So what’s dispute at refinery all about?
Pensions are at the root of the friction between workers and the employer
A single word explains why members of Unifor 594 have spent weeks on the picket line and why the Co-op Refinery Complex (CRC) is willing to build a work camp and fly managers in on helicopters: Pensions.
WHO SAYS WHAT
Unifor says the fact Federated Co-operatives Limited (FCL) netted nearly $1-billion last year means it can afford to save employee pensions.
FCL says under its proposed pension most employees will still receive more than $1 million for their retirement, as well as an 11.75-per-cent raise over four years.
Here is what the two sides might talk about at the bargaining table ...
100 PER CENT: WHAT FCL PAYS RIGHT NOW
Members of Unifor 594 like their pensions because they don’t pay into them and they can predict how much they’ll get when they retire.
FCL wants to get rid of the 100-per-cent employer-funded defined-benefit (DB) pension plan.
The average Unifor 594 member makes an annual salary of $104,000, plus benefits. That amounts to employee retirement benefits of around $62,400 per year. (Most would make more, however, since the formula that calculates the pension takes the three best years of earnings. Payments are also indexed, so they rise every year.)
THE HOLE IN THE FUND: $71 MILLION
The company makes regular service payments, which hover at around 21 per cent of employee salaries, into a pension fund.
But once the money is there, things can change.
Markets fluctuate. Interest rates go up or down. People live longer than expected. As of 2018, there was roughly $71 million less in the pension plan than required to fund FCL’S obligations to employees. FCL has had to make “special payments” of $192 million over the past four years into the fund.
FCL can’t predict how much more it will have to pay, according to vice-president of finance Tony Van Burgsteden. He says hundreds of plan members have less than 10 years of service.
“For a business like us, or any business, frankly, to guarantee somebody’s pension for 50 years, or guarantee any benefit for 50 years, is extremely difficult,” he said.
PROFITS: $959 MILLION
Unifor has a simple response to FCL’S pension travails: That’s not Unifor’s problem.
Unifor says the special payments are just a sliver of the company’s balance sheet. FCL made $959 million in profit in 2019, a $1.1-billion profit the year before, and roughly $500 million for each of the three years previous.
Van Burgsteden isn’t counting on it being like that forever.
THE PROPOSAL: 10 AND FOUR PER CENT
Scott Doherty, assistant to Unifor’s national president, says he thinks workers did their part almost three years ago when they agreed to have new members move onto a different plan as part of their last collective agreement.
They say that, in exchange, they were promised that employees on the DB plan would remain on that plan.
But in this bargaining round,
FCL asked existing employees to take the same deal as new members.
Instead of paying 21 per cent to fund guaranteed pension payments, the company has proposed chipping in six per cent. If the employee pays another four, the company will match that. From there, the money goes into an account for each employee that moves with the markets.
Under that model — known as a defined contribution (DC) plan — the company knows how much it has to pay. The employees have to guess what they’ll earn when they retire.
WHAT IT MEANS: A 40-PER-CENT HIT?
Unifor says its members would see their pensions fall by 40 per cent. FCL says that is “simply untrue.”
According to FCL estimates, employees’ retirement earnings under the new plan could range from a lifetime value of roughly $1.2 million for an employee with seven years’ current service who stays on until retirement to more than $1.7 million for a 32-year employee.
Much of the money under the new plan comes from a payout that captures the value of what employees built up in the DB plan.
“We’re not taking away anything from anybody,” Van Burgsteden said.
Doherty acknowledged that Unifor’s claim of a 40-per-cent drop doesn’t account for the payout, but insists workers would still lose out.
11 PER CENT: FCL’S LATEST OFFER
Van Burgsteden says Unifor is being obstinate by insisting on keeping the 100-per-cent employer-funded plan as a “condition” before bargaining again. The union also wants a promise that if someone chooses a DB plan that can’t be changed.
“That condition is extremely problematic,” Van Burgsteden says.
Doherty frames it differently. It’s “protection” against facing “concessions on the DB pension plan” in each round of bargaining, he said.
As negotiations dragged on into conciliation, FCL made an offer: the DB plan could be saved if employees pay 11 per cent of their salaries into it. Doherty calls that a “gutted” version of the existing plan.
17.5 PER CENT: IS IT A ROLLBACK OR NOT?
Unifor relies on another number to cast the FCL position as a 17.5-per-cent rollback.
That number comes from the value of an existing savings plan where the company matches what employees put away, up to 6.5 per cent. Add that to the 11-per-cent pension contribution FCL is asking for, and the result is 17.5 per cent.
FCL wants to ditch the savings plan, but resists any talk of a rollback. The 11 per cent is an “investment.” The savings plan is simply being transformed, management says, into a performance bonus that could be worth as much as nine per cent.
Doherty accepts that the bonus could be valuable, but notes it isn’t in the collective agreement. After what many union members feel was a betrayal over pensions, he isn’t willing to count on the good graces of management.
HOW MUCH HAS THE STRIKE COST?
Neither side has an answer. “There’s no question that the refinery is not making as much money as it would normally,” said Doherty. “Our members are certainly not making as much money as they would normally.
“Both parties are hurting.”