Should Government Facilitate Voluntary Pension Plans?

Several proposals have surfaced recently that government develop and offer some sort of voluntary pension plan (VPP). This paper examines areas of public policy on pensions where changes should take place with or without the development of a VPP, including those that promote greater harmonization, portability, and labour mobility. Similarly, the challenges of inertia and annuitization are areas in which a VPP is only one of several available policy devices. In the final analysis, two key arguments provide the only compelling reasons to support the establishment of large, economically efficient funds: that their assets could be managed professionally and efficiently and that they could reduce the distraction from employers’ primary goals. Neither of these arguments, however, offers convincing evidence that VPPs should be developed by government rather than by the private sector. Ultimately, the marketplace will determine whether the additional option of a VPP is needed and whether it is offered on terms that make it more attractive than the other available alternatives

Policy Reflection: Letter of Credit Usage by Defined Benefit Pension Plans in Canada

There is an argument to be made for letting corporations hold off on contributing to their employees’ defined benefit pension plans, as long as there is a guarantee the cash will come eventually. That is the reason that provincial governments began allowing creditworthy companies to instead provide a letter of credit, backed by a Canadian bank, guaranteeing the cash deposit, and secured by the company’s line of credit or some similar facility. Sometimes circumstances are such that a company needs all the cash it can get to grow, or perhaps to manage through tough economic times. Given the sluggish recovery from last decade’s financial crisis and the difficulty for pension funds to grow amid persistent low interest rates, it perhaps is understandable that more companies are using standby letters of credit as IOUs for their employee pensions. The letters provide the companies more flexibility with their capital, and diminish the risk that, should returns to pension funds rise again to more normal rates, there could be “trapped surplus.” It is, however, harder to make a case for why public sector companies and Crown corporations have begun using letters of credit in place of cash deposits to pensions. They certainly do not face the same pressure for capital flexibility, given their revenue is frequently assured, and they face no competition that would pressure them to redirect capital for strategic purposes. And yet, research shows that this is happening, at least to some degree. That should give policymakers pause. Unfortunately, there is a troubling lack of data available as to which organizations have been using letters of credit in place of cash contributions to pension funds. Clearly they are proving useful for some companies, and that the exact reasons vary widely. We observe some companies using the letter of credit option that would appear to have plenty of capital flexibility, so the rationale for their use might not be what the policy anticipated. Meanwhile, it is unclear why so many other companies have chosen not to avail themselves of this temporary pension-funding relief, despite the advantages it offers for avoiding the risk of trapped surpluses. There also remain restrictions on who can underwrite these credit guarantees — regulations do not consider foreign banks and insurance companies acceptable, for example — raising the cost for companies that arrange letters of credit. Taken together, it would seem that there are signs that the policy changes allowing pension-funding relief might be serving their purpose and might be helping companies that could use it, but there is a worrying lack of information to be sure how well they are working and what problems may loom. It certainly seems like a close review is in order. When a Crown corporation is writing IOUs to its defined-benefit pension fund, that is surely a sign that policy-makers are not keeping a close enough eye on the outcomes this policy has led to

Evaluating Federal and Provincial Solvency Standards in Canada

This article benchmarks solvency supervisory system for the federal and provincially-licensed companies who write insurance in Canada against/The IAIS Common Structure for the Assessment of Insurer Solvency/. The federal regulator (OSFI) is the only one with statutory authority that provides both sufficient power and flexibility to be considered as meeting the core principles of IAIS. At the provincial level, the insurance supervisory system in some provinces falls short of the international standards to varying degrees and, by extension, the practices of the federal insurance regulator. Alberta, British Columbia, and Québec are not far behind. All other Canadian provinces exhibit extensive deficiencies when compared against international standards.Cet article compare les systèmes de contrôle de la solvabilité pour les compagnies canadiennes d’assurance fédérales et provinciales en utilisant le IAIS (Structure commune pour la garantie de la solvabilité des assureurs). Le régulateur fédéral (BSIF) est le seul organisme avec l’autorité statutaire qui fournit à la fois le pouvoir suffisant et la flexibilité nécessaire en vue de rencontrer les principes de base d’IAIS. Au niveau provincial, le système de supervision de l’assurance dans quelques provinces est au-dessous des normes internationales à des degrés variables et, par extension, les pratiques du régulateur fédéral d’assurance. L’Alberta, la Colombie-Britannique et le Québec ne sont pas loin derrière. Toutes les autres provinces canadiennes exposent de vastes lacunes par voie de comparaison avec les normes internationales

Should Government Facilitate Voluntary Pension Plans?

