Defined Benefit Redefined

HOOPP's Role in Healthcare, Health Human Resources and the Economy

TORONTO (January 20, 2009): Good evening ladies and gentlemen and thank you for joining us for what I hope you will find to be an informative evening discussing healthcare and Ontario's economic outlook.

My purpose this evening is to answer two related questions which have undoubtedly been on your mind.

First – What is HOOPP?

And second – Why are we hosting this evening's event?

Let me start with answering the first question - what is HOOPP?

HOOPP is a defined benefit pension plan that, since 1960 has been providing pension benefits to Ontario's healthcare workers. We are a not for profit organization jointly governed by Trustees appointed by the Ontario Hospital Association and four unions – the Ontario Nurses' Association, the Canadian Union of Public Employees, the Ontario Public Service Employees Union and Service Employees International Union.

As the 5th largest pension fund in Canada, HOOPP plays a critical role in the Canadian economy by managing $30 billion worth of assets in order to secure the pension promise for our members. It's the kind of role played by our peer plans, many of whom are represented here tonight. These plans serving hundreds of thousands of public sector workers represent many hundreds of billions of dollars in pension assets.

As a defined benefit plan, we provide pension security in a way that defined contribution plans, RRSPs or other savings vehicles can never do. Our research shows that two-thirds of Ontarians are worried about having enough money for retirement – and half say their financial situation has worsened over the past year. In today's volatile economy, plans like HOOPP provide a safe harbour for the retirement savings of Ontario workers – a secure, reliable pension that will provide them with meaningful income in retirement.

The report of the Ontario Expert Commission on Pensions, headed by Dr. Harry Arthurs confirms that large plans (such as HOOPP) "generally achieve better results than small plans or individuals who manage their own investments." He further stated that large plans "pay lower investment management fees" and "can achieve significant economies of scale in their administration and in providing service to their members."

We're committed to being the best pension provider for all healthcare workers. Unlike some of our peer plans such as Ontario Teachers and OMERS, HOOPP's membership is voluntary – at the discretion of health care employers. We have been extremely successful in meeting the needs of the health care community in the past, with over 320 participating employers, including almost every hospital in Ontario, choosing HOOPP as their pension provider. We now serve more than 250,000 members from all walks of life in the sector (technicians, administrative staff, nurses, security, housekeeping, food, laundry, cleaning services and many others).

Our multi-employer model makes it easy for a worker to continue building pension benefits after a job change between HOOPP employers. The defined benefit model provides a benefit based on career earnings, through a formula, that other kinds of pension plans cannot.

HOOPP provides nearly $1 billion in pensions each year to retired healthcare workers – an important boost for the Ontario economy.

Here's a portrait of a typical HOOPP pensioner and why the defined benefit model works for her.

Lisa is 59 years old and worked at various health care employers over her career, contributing $57,000 to HOOPP over 18 years.

If she lives to the age of 81, she will have received $345,000 in pension payments from HOOPP, not including any cost of living adjustments – and Lisa can never outlive her HOOPP pension because it's a guaranteed amount based on her years of service and contributions – it's not based on financial market returns.

If this $57,000 was contributed to an RRSP instead of the HOOPP defined benefit plan, the return would only be $96,000 – that's $249,000 less than the HOOPP pension! We're assuming that the RRSP got the TSX rate of return each year, net of fees of 2.5 per cent – fees that HOOPP doesn't charge.

It takes $1 million in savings to provide a pension of $50,000 per year. The average Canadian currently has only $60,000 in RRSP savings. It's clear that a gap exists – one that can be addressed by DB plans like HOOPP.

Let's face it – the last thing anyone wants is for the medical staff working on you in the operating room to be distracted by pension plan worries! HOOPP takes care of their financial future for them.

Turning now to the second question, why are we hosting this event tonight? Because change is in the air. Change in the delivery of healthcare and change in our demographics – our aging population as a whole and an aging healthcare workforce in particular. And in light of the Ontario Expert Commission on Pensions report there may be change, as well, in the legislation that covers pension plans.

