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June 26, 2019


Mental Health Accounts For Half Of Claims

Data just released to the National Joint Council’s Disability Insurance Plan Board of Management shows claims involving mental health conditions represented 52 per cent of disability insurance claims approved for federal public service employees in 2018. In other words, there are now more federal disability claims approved for mental health conditions than non-mental health conditions, says the Public Service Alliance of Canada (PSAC). Although in the past, mental health claims have comprised the highest portion of approved disability claims, this is the first instance where the percentage has exceeded 50 per cent in the 49-year history of the federal disability insurance plan. It is also significant to note that federal disability claims are only approved when an employee has been medically incapable of working for a minimum of 13 weeks or the expiry of accrued sick leave credits, whichever is later. The data also indicates that an increasingly disproportionate number of approved federal disability insurance claims have been filed by women. Although women represent 55 per cent of employees in the federal public service, they accounted for 69 per cent of all federal disability insurance claims approved in 2018, which means that approved claims are almost twice as likely to come from women as men. The reason behind this needs to be further investigated to determine whether there are systemic issues, says the PSAC.

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Workers Hiding Workplace Romances

Canadians are finding love at work, but many are hiding it from their coworkers, says an ADP Canada study. Nearly half (45 per cent) of those in relationships kept their workplace romance a secret from someone, with 27 per cent keeping it a secret from everyone at work. Canadians are more likely to hide a relationship from human resources (37 per cent) or management (40 per cent) than from their colleagues. Part of this secrecy could be credited to a fear of penalization or a misunderstanding of workplace policies. Approximately half (49 per cent) of participants claim their company does not have a formal policy that addresses workplace relationships. This percentage was even higher in Quebec, with 65 per cent reporting there was no clear policy at their company. But employees aren’t opposed to workplace romance. In fact, a large majority (83 per cent combined) are open to relationships at work, indicating relationships between colleagues should be allowed or they don’t care if people they work with are in romantic relationships. “HR policies should not exist to control employees, but to protect them,” says Heather Haslam, vice-president of marketing at ADP Canada. “We know people are finding love at work, but many are keeping it a secret. These statistics represent a call to action for organizations to make their policies clear to employees and to offer them the support and resources they need to feel comfortable navigating these situations.”

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Rising Costs Take Toll

Rising costs ‒ especially from non-compensation expenses including technology, regulatory, back-office processing, and office space ‒ took its toll on money manager profitability globally. Despite 20 per cent growth in worldwide investment industry assets to $71.8 trillion over the four years ended December 31, aggregate industry revenue rose just eight per cent over the period, says an analysis from Casey Quirk, a business of Deloitte Consulting, and McLagan, a unit of Aon. Over the one-year period ended December 31, worldwide asset growth was 5.1 per cent while revenue was up three per cent. Part of the slowdown in revenue growth is a result of declining fees. There was a 12-basis-point decline in median total manager fees to 42 basis points over the four-year period and the median operating margin dropped to 32 per cent. The ongoing operational expense for running an asset management company with $150 billion in assets under management rose to $23 million in the year ended December 31, up from $5 million in 2014. “It’s now a necessity, not a luxury for asset managers to reduce expenses by automating, streamlining data and technology, and shifting functions to lower cost locations,” says Amanda Walters, a senior manager at Casey Quirk. Implementing cost-savings practices could lead to a reduction in ongoing fixed and variable expenses of between 6.5 per cent and 17 per cent for individual managers, resulting in minimum industrywide savings of $13 billion.

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Consumers Bear Burden From Tariffs

Studies by economists in the U.S. have concluded that most or all of the burden of the tariffs now in place have been borne by American consumers, says Andy Rothman, investment strategist at Matthews Asia. Economists at the New York Fed, for example, found a “complete pass-through into domestic prices of imports, which means that Chinese exporters did not reduce their prices. Hence, U.S. domestic prices at the border have risen one-for-one with the tariffs levied.” Even if some of the additional tariffs are absorbed by exporters in China, it is worth noting that much of that impact will not fall on Chinese companies as about two-thirds of the 25 largest exporting companies based in China are foreign-owned. In fact, he says the impact of tariffs on the Chinese economy is limited because it is no longer export-driven. Net exports (the value of a country’s exports minus the value of its imports) account for less than one per cent of China’s GDP, down from a peak of nine per cent in 2007. In seven of the last 10 years, net exports were a negative drag on economic growth. By contrast, domestic consumption now accounts for more than two-thirds of China’s economic growth and more than half of its GDP. It is also clear that China’s government will step in to provide financial aid to companies that are hurt by any of U.S. President Donald Trump tariffs. Despite a tax cut of almost US$200 billion last year, China’s fiscal revenue increased six per cent compared to 2017. Beijing has the resources, as well as the political will, to support its exporters, just as it did a decade ago during the global financial crisis, he says.

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Popularity Of Index Funds Grows

Index funds have grown in popularity by 401(k) plan sponsors since 2006, says the BrightScope/ICI (Investment Company Institute) report ‘Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2016.’ The use of index funds by plans increased from 79 per cent of plans and 16.7 per cent of assets in 2006 to 91.3 per cent of plans and 33.2 per cent of assets in 2016. More than 95 per cent of 401(k) plans with more than $10 million in plan assets offered index funds in their plan lineups in 2016 and 77 per cent of 401(k) plans with less than $1 million offered them. Mutual funds were the most common investment vehicle in large 401(k) plans, representing 45 per cent of assets in 2016. Collective investment trusts (CITs) accounted for an additional 28 per cent of assets, overall, followed by guaranteed investment contracts (GICs) at nine per cent and separate accounts, with four per cent of assets. CITs accounted for a larger share of assets in larger plans, while separate accounts were responsible for a larger share of assets in smaller plans.