Several proposals have surfaced recently that government develop and offer some sort of voluntary pension plan (VPP). This paper examines areas of public policy on pensions where changes should take place with or without the development of a VPP, including those that promote greater harmonization, portability, and labour mobility. Similarly, the challenges of inertia and annuitization are areas in which a VPP is only one of several available policy devices. In the final analysis, two key arguments provide the only compelling reasons to support the establishment of large, economically efficient funds: that their assets could be managed professionally and efficiently and that they could reduce the distraction from employers’ primary goals. Neither of these arguments, however, offers convincing evidence that VPPs should be developed by government rather than by the private sector. Ultimately, the marketplace will determine whether the additional option of a VPP is needed and whether it is offered on terms that make it more attractive than the other available alternatives

Auto Insurance Reform for Canada’s Tort Provinces

Due to its mandatory nature, and because a majority of the population drives, a cost-effective and efficient system of automobile insurance is in the interest of all parties involved. Although a tort system for compensating automobile accident victims works reasonably well for that relatively small number of claimants with serious losses, it does not work very well for the higher volume of relatively minor accidents. In this paper, we suggest means by which Canadian jurisdictions operating a system of tort liability can control costs and improve compensation for accident victims. Suggested reforms focus on improving coordination between public and private-pay aspects of health care; setting first-party benefits at a level which reduces the transaction costs without increasing aggregate costs; reducing or limiting access to payments for compensation for non-economic losses for non-permanent injuries; encouraging an efficient mechanism for dispute resolution; and developing a pricing system that is perceived to be fair by insureds while also providing incentives for safe driving.Parce qu’il est obligatoire et qu’il concerne la majorité de la population susceptible de conduire une automobile, il est dans l’intérêt de toutes les parties en cause de bénéficier d’un système d’assurance automobile efficace en termes de coût et de service. Bien qu’un système fondé sur la responsabilité en matière d’indemnisation des victimes d’accident fonctionne raisonnablement bien à l’égard d’un petit nombre de réclamants qui sont atteints de dommages sévères, il est moins efficace pour la majeure partie des victimes d’accidents ayant subi des dommages mineurs. Nous suggérons, dans cette étude, des moyens permettant aux régimes d’assurance de juridiction canadienne, dont l’indemnisation est basée sur la responsabilité, de contrôler les coûts et d’améliorer l’indemnisation des victimes d’accident. Les réformes que nous suggérons sont focalisées sur une meilleure coordination entre les secteurs publics et privés chargés des soins de santé ; sur l’établissement de bénéfices aux victimes, sans l’implication des tiers, ce qui permet de réduire les coûts du traitement de la réclamation sans augmenter les coûts d’ensemble ; sur la réduction ou la limitation du droit au paiement d’une indemnité en matière de dommages non pécuniaires découlant de blessures entraînant des séquelles non permanentes ; sur la recherche de mécanismes efficaces en matière de résolution des conflits ; et enfin sur la mise en place d’un système tarifaire qui est équitable du point de vue des assurés et qui est susceptible d’encourager la conduite prudente auprès des automobilistes

L’IMPACT DU PARTAGE DES COÛTS SUR LA CONSOMMATION DE MÉDICAMENTS

Les défis de la gestion du coût des médicaments d’ordonnance, les approches qu’on essaie actuellement d’adopter, et les solutions, sont étonnamment semblables partout dans le monde. Les objectifs poursuivis par une formule de partage des coûts des médicaments sont le plus souvent de percevoir des fonds supplémentaires, de décourager la consommation de médicaments « non nécessaires », de rendre les patients conscients des coûts des médicaments et d’aider à contenir les dépenses croissantes en médicaments.Les auteurs de cet article, en se basant sur une revue de la littérature mondiale, concluent que l’imposition d’un partage des coûts réduit en effet la consommation de médicaments, mais que cette consommation réduite ne se limite pas aux ordonnances non nécessaires. Les effets de la consommation subissent une forte influence des effets du revenu et de la richesse. On peut faire des économies considérables avec un impact minimal pour la santé en rehaussant le taux de substitution générique; il est difficile de trouver et d’évaluer d’autres moyens de faire des économies. Il n’y a qu’un petit nombre d’études récentes qui tente explicitement de mesurer les coûts des médicaments par rapport aux bénéfices obtenus sous la forme d’une utilisation réduite d’autres services médicaux. Il y en a encore moins qui essaient d’évaluer les coûts par rapport à l’amélioration de la qualité de vie du patient. L’imposition du partage des coûts n’a, semble-t-il, aucun impact sur le taux de croissance des dépenses en médicaments d’ordonnance.The challenge of managing prescription drug costs, the approaches being tried, and the responses are surprisingly similar around the world. The objectives for cost-sharing requirements imposed for prescriptions are most often cited as providing additional funding, deterring consumption of "unnecessary" drugs, making patients aware of the costs of medicines, and helping to contain rising drug costs.The authors of this article, based on a review of the global literature, conclude that cost-sharing requirements do reduce drug utilization but that the reduced utilization is not limited to unnecessary prescriptions. Utilization effects are strongly affected by income and wealth effects. Significant cost savings can be achieved with minimal health impacts by increasing the rate of generic substitution; other savings are hard to find and difficult to assess. Only a few recent studies explicitly attempt to measure the cost of prescriptions against the benefits achieved in the form of reduced utilization of other parts of the health core system. Even fewer attempt to assess the cost against the improvement in a patient's quality of life. Cost-sharing requirements do not appear to impact the rate of increase in expenditures for prescription medications