pension plans within the changing discourse of the legal, economic, accounting and actuarial professions.
1.4.2 Legal and regulatory reform as a strategy to arrest or reverse the decline of occupational pensions
The Commission's terms of reference include explicitly or by implication almost all of these explanations in their articulation of “guiding principles” and “factors to consider.” However, the terms of reference give special prominence to a number of specific legal and regulatory concerns as “issues to be addressed in the report.” Those issues, and others closely linked to them, are carefully addressed in chapters of the report that focus on the rules governing plan funding, the consequences for plans of the restructuring of the sponsoring organization in our changing economy, problems arising out of plan failure, the effectiveness of the existing regulatory framework, and the need for attention to innovation in plan governance and design. These are extremely important issues, and if they are not resolved appropriately, the future of the occupational pension system will clearly not be — in the words of my mandate — “secure,” “viable” or “sustainable.”
1.4.3 Alternative strategies
However, the converse is not true: if appropriate legal and regulatory rules, institutions and processes are put in place, it does not necessarily follow that the pension system will be stabilized or reinvigorated. This possible disjuncture between underlying concerns about the system, and the specific issues identified for my analysis and recommendations, was a recurring theme of briefs and research studies received by the Commission, as well as of many conversations with stakeholders. The gist of these briefs, studies and conversations is that the Commission ought to investigate and recommend transformative developments in pension design, funding, regulation and policy that would amount to a virtual reinvention of the occupational pension system, or even its replacement.
Clearly, I had no mandate, nor did the Commission have the time or resources, to investigate the most ambitious of these alternative strategies, and it did not do so. However, in deference to the force of the imaginative proposals presented, and to the good will and creativity of those who presented them, I am anxious that they should not simply disappear from view. Accordingly, they are recapitulated in Chapters Nine and Ten so that they can be considered within the context of a larger, longer-term discussion about how to ensure that Ontarians have the kind of income security in retirement that they need and want.
1.4.4 Technical and operational issues
The Commission also learned of a number of technical and operational difficulties arising within the pension system or closely related to it. These difficulties have sometimes adversely affected the interests of individual plan members, sometimes created problems for sponsors, and sometimes unnecessarily complicated or constrained the work of the pension regulator. However, most do not raise fundamental issues of policy, and most are capable of being resolved by relatively straightforward, or at least non-controversial, changes in the law or in regulatory practices.
Commission staff have compiled a list of these matters, with contributions from members of the pension community and from FSCO. My Expert Advisors, using this list, have prepared a Memorandum for the Ministry of Finance (supplementary to this report) suggesting how these difficulties might be resolved in ways that are likely to be acceptable to most members of the pension community. I believe that these technical and operational issues can and should be dealt with promptly, both on their individual merits and to ensure that they do not cumulatively detract from the smooth running of the pension system.
1.5 Assumptions and Principles Underlying This Report
While occupational pensions in Ontario have been the subject of several previous comprehensive reviews, most efforts at reform over the past 20 years could fairly be described as ad hoc rather than principled, and issue-specific rather than systemic. There are good reasons for this, the most important being that pension reform is both technically complicated and politically controversial. However, the result is that an important domain of public policy has not been subject to thorough review for over two decades. Much has changed during that time, within both the pension community and the broader society and economy. Much more is apt to change in the years ahead, since pension policy is likely to become even more important as the province engages with the problems associated with an aging population. A broad and informed review of Ontario's occupational pension system, and of the legal regimes by which it is regulated, is therefore very much in order. The fact that so many other jurisdictions in Canada and elsewhere have been re-examining, and sometimes re-designing, their pension systems reinforces this conclusion.
Fortunately, my mandate contemplates such a review. It articulates a number of “guiding principles” and “factors to consider,” enumerates a number of specific “issues to be addressed,” and concludes with a “general” instruction to consider “pensions as an important policy instrument that support workforce attachment and foster an entrepreneurial economy” — as well as “any other matters relevant to enhancing the viability of DB pension plans in Ontario.” But the mandate is not infinitely broad: I am specifically enjoined to produce recommendations that are “practical, affordable and implementable.”