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Financial Wellness Makes Workforce Healthier

Employers that provide traditional health and wellness offerings alongside financial wellness programs are likely to have a healthier workforce, says research by Prudential Financial. Workers. ‘The Interplay Between Health & Financial Wellness Benefits’ says as physical and mental health improves and their level of stress reduces. “Workplace health and financial wellness programs can make a positive difference in the lives of American workers,” says Judy Dougherty, chief wellness officer at Prudential. “Financial and physical health are often intertwined and employers who provide help on both fronts stand a greater chance of achieving better outcomes for their employees.” It found that 45 per cent workers who used health wellness benefits said they are in good physical health, compared to 37 per cent of non-users and 59 per cent of workers who use health wellness programs say their overall mental health is good and 59 per cent of those who use financial wellness programs say the same. Only 13 per cent of those who use financial wellness programs say their stress level is high, compared to 17 per cent of non-users.

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Swamy Joins Medavie Blue Cross

Anita Swamy is vice-president, operations, at Medavie Blue Cross. She has expertise in the transformation of retail insurance and wealth management operations as well as experience leading teams in contact centres and operational support services, training, quality, process optimization, and group member administration.

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Networking Runs Concurrently

One-on-one networking opportunities will again run concurrently at the ‘5th Annual AIMA Canada Investor Forum.’ Participants will be provided with access to 20-minute match-making sessions throughout the day to discuss their companies and services. Conference sessions will be featured on areas such as hedge funds, alternative credit, and ESG and investing for impact. It takes place October 17 to 18 returns in Toronto, ON. For information, visit AIMA Forum

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June 25, 2019


Proposals Clear Up Taxation Issues

Plan sponsors will have more certainty about the tax treatment when they convert their health and welfare trusts (HWTs) to employee life and health trusts (ELHTs) following proposed amendments to the taxation rules, says an Eckler ‘Special Notice.’ The federal department of finance is proposing a number of changes to the taxation rules including proposed transitional administrative guidance for winding up existing HWTs, as well as additional rules to facilitate the conversion of HWTs to ELHTs. HWTs and ELHTs are trusts established by benefits plan sponsors for the purpose of providing specific health and welfare benefits to their employees or members. The tax treatment for HWTs is not explicitly set out in the Federal Income Tax Act. However, in 2010 the Income Tax Act was amended to explicitly set out the tax treatment of certain elements of ELHTs, including the treatment of surplus and the pre-funding of benefits. The Canada Revenue Agency has published several administrative positions regarding the requirements for qualifying as an HWT that often mirror the specific tax treatments for ELHTs, but these requirements have never been codified in the Income Tax Act. The 2018 federal budget, to provide greater certainty and consistency in the tax treatment of HWTs and ELHTs, proposes changes to the Income Tax Act to ensure that a single set of rules applies to both. The changes included proposed transitional administrative guidance for winding up existing HWTs, as well as additional rules to facilitate the conversion of HWTs to ELHTs. These measures include extending the rules governing ELHTs to apply to trusts created prior to 2010; allowing existing HWTs to elect to continue as ELHTs without adverse tax implications.

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Pre-retirees Expect To Owe Money

Nearly half (46 per cent) of pre-retirees expect to have long-term IOUs heading into retirement. However, nearly nine in 10 pre-retirees (87 per cent) with a written financial plan have a positive outlook on life in retirement, while less than half of pre-retirees (42 per cent) who do not have a plan have a negative outlook, says Fidelity Investments Canada ULC’s ‘Retirement 20/20,’ an annual survey that examines opportunities and challenges facing Canadians already in and approaching retirement. “For Canadians, the path to retirement is becoming more complex. With higher debt loads and longer than ever life expectancy, those approaching retirement must think critically, plan ahead, and take action today,” says Michelle Munro, its director of tax and retirement research. “Our latest research findings show that working with a professional financial advisor and putting a plan on paper is the best way to navigate this new environment.” It found pre-retirees who have planned ahead by putting their retirement plans on paper relative to those who have not feel better prepared financially (88 per cent versus 43 per cent), emotionally (79 per cent versus 64 per cent), socially (84 per cent versus 67 per cent), and physically (89 per cent versus 67 per cent). Retirees and pre-retirees also trust their financial planner or advisor the most when it comes to retirement planning, with social media being the least trusted source of information. As well, more retirees (34 per cent) are working to keep mentally and physically active, to have a sense of purpose, for social, financial, and other reasons. Almost three in four (70 per cent) pre-retirees say they believe they will be working in retirement.

