Bill C-27: An­other ero­sion of Cana­dian pen­sions

Pro­posed changes would threaten se­cu­rity of re­tirees’ in­come

The Hamilton Spectator - - COMMENT - MAL­COLM BUCHANAN

Bill C-27 An Act to amend the Pen­sion Ben­e­fits Stan­dards Act, 1985 was qui­etly in­tro­duced in the House of Com­mons on Oct 19h, 2016. The Bill was in­tro­duced with­out no­tice or con­sul­ta­tion with Cana­di­ans, pen­sion­ers, or unions, and con­tains mea­sures that di­rectly con­tra­dict elec­tion prom­ises to im­prove re­tire­ment se­cu­rity for Cana­di­ans.

If en­acted, it will have se­ri­ous neg­a­tive im­pli­ca­tions for ex­ist­ing pri­vate and pub­lic-sec­tor de­fined ben­e­fit (DB) pen­sion plans in ev­ery ju­ris­dic­tion in Canada. Bill C-27 rep­re­sents a dan­ger­ous and im­me­di­ate at­tack on fu­ture and cur­rent re­tirees de­fined pen­sion plans.

The Harper gov­ern­ment pro­posed a sim­i­lar tar­get pen­sion plan “shared-risk” pro­posal in 2014. The Harper plan pro­posed that em­ploy­ees and em­ploy­ers would jointly man­age a plan aimed at col­lect­ing de­fined con­tri­bu­tions to achieve a spe­cific ben­e­fit (tar­get) in re­tire­ment. The plan would al­low a re­duc­tion of ac­crued ben­e­fits (il­le­gal un­der the Pen­sion Ben­e­fits Stan­dards Act) if the plan ran into ac­tu­ar­ial dif­fi­culty. Cur­rent em­ploy­ees and re­tirees of the tar­get plan pro­posal would have to “share the risk” and there­fore be sub­ject to a re­duc­tion of pen­sion ben­e­fits.

In April 2014, the Harper gov­ern­ment launched pub­lic con­sul­ta­tions on in­tro­duc­ing a tar­get ben­e­fits (TB) pen­sion plan frame­work. Re­tirees and other pen­sion stake­hold­ers strongly op­posed the pro­posal and the gov­ern­ment was forced to with­draw the leg­is­la­tion.

Bill C-27, which con­tains much of the Harper gov­ern­ment’s pro­posal, would im­me­di­ately af­fect fed­eral pri­vate-sec­tor plans and Crown cor­po­ra­tions. How­ever, it will fun­da­men­tally al­ter the pen­sion land­scape across Canada. It will set the new stan­dard for pen­sion re­form across the coun­try, and it will ac­cel­er­ate the ero­sion of de­cent pen­sions in both the pri­vate and pub­lic sec­tors. Em­ploy­ers and the pen­sion in­dus­try are pay­ing close at­ten­tion to Bill C-27 for this very rea­son. If the fed­eral gov­ern­ment sig­nals that em­ploy­ers in one sec­tor are no longer legally re­quired to live up to their pen­sion prom­ise to work­ers and re­tirees, em­ploy­ers ev­ery­where will de­mand the same treat­ment.

Bill C-27 would amend the Pen­sion Ben­e­fits Stan­dards Act to pro­vide a frame­work for the es­tab­lish­ment, ad­min­is­tra­tion and su­per­vi­sion of TB plans. Bill C-27 would un­der­mine al­ready-earned or “ac­crued” ben­e­fits which cur­rently are legally pro­tected, and may not be retroac­tively re­duced. The bill would re­move that le­gal pro­tec­tion, and en­cour­age the pro­lif­er­a­tion of TB plans in­stead, po­ten­tially low­er­ing ben­e­fits for both cur­rent and fu­ture re­tirees. Em­ploy­ers would also be al­lowed to per­suade in­di­vid­ual ac­tive and re­tired plan mem­bers to sur­ren­der their earned DB ben­e­fits in ex­change for less se­cure, less sta­ble TB plan ben­e­fits.

The gov­ern­ment ar­gues that em­ploy­ers can­not uni­lat­er­ally make changes to ex­ist­ing work­place DB pen­sion plans. It is true that Bill C-27 re­quires in­di­vid­ual work­ers to give their con­sent to give up their DB ben­e­fits. Em­ploy­ers will reap huge ben­e­fits if plan mem­bers can be per­suaded to sur­ren­der their DB ben­e­fits.

To con­vince their em­ploy­ees to sur­ren­der these ben­e­fits, em­ploy­ers have a wide range of car­rots and sticks they can use to per­suade DB plan mem­bers to give up their legally-pro­tected ben­e­fits. Em­ploy­ers can of­fer gifts, perks and pro­mo­tional op­por­tu­ni­ties and pro­vide ad­di­tional work­place train­ing. More likely, em­ploy­ers will use threats such as po­ten­tial job losses and re­duced hours of work, re­duced in­vest­ments, scal­ing-back ben­e­fits and even threats of lock­outs, re­struc­tur­ing pro­ceed­ings, or bank­ruptcy, if DB plan mem­bers don’t sur­ren­der their ben­e­fits for the good of the com­pany. The city of Hamil­ton has wit­nessed this sce­nario first hand.

It must be noted that the ap­proach pro­posed by Bill C-27 is al­ready prov­ing to be a fail­ure. In­tro­duced in 2012 by the New Brunswick gov­ern­ment, New Brunswick’s leg­is­la­tion al­lowed con­ver­sion of both pri­vate-sec­tor and pub­lic-sec­tor DB plans to so called “Shared-Risk” TB pen­sion plans. Plan con­ver­sions have re­sulted in class ac­tion law­suits, con­sti­tu­tional chal­lenges, and plum­met­ing de­fined-ben­e­fit plan mem­ber­ship.

The Tar­get Ben­e­fit “Shared Risk” pen­sion plan pro­posal con­tained in Bill C-27 is not the so­lu­tion to cre­ate a se­cure and sus­tain­able pen­sion for re­tirees. Tar­get ben­e­fit plans will have the ef­fect of wa­ter­ing down ex­ist­ing DB plans. Gov­ern­ments and com­pa­nies that cur­rently of­fer DB plans will be en­cour­aged to adopt TB plans that will cost em­ploy­ers less while of­fer­ing work­ers less and tak­ing all the risks.

In­stead of pro­ceed­ing with Bill C-27, the fed­eral gov­ern­ment should ac­tively en­cour­age all pri­vate-sec­tor and pub­lic-sec­tor em­ploy­ers to in­tro­duce, main­tain and en­hance work­place de­fined ben­e­fit pen­sion plans. That’s the real so­lu­tion for re­tire­ment se­cu­rity.

Mal­colm Buchanan is pres­i­dent Hamil­ton, Burling­ton and Oakville Chap­ter of the Congress of Union Re­tirees of Canada. macbuchanan@rogers.com

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