However, these various components of my mandate — guiding principles, factors to consider, issues to be addressed and the need for practical recommendations — are not always easy to reconcile. Practicality may be at odds with principles, and principles may exist in tension with each other. Giving undue weight to some of the factors and issues — essentially, current controversies within the present system — may foreclose approaches that have not yet been tried. And finally, proposals for sound, principle-driven reforms that might “enhance the viability” of the defined benefit system risk being characterized as politically “unimplementable” if they challenge the conventional wisdom or existing alignments of interest.
For all of these reasons, I have tried to ensure that while my recommendations are sensitive to the positions expressed in briefs and stakeholder discussions, they are ultimately based on sound evidence and analysis and, especially, grounded in principle. This approach has left me with ample room to recommend from among a range of acceptable solutions those that seem the most practical, affordable and implementable. My emphasis on evidence, analysis and principle has several positive features: it imposes structure and discipline on my analysis; it forces me to acknowledge the existence of contradictions within pension policy and of conflicts among stakeholders; and it reminds stakeholders of the need for sensible compromises. It also provides those stakeholders, as well as general readers, with benchmarks against which to evaluate this report.
In the discussion that follows, I review the assumptions — the “factors to be considered” — and flesh out the “guiding principles” that inform the report. In subsequent chapters, I draw on these same assumptions and principles to analyse specific issues and make the case for specific recommendations.
Principle: Maintain and encourage defined benefit pension plans
The Commission's mandate rests on several implicit and explicit assumptions: that DB pensions provide workers with an important form of income security upon retirement; that they thereby relieve pressure on the publicly funded social safety net; that they are useful to employers; that they represent significant aggregations of investment capital; and that in all these ways and more, pension plans make a positive contribution to Ontario's social and economic well-being.
To anticipate the outcome of the detailed review of these assumptions in subsequent chapters: they seem broadly sound. Consequently, I have no hesitation in adopting as the first principle of this report the approach set out in my mandate: public policy in Ontario ought to maintain and encourage DB pension plans.
Principle: Create a positive environment for defined benefit pension plans within a voluntary system
Implicit in the Commission's mandate is a further assumption: that our present system of DB pensions is voluntary. This assumption explains several features of the present system: employers are not now required by law to provide workers with any form of occupational pension (though the establishment of public sector plans is necessarily authorized by statute); employers may initiate plans for their own reasons or because they have promised to do so in the context of individual or collective negotiations with their employees; and employers are free to amend or discontinue existing plans, provided that they do not violate such promises or infringe the rights of plan beneficiaries.
Moreover, voluntarism not only explains much about the present system, but it also effectively defines the range of options available to reform it. For example, while other countries have experimented with compulsory retirement savings schemes, my mandate does not permit me to recommend substituting some such system for our own. Or to take another example, in evaluating options for reform of the present voluntary system, one criterion, among others, is how reform might influence the exercise by employers of their choice to sponsor or not sponsor plans.
However, while voluntarism is certainly a baseline assumption of our occupational pension system, it is not a principle per se. Moreover, while voluntarism is implicitly assumed in the mandate of the Commission, the “maintain and encourage” principle set out above is, by contrast, explicit. How then to square an implicit assumption with an explicit principle? How to “maintain and encourage” DB pensions within a voluntary system? This answer, perhaps, is to adopt a second principle: public policy initiatives ought to focus on creating a positive environment in which DB plans will flourish; in which the integrity of such plans, once established, will be protected; and in which the legitimate interests of plan sponsors and active and retired members will be fairly balanced.
Thus stated, the second principle is optimistic: it looks forward to an era in which the benefits of DB plans will be more secure and widespread. It is realistic: it assumes that employers who voluntarily choose to initiate or maintain pension plans want them to operate at acceptable cost, honestly and in accordance with the law and proper standards of administration. And it is necessary: it acknowledges that once voluntarily established, pension plans affect the rights and interests both of their sponsors and of their intended beneficiaries.