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Expanding Benefit Choice Highest Priority

To improve their employees’ healthcare experience, employers say offering or expanding benefit choices is their single highest priority (31 per cent) over the next three years. This is one finding from Willis Towers Watson’s ‘2019 Emerging Trends in Health Care Survey.’ “Every employee’s benefit needs are unique, and each is looking for a benefit package to address their individual priorities,” says Kevin House, national leader of client relationships and sales for health benefits delivery at Willis Towers Watson. “With five distinct generations in today’s workforce, most companies have vastly different populations ‒ from stage-of-life perspective to health situations. The challenge for employers is to offer both the options that address a diverse set of employee needs and the tools that make those choices easy to navigate and understand.” Employers are less confident, however, that they are giving employees the tools they need to sort through these benefit offerings. That’s why over the next three years, three-in-four employers (75 per cent) are prioritizing efforts to provide employees with these tools. Today, just over half of employers (55 per cent) provide benefit decision tools. Up to now, providing employees with tools to make informed decisions about benefits is often confined to open enrollment, rather than year-round support. As well, currently, less than one-third of employers (28 per cent) provide a holistic approach to enhance their employee experience, but the tide is turning. Employers are beginning to implement solutions that help employees consider the broader financial context when making their benefit decisions.

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Investors Make Irrational Decisions

Subjective expected utility theory (SEU) “is the workhorse model of decision-making under uncertainty and economists assume routinely that agents behave according to its precepts,” says a white paper from the TIAA Institute. The paper ‒ by Federico Echenique and Kota Saito, of the California Institute of Technology, and Taisuke Imai, of the Ludwig-Maximilians-University Munich ‒ evaluates SEU’s empirical validity in experimental settings in which subjects were asked to make decisions resembling portfolio allocations. The researchers found the vast majority of subjects analyzed do not conform with SEU theory, meaning they do not make their decisions about what do to in uncertain circumstances according to a rational analysis that ranks the relative utility of the various potential choices and outcomes. More interesting for the retirement plan industry is the fact that subjects exhibited similar responses to uncertainty generated by simulated low- and high-volatility stock prices. Further, the degree of compliance with the SEU theory is very similar for undergraduate students, younger adults (20 to 39), middle-age adults (40 to 59), and older subjects (60 or older). This finding suggests that individuals do not naturally become more financially savvy as they age or as they experience cyclical economic conditions. Rather, they require educational support to behave rationally.

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Open MEPS Create New Asset Pool

The creation of open multiple-employer plans (open MEPs) in the U.S. is expected to create an attractive new pool of assets within a defined contribution market that is otherwise mature and experiencing flat to negative growth, says Cerulli Associates. As of year-end 2018, MEP assets totaled $211 billion, which represents a 21 per cent increase from 2015. MEPs have existed in “closed” form for many decades. Under current rules, businesses must share a pre-existing organizational relation or “common nexus” to pool resources and plan assets within a MEP structure. However, current legislative proposals aimed at expanding retirement plan access for small business employees will reduce or eliminate the common nexus requirement with their support of open MEPs. For small businesses (including those with and without a retirement plan), principal advantages of a MEP structure are the purchasing power afforded by pooled assets and increased scale and the implicit cost savings for small business owners of reducing administrative and fiduciary responsibilities.

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Dark Clouds Still On Horizon

Equity markets heaved a sigh of relief after chairman of the U.S. Federal Reserve Jerome Powell’s words at the post-FOMC (Federal Open Market Committee) meeting conference, as they interpreted his remarks as an implicit assurance that (if needed) the policy of former Fed chairmen Alan Greenspan/Ben Bernanke/Janet Yellen will be continued under his stewardship. However, Riccardo Rebonato, professor of finance, at the EDHEC-Risk Institute, says matters are not quite as straightforward for two important reasons. The darkest cloud on the economic horizon is the current trade war with China and Mexico and to the extent that U.S. President Donald Trump feels he can count on the Fed’s support to ‘mop up the mess’ if the spill-over from the trade war turned ugly, this can embolden his stance and bring about, via an aggressively hawkish negotiating position, the very need for monetary intervention. This gives rise to a dangerous positive feedback which makes the monetary-cut prophecy more likely than ever to become self-fulfilling. As well, if the problems faced by the Fed turn out to be no more severe than an equity market wobble, with Fed funds around 2.5 per cent there is currently some room for conventional monetary actions such as cutting rates – actions whose value would be more talismanic than economic, but effective nonetheless. However, if the economy were to face a real headwind, the Fed would very soon have to resort to non-conventional monetary measures, such as QE. The two forms of monetary easing would have a very different impact on the shape of the yield curve, with conventional measures reducing and QE intervention increasing, the current curve inversion.

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China, India Offer Opportunity

Despite trade risks facing emerging markets, there are opportunities for investors particularly in China and India which are expected to drive much of the projected global GDP growth this year, says State Street Global Advisors’ ‘Global Market Outlook.’ Even with U.S. tariffs on Chinese goods, China is projected to contribute more than 34 per cent of the global GDP growth in 2019. India is also expected to be a key contributor to global GDP growth, with 7.3 per cent growth projected this year and 7.5 per cent growth in 2020. Attractive active exposure to Chinese companies include firms geared toward secular trends in the domestic market that are under-represented in the index.

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League Offers Single Access Hub

League Inc., a health benefits experience platform, has introduced HBX, a digital platform designed to provide a single access hub for employees to engage with their health, lifestyle, and benefit programs. It will help employees proactively leverage employer-sponsored programs to improve health and productivity while reducing healthcare and administration costs. It features a centralized OS for employee health benefits and empowers HR teams to put employees at the centre of their own health experience, using data to engage with personalized programs. It includes data-driven, personalized health journeys, comprehensive health profiles, and a library of health programs for each member, all of which integrate with a growing ecosystem of partners and providers.

