Canadian Employers Try to Balance Adequacy and Cost of SERPs

September 3, 2008 ( - Findings of a nationwide survey of Canadian plans by Buck Consultants show that for Supplemental Employee Retirement Plans (SERPs), sponsors' top concerns include communications, the adequacy of benefits, and the costs of the plan.

The study, “Moving Forward – An Overview of Supplemental Employee Retirement Plans in Canada,” examined the two types of SERPs – the “top-up” arrangement (based on the same formula as the registered pension plan) and the “executive” plan (which provides separate benefits for senior executives), according to a Buck press release. Employee understanding and communications issues topped the list of concerns for 69% of sponsors of both types of SERPs, while adequacy of benefits was cited by 67% of top-up plan sponsors and 62% of executive plan sponsors. Cost containment was a major issue for two-thirds of sponsors.

The survey also found that, while there is no requirement to fund a SERP, 32% of the plans are funded through a Retirement Compensation Arrangement. One reason for this is that key decision makers in the company are often those who have the most significant benefits in the SERP and bear the highest risk if the plan is unfunded, Buck said.

Forty-four percent of plans provide inflation increases for SERP benefits, and just over half of those provide inflation protection on an ad hoc basis.

Buck found that a significant number of plan sponsors – close to 80% – have a SERP in place for all salaried non-union employees, not just senior management. “As the average wage steadily climbs, more and more employees are finding their pensions restricted by the Income Tax Act limits under the registered pension plan,” said Charlene Moriarty, consulting actuary in Buck’s Toronto office, in the press release. “Employers are therefore finding it increasingly necessary to offer supplemental pension arrangements not only for their senior executives, but for their middle management employees as well.”

The Buck Consultants survey of more than 150 employers was conducted in the third quarter of 2007. The survey report is available to interested parties for $400 from Buck’s Global Survey Resources, 500 Plaza Drive, Secaucus, NJ, 07096-1533, or by calling 800-887-0509, or by visiting .