Small businesses, big wins with retirement plans

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Small and medium businesses should consider prioritizing competitive compensation programs such as group retirement plans, despite limited internal resources. Leaning on an industry built to support them, outsourcing to specialists allows organizations to keep their focus on the business

WHETHER THEY work at a small local business with a handful of employees or a global organization with a workforce of thousands, the needs of employees are similar – what differs are the internal resources available to the employers. But when it comes to delivering comprehensive benefit packages, small and medium businesses can’t afford to let that imbalance stand in the way. “Programs like group retirement plans are valuable for any working Canadian, and every organization regardless of size should consider it if they haven’t already,” advises Chris Walker, regional vice president business development and investment strategy at Desjardins Insurance. “It’s a good thing to do, employees need it, and it’s easier than you think.”

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Overall wellness survey: 5 key dimensions

a state of good physical health, with no disease or disability

Physical

“Programs like group retirement plans are valuable for any working Canadian, and every organization regardless of size should consider it if they haven’t already. It’s a good thing to do, employees need it, and it’s easier than you think”

Chris Walker, Desjardins Insurance

According to Innovation, Science and Economic Development Canada’s 2023 research report, Key Small Business Statistics, there are 1.22 million employers in Canada and almost all (99.7 percent) are categorized as small and medium-sized businesses (SMBs), with the vast majority coming in at 1–99

In Walker’s experience, large organizations often have employees whose full-time jobs are the administration of these plans while SMBs don’t have that luxury. In fact, in the wake of the Canadian Association of Pension Supervisory Authorities’ updated capital accumulation plan guideline, a September 2024 article in Benefits Canada argues that smaller plan sponsors may face administrative challenges in applying the updates. With a long tenure in the field, Walker can confirm that the most common stumbling block for SMBs is that disconnect: where can they get the kind of support their bigger counterparts have in-house? “I call them Swiss Army knives because they wear so many hats,” he says, adding that for additional resources, his answer is to partner with subject matter experts.

“Don’t do it yourself; outsource it. There’s an entire industry built around providing support, full of capable service providers, including plan advisory firms, to lean on. Most small and mid-clients are surprised at the low cost for this support. When companies I work with go down this route, they almost always say, ‘Why didn’t I do this earlier?’” The first step is investing the time upfront to ensure the plan suits your organization. A plan with reasonable fund management fees – certainly better than employees would get if they invested in a retail RRSP, Walker notes – and diversification, good returns, and good reporting is critical. But don’t overcomplicate it: seek out solutions built by experts with years of experience in the field. While the solution itself should be simple, the purpose behind it should be well thought out. Walker says this step is often overlooked, but it’s part and parcel of good governance and best practice. It makes reporting up easier as well, Walker notes.

“Why are you offering this benefit? What are you trying to achieve? There’s no right or wrong answer, but the plan purpose should align with, and feed back into, the mission and vision of the organization – which is tied closely to their objectives for their workforce.” It must also align with the employee population – millennials, whose generation now outnumbers baby boomers in Canada according to data released by Statistics Canada in February, are increasingly interested in ESG investments, for example – and a clear plan purpose will answer most of the questions that crop up while informing future decisions as well. From speaking with a knowledgeable advisor to interviewing potential providers, finding an entity you work well with takes some time, but it’s worth the upfront work to ensure you have the support to set up and maintain best practices in your plan. Operational excellence in a provider, whether it be guidance through crucial points like implementation, organizational change, or onboarding a new hire or ensuring robust governance, is what SMBs are looking for. Service providers should offer quick problem resolution, proactive support, and fantastic employee experience. “These smaller organizations don’t have giant procurement departments so they prioritize the trust factor – can I rely on

Take member engagement as an example. A fundamental and critically important measure is simply whether your employees are enrolled; thus, measuring the participation rate is key. Other questions to ask: Are they making active decisions such as investment elections, or defaulting to the target date fund? Are they keeping their information up to date, or is their beneficiary still their ex-partner? For either situation the service provider gathers statistics, reports on them, and can establish a communication strategy to improve those numbers. Then six months or a year down the line, they can check again and see if the outreach moved the needle. “Leveraging readily available data and measuring along the way is important because it tells a plan sponsor if they’re on track,” says Walker, who adds that for himself and his team, it’s about being simple, efficient, and modern from implementation to ongoing measurement of data. But he notes it all really boils down to one thing: specialists are here

to help. There are tools and solutions ready to go that will meet these objectives. “If you’re considering setting up a plan or aren’t sure if your existing one is working optimally, there are multiple resources available to help you,” Walker says. “Seek them out, keep it simple, and delegate to the experts who understand the market – and the differences when it comes to SMBs.”