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Consortium Acquires Alberta Powerline

A consortium including the Greystone Infrastructure Fund and IST3 Infrastruktur Global will acquire up to 100 per cent in Alberta PowerLine L.P. from Canadian Utilities Ltd. and QSI Finance Canada ULC. Alberta PowerLine is a partnership between Canadian Utilities Ltd., an ATCO Company, and Quanta Services Inc. It was selected in 2014 to design, build, finance, own, operate, and maintain the Fort McMurray West 500kV transmission project. Jeff Mouland, managing director and head of infrastructure, infrastructure investments, at TD Greystone Asset Management, says, “The acquisition of Alberta PowerLine is a landmark investment for the Greystone Infrastructure Fund. APL is a core, operating asset that will provide stable, contracted long-term income that strongly aligns with our client needs.”

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Franklin Heads CFA Institute

Margaret Franklin (CFA) is CEO and president of the CFA Institute. When she assumes the role on September 2, she will become the first woman to hold the position in the 73-year history of the organization. She has been a leader in the investment management industry for 28 years, most recently as president of BNY Mellon Wealth Management in Canada and head of international wealth management in North America. Her experience has been gained at firms ranging from large, global asset managers to start ups, including Marret Private Wealth, State Street Global Advisors, and Barclays Global Investors and she has advised individuals, families, pension plans, endowments, foundations, and government agencies. In 2011, she was chair of the board of governors of CFA Institute and is a member of CFA Society Toronto, where she has also served on its board.

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Three-legged Stool Opens Conference

‘The Three-Legged Stool: Is It Still Standing?’ is the opening plenary at the 2019 ACPM National Conference. Frank Wiginton, of Eckler; Dr. Robert L. Brown, professor emeritus at the University of Waterloo; and Frédéric Létourneau, of National Bank; will discuss areas such as which leg of the stool could (or should) take on more or less responsibility as it relates to the retirement system and where the accountability falls if the stool is broken. Theme of this year’s event ‘Shifting Currents: Negotiating Retirement Diversity.’ Others sessions include ‘Moving from DB to DC: The Insider Perspective,’ ‘Capital Accumulation Plans: How to Balance Flexibility with Retirement Adequacy?,’ and ‘The Quest for Sustainability in Pension Plans with Contingent Benefits.’ It takes place September 10 to 12 in Vancouver, BC. For information, visit ACPM Conference

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June 24, 2019


Funding Proposal Inconsistent

Adopting a lower solvency funding floor (85 per cent in lieu of 100 per cent) in combination with required PfADs on going-concern funding is inconsistent with other jurisdictions who have introduced similar modernizations of their pension funding rules, says the Association of Canadian Pension Management (ACPM) in its comments on ‘The Road Forward,’ the improved funding framework for Nova Scotia pension plans. It says it believes that the model of enhanced going-concern funding reduces the need for a 100 per cent solvency ratio funding floor. The approach taken by Ontario, being a smaller PfAD and 85 per cent solvency ratio funding floor is a reasonable alternative to the Quebec model which relied on larger PfADs and no solvency ratio funding floor. Accordingly, “we do not believe it makes sense to impose the PfADs on top of a 100 per cent solvency funding model. If the government believes it must provide an opportunity for plan beneficiaries to object to reducing the solvency ratio funding floor, then it should call for 100 per cent solvency funding without mandated PfADs on the going-concern valuation (current funding rules) or 85 per cent solvency funding with mandated PfADs in the going-concern valuation.

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Pharmacare Session Timing Impeccable

The timing of the CPBI Southern Alberta Region’s ‘Exploring Pharmacare Options: A Critical Analysis’ session was impeccable, with the report from the advisory council on national pharmacare, which recommended the establishment of a universal, single-payer public pharmacare system, released the day before. In his role as a public policy analyst with GlaxoSmithKline, Warren Xu summarized the nine pharmacare models that range from robust, universal models to scaled-back, optional public coverage. The analysis of each model identified who (how many Canadians are enrolled), what (how comprehensive is the coverage), and how (government expenditure). When this analysis was overlaid with the interests of the stakeholders, three models were determined to satisfy the needs of the majority and they ranged from medium to low government expenditures. Sarah Hedayat, from Gallagher, shared an overview of the current financial sustainability challenges in private plans due to rising prescription drug costs ‒ a trend that is gaining momentum with the introduction of new biologics and the use of biologics for more common indications. She pointed out opportunities that could be realized by plan sponsors in a national pharmacare program such as transferring the drug costs away from private plans and increased peace of mind. Potential downsides are less comprehensive drug coverage and the threat that the cost for benefit lines other than healthcare will be increased to offset insurers’ lost revenue.

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Fed Has Dovish Outlook

The U.S. Federal Reserve (Fed) left the target range for the its funds rate at 2.25 to 2.5 per cent at its June meeting suggesting a more dovish outlook for poverty, says an HSBC Global Asset Management ‘Commentary.’ The market had been pricing a 20 to 25 per cent chance of a rate cut. The Fed also made a number of important changes to its forecasts. The median growth forecast was revised up a fraction in 2020 and the unemployment rate was nudged down in 2019 to 2021. However, the key changes were to the inflation projections and FOMC members’ expectations for rates. These changes imply a more dovish outlook for policy. Headline and core inflation were revised down in 2019 and 2020 to below two per cent. The “longer run” Fed funds rate was pushed down by 30 basis points to 2.5 per cent, implying that the current level of the policy rate is not as accommodative as previously thought. It is worth noting, however, that the median projection for the Fed funds rate also shows a reversal of the rate cut by the end of 2021. This suggests that while the Fed is now willing to deliver some ‘insurance’ rate cuts to lean against the risks that inflation remains below target for a prolonged period, or that growth unexpectedly weakens, it is not signalling the start of an easing cycle.