Finally, creating a positive environment within a voluntary pension system implies an active role for the state beyond its necessary regulatory functions. The state is particularly well placed to gather and distribute information, to disseminate ideas, to promote dialogue among stakeholders, and to clear away obstacles to and provide incentives for thoughtful innovation. If the state is indeed to perform these important functions, some agency or official must be mandated to lead the exercise. As well, creating a positive environment implies an active role for stakeholders who must be prepared to work with the state and each other in an open and constructive manner.
Principle: Coordinate pension policy with other policy domains and legal-regulatory regimes
In addition to DB pensions, many other kinds of arrangements — public and private, voluntary and otherwise — contribute to the overall income security of older Ontarians. Moreover, many of the positive outcomes associated with DB pensions, such as the promotion of labour force attachment and the accumulation of pools of investment capital, can be, and often are, advanced through public policies that have nothing to do with pensions. Further, as noted above and as explored in later chapters, legal rules originating in other policy domains — notably taxation and bankruptcy — directly or indirectly affect the establishment and operation of DB plans and, more generally, the sustainability of the occupational pension system. And finally, pension law and regulation are intertwined with other public and private regimes, including trust and contract law; family and labour law; and rules and practices emanating from the actuarial, accounting and legal professions.
This intertwining of pension policies and legislation with regimes originating elsewhere underlines the need for coordination, the third principle shaping my analysis and recommendations. Clearly, policies governing occupational pensions should, if possible, be designed to produce optimal results in labour and capital markets and to reinforce Ontario's system of income protection for seniors. Just as clearly, the authors of income tax and insolvency legislation should take account of their effects on pension design and administration. And judges and regulators should be sensitive to the need to maintain coherence and predictability in pension law and policy while drawing on potentially helpful concepts, principles and rules developed in other contexts.
In the end, coordination is likely to require legislative action — but for that very reason, it is especially hard to achieve in Canada's federal system. Some policy domains relevant to pension policy fall under the jurisdiction of provincial governments and others under federal jurisdiction, and within each jurisdiction, some are confided to one branch, agency or department of government and some to another. However, these constitutional and jurisdictional difficulties can be eased, if not overcome, by open dialogue among and within governments, supported by good research, which provides them with a common understanding of the issues. There is room for significant improvement in current arrangements to facilitate coordination.
Principle: Promote cooperation and selective convergence among Canadian pension regimes
Each Canadian jurisdiction is in principle free to enact and apply its own pension legislation. However, many employers operate across provincial boundaries and many occupational pension plans cover employees in two or more provinces, while others cover employees in industries under federal jurisdiction. Cross-Canada harmonization of pension legislation would thus facilitate not only regulation but plan administration.
However, harmonization has not been achieved and the provinces have so far settled for an arrangement whereby regulatory responsibility is assigned to the jurisdiction in which a plurality of active plan members works. For reasons canvassed elsewhere, the current arrangement is less than satisfactory, and the problem remains that regulatory requirements continue to differ from one province to another.
In these circumstances, Ontario ought to minimize the cost and inconvenience to plan sponsors and members by adhering to the principle of selective convergence. This principle requires that legislators should inform themselves of regulatory best practices in other Canadian jurisdictions and adopt similar measures in Ontario when such practices appear to be conceptually sound and/or successful in practice. If other jurisdictions decide to do likewise, momentum in the direction of more extensive convergence may develop.
Principle: Ensure the honesty and integrity of the pension system
It is important to ensure the honesty and integrity of pension plans and of the pension system as a whole. Beneficiaries are entitled to be treated in accordance with the terms of the instruments by which plans are established and the legal rules by which they are governed. This requires that those responsible for collecting pension contributions, administering pension plans and dispensing pension benefits should act as fiduciaries: honestly, competently, in good faith and transparently. It also requires that those who provide professional advice and services to pension plans should meet the highest applicable legal and professional standards.
Principle: Protect the financial security of pension plans
While employers are under no obligation to establish pension plans for the benefit of their workers, once established, public policy requires that such plans be kept financially secure. The financial security principle requires that pension promises should be honoured, subject only to contingencies contemplated by law or set out in the terms of the plan itself.
