About Sanofi
For more than 100 years, Sanofi, a global pharmaceutical company, has been dedicated to making a difference in patients’ daily lives. They are committed to healthcare solutions from prevention to treatment, turning scientific discoveries into medicine. With nearly 2000 employees across Canada, Sanofi works to support patients and families through their health journeys.
The Challenge
Alternative Pension Options Create Negotiation Deadlock
Sanofi was eager to reduce costs, risk, and balance sheet liabilities of the single-employer defined benefit (DB) pension plan offered to its employees working at its manufacturing and research and development office in Canada.
Through bargaining, various retirement and pension arrangements were presented to Sanofi’s unionized employee groups, including migrating to a Defined Contribution (DC) plan, which would alleviate the pressure of high and increasing pension contribution rates for the company. The unions resisted the change, feeling members would be losing out on the key DB plan features their previous plan provided. This resulted in a negotiation deadlock lasting almost a decade.
The Solution
DBplus Meets the Needs of All Parties
Under Sanofi’s previous DB plan, employees contributed 1.5% up to year’s maximum pensionable earnings (YMPE) and then 4% above YMPE while the company’s contributions had risen to 14% with growing pressure brought about by an aging workforce.
The complexity of Sanofi’s negotiations was compounded as they impacted 1,000 employees represented by two unions. To support all parties involved, the CAAT team played a crucial role, presenting essential information about DBplus. Additionally, they developed 1,000 personalized statements explaining how each individual member would be impacted by the proposed deal.
Employees voted 96% to welcome DBplus as their new pension plan. Over 1000 members joined on April 1, 2021.
The Results
Maintaining DB Pension Plan While Reducing Risk
DBplus enabled Sanofi to find a fixed-cost solution benefiting all bargaining parties.
Under DBplus, employees would continue to receive the in-demand and coveted benefits and features of a DB pension plan: retirement income for life, conditional inflation protection, early retirement options, and survivor benefits. While as an employer, Sanofi was able to divest their pension liabilities and risks to CAAT.
Employees voted 96% to welcome DBplus as their new pension plan. Over 1,000 members joined on April 1, 2021.
DBplus eliminated the contribution volatility, risk of funding deficits and balance sheet liability Sanofi was experiencing with its single-employer DB plan. CAAT also took on administrative obligations, member communications, and governance responsibilities associated with pension plan administration, allowing Sanofi to focus on its core business.
Satisfying Employee and Employer Needs
Unions, associations, and employees endorse CAAT’s DBplus pension plan design because it provides members with a desirable pension plan with a compelling combination of value, simplicity, and security.
For larger unionized employers like Sanofi, DBplus enables cost certainty in their pension offering:
- ✔No administrative or service fees
- ✔Simple accounting
- ✔Elimination of fiduciary and governance risks
- ✔Contribution choice and fixed rates with options to phase-in