This is my first blog post in a series regarding target benefit
plans (TBPs) (also called defined ambition plans). In this post, I
will describe what TBPs are and why such plans should be permitted
under pension laws as a design option.
Most pension standards legislation in Canada currently permits
target benefits for multi-employer plans, but not for single
employer plans. Similar to defined contribution (DC) plans, TBPs
have fixed contribution rates (or contribution rates that are
variable within a narrow range). This provides costs certainty to
plan sponsors. Similar to defined benefit (DB) plans, target
benefit plans have a targeted DB-type pension benefit (often career
average). However, unlike DB plans, TBPs allow for benefits to be
reduced if there are insufficient funds to provide the targeted
benefit.
