A year after the Certified General Accountants Association of Canada (CGA-Canada) reported serious funding shortfalls in Canadian defined benefit pension programs, CGA-Canada has released updated pension deficit information and the numbers are even more disturbing than last year.
The State of Defined Pension Plans in Canada: an Update builds on CGA-Canada’sJune 2004 report and compares 2003 and 2004 survey results. The report estimates that the additional funding required to fully fund deficit plans has grown from $160 billion at the end of 2003 to $190 billion at the end of 2004. This clearly demonstrates a weakening of the funding ratio of deficit plans between 2003 and 2004 and further corroborates last year’s projections through to 2008.
Recently, the number of companies that have failed to deliver on pension obligations have been a wake-up call for the Canadian business community. As a result, defined benefit plans, once the flagship of benefit packages, are losing favor. This new CGA-Canada report encourages employers to consider the relative benefits of defined contribution programs as a safer long-term solution for their employees.
CGA-Canada believes that pension obligations, like payroll, should be considered a contractual undertaking, and that employers should not be permitted to abdicate from pension obligations. “For a company to fail on pension obligations is no more acceptable than not paying an employee their salary,” says Rock Lefebvre, CGA-Canada’s Vice-President, Research and Standards. “Canadian employers need to change the way they think about pensions and start looking at them as deferred compensation.”
Our reality in Canada today is that our workforce is aging, and in the very near future, fewer workers will have to support a rapidly growing group of retirees. This, combined with the under funding of Canadian defined benefits pensions, will negatively impact the retirement of many Canadians. “The pension situation in Canada is ripe for reform,” comments CGA-Canada President and CEO Anthony Ariganello, “and reform is necessary in order to sustain the lifestyle and economic expectations of Canadians.”
CGA is the fastest-growing accounting designation in Canada. The CGA designation focuses on integrity, ethics and the highest education requirements. Recognized as the country’s accounting business leaders, CGAs provide strategic counsel, financial leadership, and overall direction to all sectors of the Canadian economy.
The Association sets standards, develops education programs, publishes professional materials, advocates on public policy issues, and represents CGAs nationally and internationally. The Certified General Accountants Association of Canada represents 62,000 CGAs and students in Canada, Bermuda, the Caribbean, Hong Kong, and China.
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