2016 Pensions Conference, Sponsored by Lancaster House at Westin Harbour Nov.29-30, 2016
Delegate Report- by Rob Acker
There was a motion passed at the last General membership meeting to send 1 member to this 2 day conference, and I was given this opportunity. I would like to thank the membership for sending me to this important conference. I had looked at attending this Conference before, however it had conflicted with the GM Council. Since GM Council was cancelled this year I could attend. When I arrived I was told there were 7 members from the National union attending which included; Bob Orr, Corey Vermey, Cammie Peirce, Barry Wadsworth, David Leacock, Sandeep Kakan, and Patrick Rettig. Most were part of the Pension &Benefits Department. I was very fortunate indeed to join them at their table and for the next two day discuss pensions with our National leadership. The Co-Chairs of the Conference were: Randy Bauslaugh, who is Pension Councel, McCarthy Tetrault, Jo-Ann Hannah, who is a Trustee for Elementary Teachers Federation of Ontario, Trustee of the Health Trusts, and former Unifor Director of Pensions and Benefits (retired Nov.1st, 2016) The Conference was broken into segments as follows, with different expert panelists:
Expanding the CPP: Assessing the implications in the public and Private Sectors
On June 20,2016, The Federal government and the provinces agreed to create an enhanced CPP with an implementation date of January 1,2018. As of Oct.4, all 9 participating provinces have confirmed their support of the Agreement. On Oct.6,2016, the federal government introduced Bill C-26, the legislation to enhance CPP. Contributions would start in Jan of 2019, and be phased in to get to 1% for employee/ employer over 5 years.The government would create another Canada Pension Plan Account , “CPP2” which would act separately from the original CPP. Changes are being contemplated already by stakeholders, and companies are baulking at the changes. Looks like employers will use opportunity to attack pension plans; especially those that are intregrated to CPP, or fight to reduce contributions to DC plans. When this starts in 2019, it is believed that no-one will get full benefits from this new plan until 2065 or in about 46 years.
Generations at Odds? How should intergenerational equity issues be addressed?
This discussion focusses on young workers versus older workers.CPP is already inequal, because when it started up, people wanted benefits quickly. There is a higher percentage of older retired workers compared to young workers. Young workers don’t want to pay for older workers that are more liable to already have a workplace pension, while young workers have none, or a DC pension. This is another reason that CPP expansion is needed.
Solvency Funding Reform: Examining provincial initiatives
This is entirely a battle between plan members that like solvency funding, and employers that fund the pensions. Solvency funding was brought in early 90’s, but companies have always been looking for loopholes since then. It’s hard to reach a concensus, and some people believe that any relief to employers, should be backstopped by better government protections in case of failures, or bankruptcies; ie like Ontario’s PBGF (Pension Benefit Guarantee Fund). Changes have already taken place in Quebec, BC, and Alberta. Ontario is looking at options to changing legislation already. Retirees want what was promised to them, while employers say they need relief to protect DB plans, or else they may have to convert to DC plans. Some provinces are using a “Target Benefit Plan” which is just another method to get away from solvency funding. We thought that these plans were scrapped, but obviously employers have still been working with legislators in the background. Some provinces are also allowing employers to take surplus funds from plans, ie when they are over 100% funded. Unions have been under pressure for about the last 10 years, to try to defend DB plans, and the solvency rules that define how they are funded.
The Changing World of Pension Reform: Examining provincial initiatives
Much of this discussion centred around how pension plans invested monies around the world. Many of which (there are 8 very big pension plans in Canada) are operating like small companies. They want good returns for their members. Although Regulations limit ownership of any company to a maximum of 10%, and limit plans to having no more than 30% of the voting shares in a company; plans have found methods to get around the rules, with flow through shares to achieve almost 100% ownership of companies. The issue was also discussed as pension plans own companies, they also valuate their value; can this lead to overvaluations? Some discussions focussed on investments in P3’s(Public/Private Partnerships), where pension plans made money, but left the public to pay for extra costs out of pocket later. Also some plans are actively involved in infrastructure projects. Instead of investing in the projects, they actually assemble all the management and resources to actually run the project. The government likes this, because projects come in at budget. These plans even begin to lobby government for privitization, ie we will build the new airport, but we will own it! ( Look at 407 as an example). Should Pension Plans be passive investors?
Cases that Count: High stakes pension litigation currently in the courts
Some of the discussion was on “Target Benefit Plans” again, that began in New Brunswick in 2010. Target benefit plans define what the contribution is, then adjust payments based on the funded level of the plan. Legislation was enacted to convert private and public plans. Unions fought on all fronts, ie Constitution section 7 (property), and section 15 (discrimination). The New Brunswick government imposed the changes, but certain Unions managed to be exempt, or have MOU’s. It was predicted that 75% would get the prommissed benefits, while only 47% would get the indexation that was promised. There was also some discussions as per resent results in the Nortel Bankruptcy. The case was resolved ,with some of the monies coming back to the retirees in Canada. Nortel retirees in Ontario ended up going from 69% of their pension to about 73%. It’s interesting to note, that the bondholders in the US got 100 % of their claim ($4 Billion), while retirees settled for much less. It is also interesting to note that approximately $1 Billion was incurred in legal costs! There was also some discussion on Stelco failure, where 23,000 employees and retirees were against US Steel Canada. US Steel has tried to restructure under CCAA, and the flexibility given to them has resulted in benefits being cut. They are now looking for a buyer. This is much the same as Nortel, in that retirees are looked at as being unsecured creditors, versus the secured creditors. There are also claims against the parent company, US Steel, that they drove the subsidiary to CCAA by not paying for the pension plans, and it is suggested that funds were directed from Canada to parent company in the US.
There was a Keynote Address with guest speaker Dr. Elizabeth Shilton Author of Empty Promises: Why Workplace Pension Law Doesn’t Deliver Pensions. Senior Fellow, Centre for Law in the Contemporary Workplace, Queen’s University, McMurtry Visiting Clinical Fellow, Osgoode Hall Law School, York University. Dr. Elizabeth Shilton discussed how pensions started and how they have progressed up until the present times. She is more of a historian, and analyses legislative changes she hypothesizes that governments should have been the originators and providers of pensions, not individual companies. She provided copies of her book “Why Workplace Pension Law Doesn’t Deliver Pensions”, which I intend to read soon.
We ended with a Roundtable Wrap-Up There was much discussion on the “Trump” effect, but most are seeing that markets have gone back to normal. There was some discussion as to the ethical and social factors of investments by pension plans, and how it will be difficult on trustees. Plans are worried about the carbon trading that is coming, they are worried about “stranded assets”. There were concerns about DB plans converting to DC plans, and severance to get rid of employees. Many were concerned that Target Benefit Plans were not the way to go. There were some suggestions to simulate the Dutch system, where about 95% of people have a pension.
Thanks again to the Executive Board and membership of Local 199 for the opportunity to attend this conference!
Rob Acker,Pension Rep-GM Unit,Trustee-Local 199, &Delegate-Ontario Regional Council