7 Conclusion

The differences between the two plans are not as vast as many commentators have suggested. In particular, the differences between the actual benefits delivered by both plans to participants is small. While the U.S. Trustees have improved their communications with members, something along the lines of the Canadian Fund’s Annual Report would be an improvement. They have already adopted actual market indexes for benchmarks, reporting results net of fees (rather than gross of fees) could would bring it on a par with Canada. Both plans would see an improvement in investment-related fees and performance from a greater use of indexed investing or direct investment in Berkshire Hathaway. The Canadian plan seems to have a better grip on their expenses, and the U.S. plan should undoubtedly try harder. However, even if the AFM-EPF were to equal the cost and investment performance of the Canadian plan, this would not solve the existing structural problems faced by the American plan.

As far as the regulatory environment is concerned, Ontario could make several steps in the right direction by emulating the disclosure policies required by the U.S. for all pension plans. Meanwhile, the U.S. plan would be in better shape if their benefit increases had to be approved by the U.S. Treasury or IRS, as is done in Canada.

It’s possible that the Canadian plan is healthier than that AFM-EPF. If so, we believe this is primarily due to the more conservative fiscal policies forced on it by regulators, such as restricting benefit increases and requiring that the normal costs be funded by money coming into the plan for that year, rather than by surpluses.