In the context of DB pension plans, the financial security principle requires at a minimum that workers should know with relative certainty the formula that will determine their future pensions; that both active and retired members should be assured that their entitlements will be maintained at the level promised; and that plan sponsors should make adequate financial provision to honour their pension promises. In the context of multi-employer plans and some hybrid plans, which treat the pension promise as less than absolute, the same principle requires that the circumstances under which entitlements may be compromised should be clearly established by law or in the plan itself, made intelligible to all plan members and invoked by means of fair procedures.
Principle: Balance the financial interests of past, present and future plan members
Adherence to the financial security principle may be jeopardized by developments over which neither plan sponsors nor pension regulators have control, such as a decline in financial markets or new competitive challenges that affect the sponsor's business prospects. On the other hand, their reactions to such developments, even when genuinely intended to protect the plan, may not end up affecting all plan members — past, present and future — in the same way. The permissible extent of differential treatment may be specified in the plan design or in the legal rules that regulate its operation. However, to the extent that it is not specified, plan sponsors, regulators and representatives (if any) of active and retired members should attempt to ensure balanced treatment of the interests of all those who have contributed or will contribute to, or are entitled to support from, the plan's assets.
Principle: Ensure predictability and affordability for plan sponsors
So long as voluntarism remains a defining characteristic of Ontario's pension system, the continuation of existing plans and the initiation of new plans depends to an extent on their cost to sponsors being — and being perceived to be — affordable and predictable.
Affordability and predictability are not always easily reconciled with each other or with the financial security principle, set out above. A sponsor may increase the predictability of its contribution by investing more heavily in assets that yield fixed returns, but these assets tend to be more expensive. Members may favour such investments as well, since the pension fund is more secure, but they may be unwilling to forgo higher wages and benefits in order to induce the employer to make larger contributions. Conversely, in an effort to keep costs affordable, sponsors and plan administrators may seek investments that provide higher returns but that involve enhanced risks that may compromise the financial security principle. And in an effort to keep their costs predictable, sponsors may turn to long-term funding strategies that, at given moments, produce unanticipated “surpluses” or “deficits” — higher or lower levels of funding than strict application of the financial security principle would warrant.
The tensions or contradictions between and within these principles lie at the heart of many of the debates over pension policy, which led to the appointment of this Commission. They are the subject of extensive analysis later in this report.
Principle: Strive for clear, comprehensive, consistent and codified regulations
While contradictions among the principles of the pension system may be inevitable, not all controversies arise from conflicts of principle. Some result from the failure of legislatures to express themselves clearly, of courts to consider or comprehend the full implications of their judgments, or of regulators to properly gauge the extent of their powers and the reach of their mandates. Greater care in the drafting and interpretation of legislation and regulations governing the pension system may help to reduce or avoid such conflicts.
Regulatory texts should therefore adhere to the clarity principle. If possible, they should be clear, comprehensive and consistent with each other. And, if possible, they should be codified in a single authoritative document so that those whose rights and obligations are affected will know the rules by which they are governed, and those who are called upon to resolve differences or adjudicate disputes will know where to find the applicable law.
Clarity if possible, then; but not clarity at any price. The clarity principle has its limits. First, understandings about policy goals or how best to achieve them may change; unforeseen contingencies may arise that cannot be dealt with under existing laws; and updating the law by substituting a new “clear” text for an old one may be a lengthy and difficult process. Consequently, legislators, regulators and decision-makers sometimes prefer broad language, with its potential for ambiguity rather than clarity. Breadth and ambiguity permit incremental changes in the law — adjustments at the margins to meet the changing needs of the pension system without the need for formal amendment.
Second, the clarity principle assumes that all subjects of the law — in this case, pension plans — will be treated alike. However, if, the maxim “one size doesn't fit all” deserves to be treated as a principle (as I next suggest), and if various types of pensions require differential regulatory treatment, “comprehensiveness” and “consistency” in the law are obviously impossible.
