Seven Reasons Why You Should Benchmark Your MEPP/TBP

Authored By: Nisha Singh & Nellie Huang | Publish Date: April 3, 2017

Benchmarking is a very effective tool often used in the business world to compare things. It lets you know exactly where you stand. In particular, it has specific application to pension and benefit plans. Single employer pension plans have been doing this for years and now there is an opportunity for multi-employer and target benefit plans to do the same.

Here are the seven top reasons why multi-employer pension plan (MEPP) and target benefit plan (TBP) trustees and administrators should strongly consider benchmarking their plan:

  • You can find out how your plan compares to the competition

Typical benchmarking for pension plans is with respect to benefit and/or contribution levels. Employers and members alike are interested in how their particular plan’s costs and benefits compare to others, particularly in the same industry, i.e. your plan’s competitive positioning.

Benefit rates, at least, and often contribution rates are included in basic benchmarking studies, but the more advanced benchmarking studies can also include such things as risk-taking effectiveness – something which is of primary importance to pension plans in general and MEPPs specifically – and which can lead to all sorts of advantages for the plan.

  • You can gain insight as to how your plan’s benefits can be improved and/or costs reduced

In a MEPP or TBP, among other things, benefits are a function of two primary factors: the level of contributions and the benefit rate per dollar of contribution (a.k.a. bang-for-the-buck). Knowing how your plan compares in these areas to other similar plans is the first step to understanding how some simple changes could achieve a better end result. Benchmarking is also something that can influence the collective bargaining process.

  • You can discover potential new investment strategies that will positively affect your risk/reward profile

Benefit rates depend on many things, including the demographics of the group, investment returns, and the administrative expenses of operating the plan. While the demographics of the plan (age and sex of the members) are difficult to change and the expenses are a relatively minor factor, the investment strategy is a significant factor ultimately impacting the level of benefits and associated security. You’d be surprised how seemingly small changes to a plan’s investment and/or risk profile can lead to significant plan improvements.

Better understanding how other plans are investing may lead to additional opportunities for your plan.

  • You can improve your plan’s risk-taking efficiency and long-term sustainability

In a MEPP or TBP, all of the risk of the plan is borne by the members. It is therefore particularly important for all types of risk to be managed effectively and efficiently.

An advanced pension benchmarking study can provide a comparative measure of risk-taking effectiveness. More specifically, you can find out how effectively your plan is rewarded (in terms of benefit per dollar of contribution) for each unit of risk undertaken. Depending on where your plan is positioned on the benchmarking spectrum, there may be anywhere from a moderate to huge opportunity for improvement, either in terms of increased benefits, lower risk, or some combination of the two.

  •  It is part of good due diligence and fulfilling fiduciary responsibilities

Knowing how benefits, contributions, and risk levels stack up to other plans enables your plan’s trustees to make more informed decisions while better fulfilling their fiduciary responsibilities. Achieving a plan’s key objectives – adequacy, affordability, and security of benefits – is a challenging task these days, but benchmarking can help trustees to optimize the level of benefits provided relative to the risk undertaken.

Benchmarking will highlight opportunities to either improve benefits, reduce costs, or some combination and to improve the plan’s risk-taking effectiveness, leading to either or some combination of higher benefits and/or greater security (lower risk). These are things which take on increased importance for members of MEPPs and TBPs.

  • Other plans do it

Today’s marketplace is very competitive. Best practices require that plans be as informed as possible about the world in which they exist. Benchmarking provides useful information for plan trustees and administrators in this regard and can lead to better and more informed decisions concerning the plan and, ultimately, enhance a plan’s long-term sustainability. You should have the same knowledge that your competitors do.

  •  It can be done without spending a dollar or any time filling out a long survey

Participating in a benchmarking study can be free and does not necessarily mean having to complete a lengthy survey. It is also completely confidential. Some organizations offer benchmarking services for free as the primary purpose of the survey is to provide beneficial information to all survey participants.

Nisha Singh is a consulting actuary ( and Nellie Huang is an actuarial associate ( in PBI Actuarial Consultants Ltd.’s Toronto office.

PBI Actuarial Consultants’ ‘2016 Apples & Oranges National MEPP Benchmarking Study’ is the first Canadian survey focused exclusively on the unique needs and interests of multi-employer and target benefit pension plans. The results of the study provide a wealth of information about more than 50 plans across Canada – in a broad cross-section of industries and trades – and covering over 800,000 members with over $40 billion in assets. On April 19, PBI will be hosting a free breakfast seminar in the Greater Toronto, ON, Area presenting highlights of the 2016 Benchmarking Study results and indicating how you can participate in the next release. Contact for more details and to request an invitation.

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