The timely rise of group retirement plans

Simple, efficient, and measurable

Published October 21. 2024

“There’s an entire industry built around providing support, full of capable service providers, including plan advisory firms, to lean on. Most small and mid-clients are surprised at the low cost for this support. When companies I work with go down this route, they almost always say, ‘Why didn’t I do this earlier?’”

Chris Walker, Desjardins Insurance

a mental state that allows someone to reach their full potential and cope with life's normal stresses

Mental

the level of confidence someone has in their financial ability to deal with day-to-day issues over the long term, plan for the future, and achieve their goals

Financial

the ability to maintain meaningful relationships and networks, and to interact with individuals and communities

Social

the ability to live and work in a safe and healthy environment

Environmental

Overall wellness survey: Key findings

Canadian-born respondents listed inflation as one of their biggest concerns (52%), compared to newcomers who have been here for up to 6 years (36%) or first-generation Canadians who have been here for 6 years or more (39%).

Finances are one of the biggest concerns of members of the LGBTQ+ community (48%) and newcomers (52%).

Most people think that their employer plays an important role in the financial (84%) and mental (73%) dimensions of their wellness.

Nearly 8 out of 10 respondents said that they would be more inclined to stay with their employer for the long term if they had more benefits.

employees. Many SMBs sponsor retirement plans to an estimated total of $110 billion of assets, which is roughly half of the entire Canadian accumulation plan market. There are new SMBs setting up shop in Canada every day. With many of those seeking to provide competitive compensation programs, it’s an area of growth. From the changing employee landscape to widespread financial struggles including the high cost of living, group retirement plans help strike the right balance between cash and non-cash components of total compensation. Besides helping future iterations of your employees by putting money away for retirement, these plans – such as defined contribution pension plans or group RRSPs, DPSPs, FHSAs, and TFSAs – can help relieve some immediate financial stress. Desjardins’ 2022 overall wellness survey found that while Canadians have many concerns related to various wellness dimensions, financial worry is at the top of the list. Financial strain can negatively impact mental health, which negatively impacts engagement and productivity at work, according to the Financial Consumer Agency of Canada’s financial wellness resources for employers, whether it’s a long-term leave that incurs disability costs or the softer cost of a dip in day-to-day engagement. Many employers seek to allay these stresses and provide peace of mind by sponsoring a savings plan for their employees. While it’s difficult to track the return on investment in a straightforward way, it is possible to connect it to positive trends in the workplace. For example, according to Gallup’s 2023 Employee Engagement indicator, engaged employees have higher well-being overall, which translates to better retention, lower absenteeism, and higher productivity. The message sent by employers who take the time to establish a group retirement plan is that they care. The employees then see their organization as providing security while also investing in their strong financial future and overall wellness – important sentiments that inspire not only employee satisfaction and engagement but overall wellness. “HR looks for those kinds of elements, creating strong employee-employer relationships and a positive work environment via support for common pain points, not only the straight ROI,” Walker says. “The more an employer can identify those problems, get ahead of them, and put policies in place like group retirement, the greater the payoff.”

Once a plan is up and running, there’s lots of data available – and a performance-oriented service provider should know how to use it. Dovetailing with the plan purpose, the information that comes in helps put actions into place.

Invest time upfront and source trusted partners

you to help me through this part of my business?” Walker explains. “A lot of that comes from a good reputation and dedicated teams that can talk the same talk and understand their needs.”

Legal note: Desjardins Insurance refers to Desjardins Financial Security Life Assurance Company. Desjardins®, Desjardins Insurance®, all trademarks containing the word Desjardins, as well as related logos are trademarks of the Fédération des caisses Desjardins du Québec, used under licence. 200 Rue Des Commandeurs, Lévis QC G6V 6R2 / 1-866-647-5013

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