Q&A with Medicus: Getting to know the new(ish) kid on the pension block

In the spring of 2023 Scotiabank rolled out a multi-employer pension plan for incorporated physicians, initially available in Alberta, British Columbia, Nova Scotia, Ontario, Prince Edward Island and the Territories.The Medical Post spoke recently with Simone Reitzes, managing director of the Medicus pension plan, to find out more about this new offering and how it can help doctors plan better for their retirement.Q: How is Medicus different from other multi-employer pension plans?There are many large and successful multi-employer pension plans within Ontario, within Canada and beyond. Just like the name suggests, essentially what these kinds of plans do is they bring together different employers—in this case, the individual incorporated physicians. By pulling together employers they create the size and scale necessary to efficiently pool risk and to cover overhead costs. With Medicus, we use the incorporated relationship between the physician and their own medical professional corporation. Q: And I understand Medicus is a defined-benefit pension plan?Yes, it’s registered in Ontario as a defined-benefit, multi-employer pension plan. Essentially with Medicus you make a fixed contribution and in exchange you receive a formulaic pension based on your earnings and the years in which you participate. And that pension is payable to you for the rest of your life. Q: Who is the fiduciary for the funds in Medicus?The fiduciary is an administrative board of trustees established with 50% physicians or physician representatives, including members of the plan. We have practising physicians on the administrative board from B.C., Ontario, and Nova Scotia. We really looked across the country to find the best-qualified experts for the board. The remaining 50% of the board comprises independent professionals. Similar to any corporate board, these experts specialize in legal, tax, finance and all matters related to pension plans, coming together to govern the plan and ensure the assets are managed in the best interest of the participating members.Q: So presumably, the more members there are in the plan, the more economies of scale are realized?That’s right. For example, we’re often asked how Medicus compares to an IPP (individual pension plan). One of the significant differences is the ability to scale overhead expenses. In an IPP, a single physician might need to hire an actuary for evaluation, whereas with Medicus, whether there are 100, 1000, or any number of physicians in the plan, only one actuarial valuation is required. This consolidation of overhead costs, including filing fees with regulators, in a multi-employer plan allows for efficiency by spreading these expenses across a larger group.Q: And how does it work from a tax planning perspective?The corporation gets a tax deduction on the money that goes into the plan and when you receive the funds in retirement, it is taxable income. I would say the primary purpose of the plan is around stable, secure, predictable income in retirement.Q: How many members does Medicus have today?We’ve been in market a little over four months with new physicians enrolling every week. We're looking forward to sharing more hard numbers as they become available with our year-end reporting. At this time, I can tell you that we’re really excited about that the breadth of physicians that have joined. We have physicians in each of our five eligible provinces, as young as age 30 and as old as age 65.Read: How to make the most of your corporationQ: Can you talk about the differences between Medicus and an IPP or a PPP?When you participate in, for example, an RSP or an IPP, it’s your own account regardless of the different tax structures or rules that apply. So what you get out of that account is essentially what you put into it adjusted for returns and expenses over time. As markets go up, you can benefit. If markets go down, you’re responsible for bearing the brunt of that and also responsible for managing the accumulation for your own retirement.One of the really cool things about Medicus is the plug-in of what we call longevity risk. When you retire, it’s really hard to know if you're going to live until 75, 85, 95 or 105. We keep hearing stories about life expectancy continuing to extend and also the significant healthcare costs that can come, especially in those later years of retirement. So lots of concern out there about outliving retirement assets. With Medicus, that’s not the case.The second feature that comes along with the multi-employer plan is the idea of protection for your family. If you have a spouse at retirement, that pension that you receive every month is not only payable for your lifetime, but it can provide coverage for your spouse's lifetime as well. If you don’t have a spouse, there are also options where those funds can continue to a child, to a beneficiary or to an estate.The third thing I would say that that’s really special about this kind of group pension as compared to an individual product of any kind is that the assets can be pooled in with a larger pool of assets. So tremendously more opportunity. Using an institutional asset manager can provide access to all kinds of asset classes that a typical investor wouldn’t have access to or would have access to in a very limited, illiquid kind of way. When we think about real estate infrastructure, other private asset classes, the pension plan can really take advantage of those assets to increase the returns, dampen the volatility and overall just provide more protection for everybody that participates in the plan.Q: When you talk about being able to pass on the benefits to a spouse or to children, how does that work? Would the benefits be equivalent to 100% of what a doctor might have received in his or her lifetime?If somebody contributes to the plan for a number of years and unfortunately passes away before they begin to receive their pension, then 100% of their value is protected and would pass on to a spouse or a beneficiary. If it’s a spouse, they could choose to convert that pension to the spouse’s own lifetime. In other cases, it’s paid out as a lump sum to whoever has been designated. When somebody reaches the point of retirement that’s when they can decide the form of pension that they would like to receive. So they can decide at that time if they would like for example, a 10-year or 15-year guaranteed period, which means that regardless of whether there's a spouse or whether they survive that 10- or 15-year period, they know those payments will continue to the designated person. Then the individual can choose either a 60% or a 100%. payment to continue to the spouse. Those are the typical choices but it usually just depends on the family finances. For example, if the spouse has their pension from another large pension plan, they might decide they don’t need that continuation and would prefer a guarantee period or that the 60% continuation is sufficient. Or if there are large overhead costs that both spouses would need to cover, like rent, for example, that 100% continuation of pension might make the most sense in that situation.Read: Pension basics for self-employed professionals and business ownersQ: The personal pension plan allows for a buy back of years of past service as well as terminal funding for those who want to retire early while boosting their pension benefits. Does Medicus offer these benefits as well?We are actively working on a buyback option to allow those physicians who do have incorporated history to be able to essentially replicate past participation. That’s something we’re looking to bring to market in 2024. Medicus doesn’t have terminal funding. If you look at retirement literature in general and the drivers are of sufficient income for Canadians in retirement, the number one predictor of sufficient income in retirement is actually just contribution behavior. With Medicus, there’s really an emphasis on contributing on a regular basis so that the younger you are when you join, the longer the opportunity to build up a more meaningful benefit.Q: How would joining Medicus affect a physician’s ability to contribute to an RRSP?In the year that you join the plan, there could be slight overlap in RSP (contribution) room. Essentially, you receive what’s called a pension adjustment, which acts to lower the RSP room and that’s reported on your tax return for each year. In the year of joining I would tell people just to work closely with their accountant to make sure they’re not tripping up any rules and are following all of the limits accordingly. Over the long-term participation in Medicus, that pension adjustment will use up almost all of someone's RSP room. In general over the long term, you would not be able to do both an RSP and have meaningful participation in Medicus.Q: A common question among early-career physicians is if and when they should incorporate and I know there are some who make this decision in part because they’ve decided to set up an IPP or PPP. How do you think having access to a multi-employer pension plan will influence physicians’ decision to incorporate?With Medicus in the picture, it’ll be interesting to see how those conversations might evolve. It's one more factor that will come into the conversation between a physician and their advisor in terms of potentially incorporating earlier in order to get access to that longer savings period and ability to build up a more meaningful benefit in a plan. When people ask me when is the best time to join I think of it in terms of what is the best time to plant a tree? Well, 50 years is really the best time to plant a tree today, right? Read: Advent of the Canadian Physicians’ Pension Plan

Q&A with Medicus: Getting to know the new(ish) kid on the pension block

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