Although the new pension system will be required for all new employees, an enhanced plan will also be open to existing workers who want to switch, according to the Canadian Press. The bank said the defined contribution plan will be improved with an automatic RBC contribution, higher matching contributions and higher annual bank contribution limits as of July 1. Eligible employees who have not yet joined the retirement program by June 30 will be automatically enrolled in the enhanced DC plan, according to the report.
“The changes are a responsible way for RBC to better manage the retirement program by ensuring more predictable pension costs in the future,” spokeswoman Elyse Lalonde told the CP. “This will enable RBC to continue to provide retirement benefits that reflect current market trends.”
Full-time employees will be able to join the defined contribution after six months of service. According to the CP, the bank says the enhanced DC plan includes investment choices that enable employees to have a diversified portfolio in keeping with their risk tolerance, including target-date funds.
Employees wanting to purchase shares of the bank can contribute up to 6% of pay, which is matched at 50% by the bank up to the plan limits.
The are roughly 7,000 private defined benefit plans and an estimated 8,000 defined contribution plans in Canada, having an estimated 4.5 million and 800,000 members respectively, according to the Certified General Accountants Association of Canada.
Between 1991 and 2006, DC plan members almost doubled, while DB plan membership declined by 4%, according to the report, and some 56% of private sector workers had defined benefit plans in 2009, compared to 76% in 1999.
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