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Strategy Starts With Location

A successful globalization strategy depends on choosing wisely the locations to focus on, says Stephane Etroy, executive vice-president and head of private equity at the Caisse de dépôt et placement du Québec. With its home market a mature economy with a limited investment market compared to global markets, its globalization efforts in private equity look to the U.S. and Europe for scale and opportunities to invest in leading companies. However, these sophisticated financial markets generate intense competition for investment opportunities. Its strategy also targets a limited number of emerging markets into which capital is deployed gradually and patiently alongside local partners. It has no material reason to focus on yearly returns as its actuarial obligations are predictable and, therefore, require a return on investment over decades, not years. This long-term outlook enables CDPQ to hold steady through industry cycles and adapt properly to new technologies. A long-term investment strategy helps to conclude successful transactions with companies that require substantial investment, but whose growth strategy is planned over many years. As an active minority investor, CDPQ negotiates governance in line with its level of ownership. The intent is not to manage the company, but to influence positively the management team and co-investors.

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Funding Of Pharmacare Undetermined

While the Council on the Implementation of National Pharmacare has concluded that the introduction of a national pharmacare strategy will reduce economic inefficiencies, increase negotiating power, lower administrative costs, and allow more Canadians to receive the prescriptions they need, information about where funding will come from has not yet been addressed, says an Eckler ‘GroupNews Extra.’ Small business owners in particular could be affected if funding is to be raised through the implementation of payroll taxes or an increase in the GST. There are also concerns that individual taxpayers could incur a financial impact if funding is raised through increases to personal income taxes. Proposals for funding through cost-savings from negotiated lower drug prices, reallocated government funds, or cutting existing spending could offer some alternatives, but could also result in costs being passed on in different ways. So it remains to be seen if the still-to-be proposed strategy for funding will alleviate concerns about potential funding measures before implementation, it says. The council has recommended that national pharmacare be delivered by the provinces and territories, but be governed by new federal legislation with federal funding linked to agreed-upon national standards.

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Safe Treatments Could Reduce Opioid Use

Optimizing safe and effective non-pharmacological treatments could reduce the use of opioids as a first-line treatment for non-cancer pain, says a report from the Coalition for Safe and Effective Pain Management (CSEPM) on possible solutions to Canada’s opioid crisis. The report’s authors believe many people who become dependent on opioids were originally looking to relieve pain. Unfortunately, many of those Canadians are unaware of pain management alternatives or are unable to access them because they are not funded through public healthcare or are inadequately funded through insurance. These alternatives include psychological treatments, physiotherapy, chiropractic treatments, and occupational therapy. Changes that could transform Canada’s approach to pain management and reduce harm from opioids include embedding non-pharmacological pain management as part of essential healthcare in Canada; empowering patients and prescribers to make safe choices in pain management; integrating non-pharmacological pain management into primary care settings; and ensuring everyone in Canada has timely access to non-pharmacological pain management. The Public Health Agency of Canada says more than 10,300 Canadians died as a result of an apparent opioid-related overdose between January 2016 and September 2018.

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Diet Discussed At Atlantic Conference

‘No Plan Is an Island’ is the theme of the ‘2019 CPBI Atlantic Regional Conference.’ Sessions will include ‘Cut the Crap: Creating Nutritional Consciousness in the Workplace’ with Dr. Yoni Freedhoff, author of the ‘Diet Fix,’ who will explore the linkages of food with chronic disease; chronic pain, and mental health. Blair Richards, of the Halifax Port ILA/HEA, will examine the missing link between contribution levels and the benefits those contributions are expected to provide ‒ an element that isn’t often measured in terms of the adequacy of retirement income, particularly within defined contribution plan models. ‘The Psychology of Investing’ will be the focus of a talk by Darin Eddy, of the HRM Pension Plan. He will provide insight into the psychology and drivers behind making investment decisions. It takes place October 2 to 4 in Charlottetown, PE. For information, visit CPBI Atlantic

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June 21, 2019


Employee Releases Personal Information

An employee who has since been fired may have released personal information on more than 2.7 million individual members and 173,000 business members of Desjardins Group. Personal member information released includes first and last name, date of birth, social insurance number, address, phone number, eMail address, and details about banking habits and Desjardins products. Information about business members was among the affected data. This includes identifying information such as business names, addresses, telephone numbers, and the names of owners and AccèsD Affaires (an online business management tool) account users. Some information about owners or AccèsD Affaires users may have also been affected. Passwords, security questions, and PINs (personal identification numbers) were not compromised. It says this incident was not a cyberattack. Desjardins computer systems were not breached during this incident. In light of these events, and given the circumstances, additional security measures were put in place on all accounts. Desjardins Group will be sending a letter to everyone affected by the incident. As a precaution, Desjardins will also offer affected members a credit monitoring plan and identity theft insurance for 12 months, paid for by Desjardins. These members will be contacted directly and an activation code will be included in the letter they receive.

