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Posted by Jimmy Carbonneau, Group insurance and group annuity plans advisor, October 13 2016
Group Retirement Savings Plan
Retirement savings: 5 points To consider to avoid litigation


You provide a retirement savings plan to your employees, the stock market is doing well and everyone seems satisfied. You are riding the wave. But you need to be very careful as there may be rocks hidden beneath that wave... To avoid all kinds of complications that could lead to litigation by your employees, there are five things you need to consider, as explained below.

1. Investment fund performance

When the stock market is performing strongly, employees are usually very happy. A 10% annual return will send them into raptures. However, they may be unaware of the fact that the rest of the market rose by 15%.

It is important to compare the performance of the funds offered in your plan with the overall market returns. This comparison should be made once or twice every year, as applicable. Thus, you will be able to see whether the funds offered in your plan must be reviewed or if you should contemplate changing providers.

2. Investment fund offering

A retirement savings plan must offer a variety of investment funds among the different asset classes (bonds, Canadian equities, global equities, etc.). It is also advisable to consider various management styles (active or index-based) and managers’ styles (value, growth, blend, etc.).

When you offer a diversified range of high quality investment funds, your employees will have the tools they need to help them get their retirement contributions working for them.

An employer who doesn’t maintain an up-to-date offering of high quality funds is potentially open to litigation. You understand this type of situation must be avoided!

3. Default fund

The default fund is the investment fund into which the contributions are deposited when the employee did not make an investment selection upon enrolling in the plan. In several retirement plans, the default fund is a money market or guaranteed investment fund. Such funds are obviously safe, but they come with a very low potential return.

If employees don’t pay attention and their contributions are deposited in this type of fund during 25 years, it is very likely that they will not achieve their retirement savings goal due to very low returns.

Businesses are increasingly choosing a life cycle fund as their default fund. This type of fund changes as the employee ages, i.e. the asset mix becomes more conservative as retirement is approaching.

4. Management fees

Do you know what management fees are applied to your retirement savings plan? If you don’t, they are most probably too high and they have not been reviewed for a long time. In that case, your employees may complain that their plan is not competitive.

That is why it is important to review these fees regularly. Usually, your broker will negotiate the fees with the provider.

5. Plan provisions

Are the rules established when your plan was set up 10 years ago still current? Do you have an employee retention problem?

With workforce mobility and the anticipated labour shortage, very restrictive withdrawal rules may no longer be appropriate and should be reviewed. It is vital to keep these rules as up-to-date as possible and thus avoid any potential conflict with or litigation by employees.

Be sure to carefully review your retirement savings plan!

If you are not certain to be safe from such situations with the retirement savings plan currently offered to your employees, don’t take any chances. Ask one of our advisors, who will help you check your plan and provide guidance to save you from any complications!


Jimmy brings overs 20 years of experience in pension plans. After starting his pension career at the Ontario Teachers’ Pension Plan, he worked as DC Consultant for a large actuarial firm and two insurance companies before joining AGA. With his extensive pension experience, he has developed an acute expertise in the selection, the design and the implementation of pension plans. Jimmy provides his clients with both expertise and insight on their employee benefits.
Jimmy Carbonneau, Group insurance and group annuity plans advisor