Third, clarity may be achieved by drafting legislation that is extremely detailed, and insisting that it be literally construed. This approach has something to recommend it. On the other hand, it is likely to yield pension legislation that, like the Income Tax Act, can be read and understood by only a small community of experts; and it may encourage regulators and courts to merely follow the detailed letter of the law rather than to advance its intent and spirit.
Principle: Accept that one size doesn't fit all
Material differences exist among types of pension plans that reflect differences among economic sectors — in patterns of employment, in the various financial circumstances and administrative capacities of plan sponsors, and especially in plan design and governance. Without compromising the principles set out above — the honesty and integrity principle and the financial security principle, for example — it is important that material differences among plans should be reflected in the details of regulatory requirements. Failure to adjust regulatory norms to accommodate such differences will result in a number of undesirable outcomes: some plans will be more intensely regulated than they need to be, others less; experiments in regulatory strategy will be more difficult to initiate; and innovation in plan design will be discouraged.
Hence the one size doesn't fit all principle: in drafting pension statutes or regulations, legislators and regulators should take account of material differences among species of plans. The principle should be invoked only when the differences are indeed “material” to the proposed regulatory variation, only after careful consideration and only prospectively. It should not be invoked after the fact or opportunistically to resolve awkward controversies.
Principle: Regulate fairly, openly, effectively, efficiently and adaptably
Ontario's pension system is too large and complex, and affects too many conflicting private and public interests, to be left unregulated. Hence the need for principles that will define the appropriate approach by the state to its regulatory responsibilities.
The regulatory apparatus of the state should be sensitive to all interests, open and helpful to all who need to invoke it, and fair in its treatment of all whose conduct is subject to oversight and constraint. Regulatory norms, processes and agencies should be effective in achieving their assigned objectives; they should be efficient in doing so with the least possible burden on public resources and on the parties regulated by them; and they should be adaptable so that they can respond to changing practices, circumstances and expectations. As a corollary, regulatory mandates should be defined with care, and regulatory agencies should be assigned sufficient powers and resources to perform the tasks assigned to them.
Principle: Achieve compliance by graduated regulatory responses
The ultimate objective of regulation is to secure compliance with public policies and statutory requirements. However, a pension system in which compliance depends primarily or exclusively on the actual or threatened use of legal sanctions is unlikely to operate efficiently or effectively, nor are legal sanctions the best way to encourage responsible innovation within an evolving pension system.
Consequently, any strategy designed to achieve compliance should operate according to the principle of graduated responses. This principle contemplates that pension sponsors, administrators and service providers will be encouraged to conform not only to law but also to best practices; that plan members should be empowered to safeguard their own rights and interests; that non-compliance with pension plan provisions, legislation and regulations should be proactively detected and forestalled if possible; that persons harmed as a result of non-compliance should be fully and speedily compensated by the wrongdoer; and — as a last resort — that gross negligence, fraud or other serious wrongdoing should be punished with certainty and severity sufficient to deter such conduct in the future.
Principle: Facilitate innovation in plan design
Despite their many attractions, DB plans cover a smaller fraction of the Ontario workforce than they used to, and new DB plans have been introduced rather infrequently in recent years. In order to promote the adoption of such plans by a new cohort of sponsors, innovation in the design of such plans should be encouraged or facilitated — not constrained or prevented — by legislators and regulatory authorities. The result of such innovation may be to encourage the emergence of new types of plans that are not, strictly speaking, DB plans, but that are their functional equivalent in the sense that they offer some or all of the advantages traditionally associated with DB plans.
Moreover, those responsible for designing and implementing new types of plans, and for establishing the regulatory frameworks within which they operate, ought to consider how to enable them to respond to changes in the external environment, in the circumstances of the sponsor, and in the composition and needs of the plan membership, while respecting the rights and interests of all stakeholders.
Principle: Promote honest, prudent, knowledgeable, efficient, successful plan administration
Even the best-designed plans, subject to the most effective regulatory oversight, are unlikely to succeed unless they are well-administered. The hallmarks of good pension administration are honesty, knowledge of the pension system, prudent management of the plan's assets and efficiency. Plan sponsors, administrators, active and retired members, service providers, professional advisors and regulators should all be committed to achieving a high quality of plan administration. Of course, lay persons and trained pension professionals may exhibit these qualities in different ways and to different degrees, but individuals in both categories should ensure that they receive the training necessary to achieve the high standards expected of them.
