Canadian companies are making changes to their pension plan designs to manage their financial risks, according to a survey released by The Conference Board of Canada and Watson Wyatt Worldwide.

As the result of recent pension plan underfunding, 18% of the survey participants that sponsor defined benefit plans have terminated at least one of their plans or have converted it to a defined contribution arrangement, the study found. For another 11%, such a change is either underway or planned, according to the survey. Of the remaining 71% that are staying with their defined benefit plans, one in five are either adding defined contribution elements or cutting back their future benefit levels or early retirement provisions.

"Clearly, plan sponsors are assessing their plan designs in managing their financial risk," said Ian Markham, director of pension innovation with Watson Wyatt Canada in Toronto. "But cost volatility is only one of the influences. Another major driver of plan design change is the need to retain talent, particularly to combat the labor shortages that are likely to develop as baby boomers retire."

Thirty-nine percent of Canadian chief financial officers said they believe Canada has a pension crisis but say it is largely cyclical and unlikely to become permanent, while 20% say they believe the problem is likely to persist beyond the next few years. However, 29% do not see the situation as a crisis, according to the study.

While most CFOs have devoted considerable efforts to reviewing their investment risk tolerance and selection of investment managers, more than 80% are not planning changes to their pension investment strategy, the study also found.

The survey polled 68 CFOs of Canadian organizations, representing more than 20% of private-sector pension assets in Canada.While the survey report is not currently available, it is scheduled to appear on the Web site of the Conference Board of Canada, at www.conferenceboard.ca/boardwise, at the end of May.