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New Ways Needed To Treat Chronic Pain

Twenty per cent of adults live with pain and many live with mental illness as well and we need to find new ways to treat them, says Dr. Abhimanyu Sud, a pain physician and academic director at the University of Toronto’s Faculty of Medicine, in his presentation, ‘Exploring the chronic pain and depression crisis in Canada.’ Speaking at Benefits and Pensions Monitor Meetings & Events’ ‘Benefits 2019,’ he said, in fact, 60 per cent of people who live with chronic pain also live with mental illness. These are people who use the healthcare system at a higher rate and are more likely to develop opioid abuse. “We’re talking about 10 per cent of adults. We can call it a crisis,” he said. Research shows that there is limited data to the effectiveness and cost-effectiveness of prescribing opioids to treat chronic pain. As a matter of fact, “non-opioid alternatives, most of which are generic and cheap … are more effective.” Sud says there is emerging data that chronic opioid prescribing can contribute to depression and cause it where it did not exist before. “The question is, is there another way?” The biopsychosocial concept of illness was first presented in 1987 and looks at the interconnection between biology, psychology, and socio-environmental factors. However, this concept has never been applied. When patients engage in biopsychosocial methods such as cognitive behavioural therapy, supportive psychotherapy, and meditation, “they actually have less pain,” said Sud. “They reduced pain scores, but, importantly, they also reduced depression.” Research supports the efficacy of these methods, so now “we need to make these interventions more available.” Sud is part of a team putting together a program to investigate these methodologies called the ‘Medotate Trial.’ It will look at how to integrate these evidence-based interventions into the healthcare system and community providers. Key partners in the program are the Canadian Mental Health Association and the Art of Living Foundation.

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More Focus Put On Climate Change Risk

Large global financial institutions are focusing more on risks from climate change, says a survey from the Global Association of Risk Professionals (GARP). However, efforts to manage those risks are still in their infancy. The survey covered governance and strategy to deal with climate-related risks; the approach to managing these risks; metrics, targets, and limits used to assess and manage climate-related risks and opportunities; the use of scenario analysis to understand the risks; and disclosures of climate-related risks. It found most firms have board-level oversight of climate risks and have incorporated those risks into their strategy. However, disclosures and scenario analysis for assessing and developing strategies for climate risk are lacking. Four in five firms (80 per cent) have identified risks and opportunities from climate change, including those related to product offerings; 60 per cent have introduced new products in response to climate-related risks; and 40 per cent have changed existing products.

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Medication Non-adherence Impacts Plans

When people don’t take their medication as prescribed, both public and private drug plans can be impacted, says Michael Roszak, chief operating officer with Express Scripts Canada. In his presentation, ‘Medication: nonadherence: a national crisis,’ at the Benefits and Pensions Monitor Meetings & Events’ ‘Benefits 2019,’, he said medication nonadherence means a patient is not taking their medication exactly as their doctor prescribes it. This includes not taking it at the right time, not taking the right dosage, or not taking it for as long as the doctor recommends. It is a problem that contributes to larger issues in the healthcare system. The reasons behind nonadherence include behavioural, clinical, and financial reasons. It could be that people are suffering from more than one condition. When they have multiple conditions, they’ll have multiple doctors and multiple medications. It becomes quite complex. In fact, claimants using multiple medications are more likely to be deemed nonadherent, said Roszak. The consequences of this nonadherence includes wasted medication, higher benefit costs, and a cost burden to the healthcare system, as well as poorer health outcomes for the patient who may suffer unnecessary complications. Compounded with an increase in new, high-cost therapies, the annual drug spend per claimant is going to increase tremendously if nothing is done about it. Plan sponsors will be challenged to balance patient care and benefit affordability and help drive lower costs and healthier outcomes. Comprehensively managed plans can bend the curve on drug spending, said Roszak. This includes formulary, utilization, channel, and patient health management. “We really need to ensure a thoughtful strategy to delivery extraordinary benefits,” he said.

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Engagement Promoted Over Exclusion

Fidelity International now has a proprietary sustainability ratings system. It will give companies, in 99 subsectors comprising the investment universe, a rating of A to E based on an assessment, relative to its subsector peers, by the company’s 180 equities and fixed income analysts. Rather than potentially excluding all companies in sectors with ESG profiles, the system looks to distinguish the best-in-class performers in each as it promotes engagement over exclusion. The ratings will be fully integrated into Fidelity’s investment process.

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Solutions Needed For Rising Chronic Conditions

With more than half of employees (54 per cent) dealing with one or more chronic conditions, it’s time to focus on redefining employee support and care delivery, says Chrissy Piraino, director, business development, health solutions, Shoppers Drug Mart. Speaking at the session, ‘The Iceberg in the Workplace: A Profile of Chronic Disease’ at Benefits and Pensions Monitor Meetings & Events’ ‘Benefits 2019,’ she said that chronic illness is on the rise, up dramatically from 37 per cent just 10 years ago. There are a number of factors impacting this rise, such as an aging population, globalization, urbanization, and the fact that people just don’t always make the best choices. This increase is having an impact on employers with increased claims, reserves, and premiums as well as increased absenteeism and lower productivity. Employees are also struggling, she said. They are having issues with lack of information, not taking medications as prescribed, and not following nutrition guidelines. “Many are suffering with more than one issue. They need help and they’re not getting it.” Unfortunately, the Canadian healthcare marketplace is reactive. We need to be on the lookout for innovation solutions, said Piraino. One of the keys to chronic disease management is patient empowerment. This includes engagement, lifestyle changes, and proper medication management. There are also emerging solutions in chronic disease management such as health coaching and pharmacogenetics testing. Health coaching is a day-to-day program with support from a registered nurse, pharmacist, and dietitian. “They create accountability for the member to have a plan and keep to it.” Pharmacogenetic testing is a test from a non-invasive cheek swab to understand how the member’s genes affect the body’s response to certain medications to find a personal solution. “It’s an evolving science but an important one,” said Piraino.