The facts around our healthcare system are well known to many of you. And Canadians are strongly supportive of efforts to enhance healthcare. In recent research commissioned by HOOPP, 91 per cent of Ontarians said they agreed that the Government of Ontario must hire more personnel in the health care sector.

Canada's healthcare system faces an enormous human resource challenge.

A large segment of our overall population is now between the ages of 50 and 65, meaning that they are either getting ready to retire, or have retired. By 2030, the Conference Board of Canada predicts this wave of boomer retirements will translate into a shortage of more than a half-million skilled workers.

From the perspective of pension funds, more retirees are collecting benefits for as long as they worked, AND even longer!

The aging work force is even more of a concern in the healthcare field. The hospital workforce is about 2 years older than the average for other industries and nurses are about 5 years older than those in other professions. More than half of the nursing workforce is over age 45, with 20 per cent being age 55 or older.

Therefore, HOOPP will be playing an important role with respect to those individuals entering retirement. But HOOPP will also be part of the ongoing effort to recruit and retain quality personnel into the system.

We know that the ability to attract and retain health human resources is attributable in part to the HOOPP defined benefit pension. We also know that the portability of this benefit throughout the healthcare system will enable a greater amount of mobility for workers in an environment that is anything but static.

Up until very recently, most healthcare workers were employed by hospitals. However, in the last several years, an increasing number of services and resources have been shifted to community based settings, outside of hospitals.

We can say with certainty that healthcare workers make their employment and job mobility decisions based upon the availability of the HOOPP pension. Our research shows that few members will leave an employer to take a job where they would lose their HOOPP pension – it's a strong retention factor.

And we've started to hear from healthcare employers who don't offer HOOPP now, but are interested in doing so. To them we say, HOOPP is well-positioned to manage additional assets and members.

We were very encouraged by the findings of Dr. Arthurs' Expert Commission on Pensions. We agree that it should be easier for people to change their jobs and keep their pension benefits whole. The unique structure of multi-employer pension plans, where the administrator is not the employer, deserve more specialized pension rules. We'll work with government on any changes to the legislation.

We must make sure that, as healthcare changes to a more community based operation, these organizations are able to continue to provide their workers with an attractive and adequate retirement income. HOOPP is not just another expense, it is one of the pillars of Ontario's healthcare system as an important lever for attracting and retaining qualified workers.

While health care is changing in Ontario – moving more to community-based entities and facing human resources challenges – HOOPP must be a constant. It is key to attracting and retaining a strong, vibrant workforce. Healthcare workers highly value their pensions and we must ensure that whether they work in a large hospital environment or smaller community based organizations, existing HOOPP members can maintain their pensions. We want to partner more closely with employers, other stakeholders and the Ontario government in order to make this happen.

HOOPP has proven itself to be the best pension plan for the health care community. We've been successful in this endeavor for almost 50 years now, with a proven track record in investments, an excellent joint-governance model, and benefits that are tailored to the needs of healthcare workers. A HOOPP pension is important for nurses, technicians, administrative, service and support staff, as well as all the industry workers that are vital to running an efficient health care system. All workers, whether they work in a hospital or a community based operation, should be able to retire in dignity with a reliable pension income. As the government and employers seek to attract and retain healthcare workers, HOOPP is anxious to support those efforts.

In Conclusion

Large multi-employer public sector plans such as HOOPP are major contributors to our province and our country's economic well-being, managing and investing hundreds of billions of dollars and providing reliable incomes to retired workers. The findings of the Arthurs Commission validate the advantages of large defined benefit plans like ours, and we support legislative changes that will help multi-employer pension plans and their members.

As I mentioned in my opening remarks, HOOPP has been successfully delivering pensions and managing one of Canada's top pension funds, but without much public or government awareness. There is much change on the horizon and we recognize the need to be more active with our stakeholders and the government.

I hope that we will have the opportunity to work together with of many of you to meet the challenges that we seem to have in common -- our changing healthcare system, aging population and desire to support and preserve Ontario's economic health by providing reliable retirement incomes. We can, and want to be, an important part of the healthcare human resources solution. We're here to help.

I look forward to more discussion about Ontario's economic health throughout the evening. I will now turn the podium back over to Evan. Thank you.