Principle: Ensure clarity and transparency of plan administration
Despite attempts to implement the clarity principle, most pension plans, the documents that initiate them, and the legal rules that regulate them tend to be complex, arcane and intelligible only to experts and professionals. As a practical matter, few plan members are likely to be able to determine for themselves the extent either of their entitlements or of the contingencies that might curtail those entitlements. However, if plan members are unable to make such determinations, they are in danger of being exposed to unwarranted risks or deprived of their entitlements without their knowledge or consent. It is therefore important that the nature and extent of the pension promise be clearly conveyed to members of the plan when they join it, when that promise is altered, and when they are in a position to benefit from it by drawing their pensions or leaving the plan.
Because most plan members lack the expertise to deal with information about their pensions, even if transparent, plan administrators should be obliged not only to provide such information to regulators but also to communicate it directly to members in easily understood language at regular intervals, upon request or promptly following unusual developments that may affect them positively or adversely. And because the plan's prospects may fluctuate from time to time, it is also important that pension administration be conducted in a transparent manner, so that regulators will be able to perform their functions and plan members and their representatives will be able to assess their position in light of reliable information and, if necessary, take action to protect their interests.
Finally, pension regulators ought to ensure that the transparency principle is respected not only by plan administrators, but by themselves. Responses by regulators to enquiries and complaints ought to be quick, courteous and comprehensible to the recipient.
Principle: Encourage voice and participation by members
Most Ontario pension plans are sponsored and administered by single employers, even though most workers are now enrolled in other types of plans, such as multi-employer or jointly sponsored plans. In single-employer self-administered plans, virtually all important decisions are made and implemented by the sponsors, or their nominees or agents, albeit within the framework of a collective agreement if their employees are unionized. However, unilateral decision-making by the employer-sponsor gives rise to two concerns: that unilateral power may be abused, whether intentionally or otherwise, and that plan administrators or sponsors may take good faith decisions that adversely affect plan beneficiaries.
These concerns each evoke a response. The first — captured in several previous principles — is to ensure that power is exercised transparently, within the bounds of clear norms and/or detailed rules, and subject to vigilant regulatory oversight. The second is to facilitate and encourage participation of those affected by decisions in the process that produces the decisions.
These two responses appear to be complementary. On the one hand, DB plans, which are administered by the sponsor, are subject to fairly strict regulation by the state. On the other, regulatory requirements may be somewhat less rigorous when decision-making is shared between sponsors and active and retired plan members, as in jointly sponsored plans, or assumed by the members themselves, as in some multi-employer plans, or when members are legislatively guaranteed the right to participate in certain kinds of decisions, such as the distribution of surpluses following plan wind-ups.
These observations seem to suggest that current pension law may tacitly acknowledge a principle: if active and retired plan members participate in decisions affecting their interests, the intensity of legal regulation may be somewhat relaxed. Whether or not this is so, it is a principle whose potential relevance to DB plans will be carefully explored in Chapter Eight.
1.6 The Organization of This Report
The next two chapters establish a context for subsequent analysis and recommendations. Chapter Two documents the role pensions play in Ontario's economic and social policy; Chapter Three investigates the specific problem of declining coverage in our pension system. Chapters Four, Five and Six all deal with difficult financial issues: the funding of pension plans, the effect upon them of corporate restructuring and worker mobility, and the consequences of plan failure, respectively. Chapters Seven and Eight deal with the regulation of pension plans by the state, and governance issues confronting sponsors and members. Finally, Chapters Nine and Ten look forward to new ways of promoting innovation in pension design, and to new strategies for keeping pension policy up-to-date.
Finally, for readers interested in identifying the sources of information and analysis that underlie the main text, the Commission has prepared a Technical Annex, which provides the equivalent of footnotes or endnotes.