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Smith Joins CCGG Board

Daren Smith, president of UTAM, has been appointed to the board of the Canadian Coalition for Good Governance (CCGG) and will also serve on the organization’s member engagement and public policy committee. The CCGG represents the interests of institutional investors. Its mission and objectives are to promote good governance practices in Canadian public companies and the improvement of the regulatory environment to best align the interests of boards and management with those of their shareholders and to promote the efficiency and effectiveness of the Canadian capital markets. UTAM’s involvement with the CCGG dates back to 2008.

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June 20, 2019


Debate Exists Over Meaning Of Inversion

Investors shouldn’t be surprised about the inverted yield curve as the economic cycle is in a late stage, says Derek Burleton, vice-president and deputy chief economist, for TD Bank Group. At this stage, even the best yield curve tends to flatten and one would expect a flat yield curve, he said in the ‘Global and Economic Market Outlook’ session at the ‘CPBI Forum 2019: Embracing Innovation.’ The Bank of Canada is calling it an “innocent inversion” and it is only one signal of an impending recession. But other signals are needed before declaring that the U.S. economy is decelerating. Alan Dunn, managing director ‒ markets and a member of the investment committee at Abbey Capita, said yield curve inversion has predicted every recession since 1960, with the exception of 1967. He said while it is a strong predictor and the U.S. Fed is paying attention to it, whether it is going to be different this time can be debated. For example, the term premium is a lot less and if it were higher as in the past, then it might be a predictor. Alex Grassino, senior investment strategist, macroeconomic strategy, at Manulife Asset Management, said a recession generally comes two years after the yield curve inverts, so there is time for investors to prepare. However, markets generally do well in the period before a recession. The evidence indicates the U.S. will go through slow patch over the next six months. In fact, all the “boxes are being ticked off” with shorter leading indicators such as the ISN Manufacturing Index inching towards a neutral level corroborating the yield curve inversion, indicating a slowing U.S. economy. Burleton suggested if there is a recession, it will be corporate lead and end quickly, lessening the impact on Canada. Dunn warned a recession will be felt, especially in Canada where household debt could make it worse. But if the U.S. escapes it quickly, Canada will follow suit.

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Sweeping Changes Proposed For Drug Pricing

Proposed changes to pricing rules for patented medicines in Canada are sweeping in their scope, although timing remains to be finalized, says Elena Lungu, manager, national prescription drug utilization information system, for the Patented Medicines Prices Review Board (PMPRB). In a ‘Telus Benefits Hub,’ she says the proposed changes to Canada’s patented medicines regulations would see, for the first time in 30 years, significant reforms in how the PMPRB sets ceilings for the prices of patented medicines. Its basket of comparator countries would increase to 12 from the current seven. Seven new countries would be added, while the U.S. and Switzerland, described as “outliers,” would be removed as they do not have national pricing containment measures in place and are less aligned to Canada economically. The new framework would provide a mechanism for manufacturers of patented medicines to report discounts and rebates that they provide to third-party payers. The PMPRB will use this information, which will remain confidential, to calculate a true transaction price as part of its price review. Finally, the PMPRB will assess factors beyond price comparisons with other countries or other therapeutic comparators. These factors include pharmacoeconomic analysis to ensure payers do not pay more for a drug than the value it offers; a consideration of market size and its reassessment over time (e.g., a larger-than-expected market size could trigger a lowering of the maximum price); and an assessment of the affordability of a drug for both payers and patients based on a country’s GDP and GDP per capita.

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Trend To OCIO Grows

In last four years, the top five OCIOs (outsourced investment officer) providers in Canada have seen their business grow by 56 per cent, so there is clearly a trend developing, says Bradley N. Rowe, a principal at Eckler. Yet, he told the ‘OCIO ‘OMG:’ Establishing Best Practices’ session at ‘CPBI Forum 2019: Embracing Innovation’ that less than 20 per cent of these were accomplished through the tender process. Instead, plan sponsors simply used their existing consultant to provide OCIO services. OCIO is all about investment governance, he said, but wondered if it is really fixing a problem. If governance is broken, he said, OCIO may not be able to fix it because it only fixes aspects of governance. And while the plan sponsor and OCIO are in a co-fiduciary relationship and the OCIO assumes a fiduciary role over implementation and operation of investment strategy, its duties do not extend to oversight which remains the responsibility of the sponsor who needs to monitor the OCIO and make sure things are going well. Sponsors are moving to OCIO for a number of reasons including de-risking, a lack of resources and skill sets, and efficiency in making decisions and acting on them quickly. However, in many cases, they just want to get out of the pension business.

