Members should be aware of the limitations of their pension plans, says Mitch Frazer in Financial Post

June 30, 2006

The Financial Services Commission of Ontario (FSCO) laid 15 charges of mismanagement this week against the trustees of the Canadian Commercial Workers Industry Pension Plan (CCWIPP). CCWIPP, one of Canada's biggest pension plans, provides benefits for 310,000 current and former members of the United Food and Commercial Workers Canada.

CCWIPP is considered a multi-employer pension plan (MEP): its plan members work for 328 different businesses, mainly grocery stores. MEPs are often found in industries where workers switch between employers. They are intended to enable workers to change employer without losing out on their pension. But some pension experts suggest that CCWIPP's problems may signal more widespread difficulties for MEPs.

For instance, investment decisions in MEPs can be difficult because their boards of trustees consist of several employers, as well as unions.

In contrast, single-employer plans usually have one full-time professional administrator who determines investment policies.

"Unless it says specifically in the [MEP] plan that you can't reduce benefits," says Mitch Frazer, "the board of trustees can reduce the pension that employees will receive."

Members should be aware of the limitations of their plans, says Mitch. "If people are not saving their money and are relying on this pension for their retirement, then they are taking a big risk."

Among the allegations against CCWIPP are accusations that the trustees invested more than 10 percent of plan assets with affiliates, in violation of pension regulations. The trustees have issued a statement denying the allegations.

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