In the next five years, one third of the Canadian workforce will retire, and those new retirees will put a tremendous strain on Canadian health-care expenditures, which are currently $200 billion per year and growing at a rate that exceeds inflation. Those same retirees will also take a bite out of pension plans, whose assets have fallen in value as a result of significant market volatility and historically low interest rates. “The numbers are staggering,” says Alain Malaket, who daily looks the stats square in the eye as the senior director of pensions and benefits for George Weston Limited.
His company, which consists of Weston Foods and Loblaw Companies Limited, is the country’s largest supermarket retailer and one of the largest employers in North America, with 145,000 employees in Canada and the United States. Currently, it has $2 billion in pension liabilities, and the road ahead looks rocky, but with Malaket’s wealth of experience and the company’s new initiatives to better educate its personnel, it will at least be less so.
“Like other employers, George Weston Limited is facing significant challenges in pensions and benefits, and those challenges will probably continue for the next decade,” Malaket says. “But we all have a vested interest in extricating ourselves from this quagmire.”
The good news is that George Weston Limited is already acting, and in Malaket it has one of the top names in the pension game. The industry veteran also currently serves as a director for the Multi-Employer Benefit Plan Council of Canada, a lobby group, and he’s on the advisor board of the Financial Services Commission of Ontario, which looks after private-sector pension plans. “Positioning people to succeed so they can retire in dignity has been a goal of mine for many years,” Malaket says.
To that end, Malaket is helping George Weston Limited prepare for the major workforce shift. “At one point, the ratio of workers to retirees was six to one, but in future years, that ratio is expected to be three to one, and a lot of people will want to come back to work part-time,” he says. “The incentives we have in place now target full-time employees, so we’re starting to think about how to deal with the workforce. What do those employees value in pensions and benefits?” To get that information, Malaket and his team have partnered with Towers Watson to undertake total-reward optimization studies, which employ dynamic surveys that actually change based on the answers provided.
The company has also changed the default investments to its pension plans. “We found that employees would default to investments in money-market funds, which weren’t keeping pace with inflation,” Malaket explains. So George Weston Limited approached Fidelity about offering its target-date Freedom Funds in Canada. Fidelity liked the idea, and those funds, which are offered under the Clearpath brand in Canada, are now the default investments in George Weston Limited’s pension plans. “The win for members is that they have professionally managed assets with a glide path at very competitive fees,” Malaket says, “so they no longer have to focus on creating a portfolio and rebalancing.”
Key to the success of such initiatives, according to Malaket, is education and communication. “Our members are consumers in terms of how they choose to spend their health and welfare dollars,” he says, “and we’re making sure they have the information they need to make the right decisions for themselves.”
Distributing this information, though, involves changing with the times, too. Malaket notes that in the old days, communications were always printed, but now George Weston Limited sometimes sends them out as simple sound bites or text messages. Malaket and his team even launched a new program that allows employees to scan a symbol with a smartphone to learn more about new initiatives. “Every group is different, and using different modes of communication is key,” he says.
In these communications, Malaket says, it’s essential to convey to workers that there is a shared cost and shared responsibility to their decisions and opinions. “You want members to understand how their dollars are spent,” he says. “Not only does that make them better consumers in terms of knowing how to use their dollars effectively; it also generates more appreciation for the program. Typically, very few people have a sense of the dollars behind their benefits.”