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RPP Membership Grows

Membership in registered pension plans (RPPs) in Canada was more than 6.3 million in 2017, up one per cent, says Statistics Canada. For a second year in a row, the number of female members reached a new all-time high. A record 3.2 million women were members of an RPP in 2017, up 36,700. This gain increased the share of female membership to 50.5 per cent. Meanwhile, 26,100 more men were members in 2017, following a decline of 35,000 in 2016. Membership in public sector pension plans increased by over 49,000 (34,100 women and 15,200 men) to 3.3 million, accounting for 52.6 per cent of total RPP membership in 2017. Meanwhile, the number of members in private sector plans rose by 13,500 (10,900 men and 2,600 women) to three million. Although more people were members of an RPP in 2017, the pension coverage rate declined from 37.5 per cent in 2016 to 37.1 per cent. Over 4.2 million paid workers were covered by a defined benefit pension plan in 2017, up 0.7 per cent from 2016. DB plans accounted for two-thirds of members with an RPP, down 0.3 per cent from 2016. Membership in defined contribution plans rose by 3.5 per cent to almost 1.2 million, accounting for 18.4 per cent of all RPP membership. Most private sector workers are in DC plans. Membership in other plan types, excluding DB and DC, such as hybrid, composite, and combination plans declined by 4,200 members in 2017. Nearly 924,000 people, accounting for 14.6 per cent of RPP membership, belong to plans not classified as the conventional DB or DC models. Despite the drop in 2017, membership in these other plan types has risen sharply over the past decade. Total employer and employee contributions to RPPs rose 1.5 per cent year over year to $70 billion.

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Australia Works To Improve Pension System

Australia’s government will work to ensure people are given better options for drawing down their savings when they reach retirement. A government-commissioned review earlier this year found the superannuation system, which invests the mandatory retirement savings of Australians, has several problems including high fees, multiple accounts, and chronic underperformance by some funds. Further, a yearlong inquiry into the financial services industry uncovered misconduct that has hurt the reputation of some funds. Under laws coming into force next month, the tax office will have greater powers to help savers consolidate low-balance or inactive accounts; fees will be capped on accounts with A$6,000 or less; and exit fees will be barred. Since there is currently very little guidance on how retirees should draw down their savings when they reach retirement, funds will be required to develop a retirement income strategy and the government is also exploring ways of expanding the range of retirement income products available.

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Solutions Wanted Before Issues Arise

HR clients would like their consultants to bring solutions to them before issues arise. That was one of the messages delivered by Jason Billard, senior vice-president at Morneau Shepell, and Kelly Cardwell, vice-president, human resources, at Bosa Properties, in the ‘Pursuing Partnership’ session at ‘CPBI Forum 2019: Embracing Innovation.’ They revealed some of the likes and dislikes that HR clients have in their relationships with consultants. HR sees their consultants more as trusted advisors rather than experts today as they can access most information online with the click of a mouse and do their own analysis. As a result, they place less value on survey data and reporting. Yet, they still expect their consultants to be on the leading edge of new trends and help their clients be there as well. Consultants are doing a better job of building relationships as they are listening to clients and better understanding their needs and organizations and building solutions around this. However, consultants who do not build these relationships and only provide transactional services and off-the-shelf solutions are not meeting the needs or expectations of their clients and could soon be replaced. In fact, that was identified as something that consultants are doing worse today. They are forcing people into a box and pushing things on them that don’t work for the client’s organization and promising a personalized approach with the same services they are offering to everyone.

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DGPP Acquiring Wind Project

The Desjardins Group Pension Plan (DGPP) will acquire, upon completion of construction, a portion of EDF Renewables Canada Inc.’s stake in the Cypress Wind Project. The project will consist of 48 turbines with a total capacity of 201.6 megawatts and will be located southeast of Medicine Hat, AB. It will support energy transition in the region using a responsible and sustainable approach to economic development. DGPP will own 40.5 per cent of the project, EDF Renewables Canada will hold 34.5 per cent, and the Blood Tribe, a First Nation located at Stand Off, AB, and advised by Indigena Capital, LP, will own the remaining 25 per cent stake. The project will be developed, built, and operated by EDF Renewables which has developed 10 wind farm projects across Canada to date. Construction will start in 2020 and it is expected to be operational by 2021.

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Cherry Park Work Starts

The Cherry Park Partnership – formed by Unibail-Rodamco-Westfield and a joint venture of the Public Sector Pension Investment Board and global real estate company QuadReal Property Group– has started work on site at the £670 million residential development in Stratford, UK. It will be comprised of one, two, three, and four-bedroom homes across a range of towers and mansion blocks, complete with a residents’ gym, swimming pool, and workspace. It will also feature public realm and open spaces, including play areas and pedestrian connections throughout. The project is one of London’s largest single-site schemes and will see a phased completion with full delivery expected post-2023.

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Lamoureux Named To Order

Claude Lamoureux, retired president and chief executive officer of the Ontario Teachers’ Pension Plan, will be inducted as a Companion of the Order of the Business Hall of Fame. The honour recognizes and celebrates his lifetime achievements. Since its inception in 1979, the Order of the Business Hall of Fame has been the highest honours of its kind in Canadian business. He joined the pension plan in 1990 after the province established an independent corporation to manage it. He was responsible for overseeing the investment of the plan’s assets and the administration of the pensions of 264,000 current and retired teachers in Ontario.

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Panel Discusses Engaging ESG Clients

The Responsible Investment Association will feature a panel discussion on ‘Engaging Clients Around ESG Issues and Responsible Investment.” Alicja Brown, an investment advisor with the Remy Brown Investment Group at CIBC Wood Gundy; Patti Dolan, portfolio manager, mission wealth advisors, at Raymond James Ltd.; and Dustyn Lanz, CEO of the Responsible Investment Association; will explore various approaches to engage clients around responsible investing, including how to start the conversation with clients, using ESG data, and addressing questions about performance. It takes place June 26 in Edmonton, AB. For information, visit Engaging ESG Clients

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