Sun Life announced that it will provide administration services for the McGill University Pension Plan (MUPP).
The insurer says it will assume this role in collaboration with the actuarial services firm Normandin Beaudry. The Insurance Portal determined that Morneau Shepell was the prior administrator.
Covering 10,000 participants, this plan is one of the biggest administered by the insurer. In a press release published on Nov. 4 regarding its Q3 financial results, Sun Life revealed that this plan, one of the largest in the education sector, has $1.7 billion of assets.
"In terms of assets, it is our largest plan in Quebec and one of the 5 largest in our block of business in Canada. We have a solid presence in the university community and we administer a plan for another university that is in our top 5," Jean-Michel Lavoie, Regional Vice-President, Business Development, Group Retirement Services at Sun Life told the Insurance Portal.
Sun Life says it began administering the MUPP, as well as McGill University's voluntary savings programs and variable benefit retirement option, on Sept. 1, 2020. This is the second McGill University pension plan to be conferred on the insurer. It has been administering the Service Employees Union’s plan since 1996. Sun Life describes itself as one of the leading providers of pension plans for academic institutions in Canada, covering tens of thousands of members at more than 100 institutions.
Simplify administration
Contacted by the Insurance Portal to explain its choice of Sun Life, the university replied by e-mail. "The proper administration of the McGill University Pension Plan and supporting members in achieving their long-term retirement goals is one of our top priorities, and I am pleased that we can continue to do so," says John D'Agata, Director of Pensions and Benefits, Human Resources at McGill University.
The McGill University website states that Morneau Sheppell was the sole provider of this plan prior to the transaction. In a letter to employees, D'Agata says he chose Sun Life to simplify administration and provide plan members with new resources to help them with their financial planning.
Hybrid plan
This type of plan is not frequently seen in the market, explain the two parties in charge of the MUPP: a hybrid type where two components—a defined contribution plan and a defined benefit plan—operate in parallel. Normandin Beaudry provides actuarial services for the defined benefit portion of the plan, including calculation of the rights acquired by the participants.
Both Sun Life and Normandin Beaudry agree that insurers are better structured to administer defined contribution plans, whereas actuarial firms are better equipped to run defined benefit plans.
"Neither of us could take on the McGill University employee pension plan alone," Martin Cyrenne, senior partner at Normandin Beaudry, told the Insurance Portal. "This is the first time we are working with an insurer on this very particular type of plan. We can contribute complementary expertise. We are administering the defined benefit portion of the plan.”
This defined benefit portion of the hybrid plan involves some 5,000 participants, Cyrenne says. "They retain their right to a minimum benefit commensurate with their years of service. We have to do actuarial calculations to determine it.” He adds that employees hired after 2009 have access to a defined contribution plan only. The others continue to benefit from the defined benefit portion of the plan.
In a defined contribution plan, employees’ pension benefits depend on their contributions, that of employers and the return on all contributions.
Centralize administration
The university had aspired to centralize the administration of its plan, Lavoie adds. “Our strength is in defined contribution plans. It's very rare that we are involved in a defined benefit plan. McGill University was looking for someone who could do both.”
Sun Life is providing investment experience and technology, Lavoie continues. Its platform allows both parts of the plan to be integrated into its member services. Plan members can view balances, make contributions and manage investments on a mobile app, the insurer explains. McGill employees can also access AI-driven technological tools including Ella, the insurer’s digital coach.
New niche
Jean-Michel Lavoie views this initiative as opening the door to serving other clients with similar plans. "The hybrid plan is a new niche for us," he says. “But it's not a growing one.” The Sun Life experts he consulted did not know of any official inventory of this type of plan either.
Apparently, these plans are rare. "This type of complex hybrid plan is more frequently found in academic, industrial, mining or health care settings. We estimate that there may be a few dozen in Canada, covering between 50,000 and maybe up to 100,000 participants," Lavoie says.
Defined benefit plans that close on a specific date are much more common. In this case, a defined contribution plan is set up to take over. As for traditional hybrid plans, where the defined benefit component is frozen and the contribution component remains open, there are about 500 to 1,000 such plans in Canada with just under a million members, Lavoie says.
