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June 2016 Newsletter

Target Benefit Pension Plans in Alberta

Alberta passed legislation in 2014 to permit registration and operation of target benefit pension plans (TBPP) for single employer pension plans and non-negotiated multi-employer pension plans.

A TBPP is neither a defined benefit pension plan (DB) plan nor a defined contribution (DC) plan but can include the best features and can eliminate the negative features of both DB and DC plans. A TBPP operates with a fixed contribution designed to produce a desired, or target, defined lifetime pension at retirement. If economic and/or demographic experience is not as favourable as predicted, benefits can be temporarily reduced to maintain the full funded status of the plan. Benefit reductions are restored when plan experience improves. Aggressive risk management approaches are applied to reduce the probability that benefits earned in the past will ever have to be reduced.

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