“Target benefit plan (external - login to view),” eh? What’s next—a target wage plan?
“We’ll try to pay you $22 an hour like the contract says. But if things get tight at budget time, we might have to drop that to $14 or so. OK by you?”
No. Not OK.
Workplace pensions are, in fact, deferred wages. They’re a forced savings plan that permits, or should permit, retired Canadians to live decently. A defined benefits plan (DBP)—what our members presently have—is a contract: in return for making regular contributions, a set retirement income, with indexing for inflation, is guaranteed.
Enter Kevin Sorenson, minister of state for finance. He has a brand-new scheme in hand, and he wants to sell it to employers in federally-regulated industries and Crown Corporations. He calls it a “shared risk plan,” but it’s no such thing. It’s just shifting risk onto employees and pensioners.
This idea was first put into practice in New Brunswick in 2012, when the provincial government repealed its Public Service Superannuation Act and replaced it with An Act Respecting Pensions under the Public Service Superannuation Act (external - login to view). Overnight, a guaranteed retirement income was turned into a maybe-yes-maybe-no one—and this legislation was made retroactive, affecting current retirees who thought they could look forward to a stable and secure retirement income.
Now Quebec (external - login to view) has jumped on the rollback bandwagon as well, promising to give municipalities the power to shift to a risk-shifting plan by Christmas. Needless to say, protests are already building (external - login to view).
The rollback people are using the 2008 recession as an excuse to go after employees and pensioners—the defined benefit plans just aren’t affordable any more, they wail.
But that’s not the case now that the economic recovery is proceeding. Air Canada’s defined benefits plan, for example, had a shortfall of $3.7 billion last year, but has now eliminated it entirely. 40% of pension plans in the Mercer Pension Health Index were fully funded by the beginning of this year—up from a mere 6% in 2013.
A report issued by pension consulting firm Aon Hewitt indicates that the average DBP is now 95.4% funded, compared to 74% last year. Even more telling, 36% of pension plans are now in a surplus position, as opposed to 3% of them only a year ago.
Crisis? What crisis?
But any excuse will do. Eroding pension plans by shifting risk onto vulnerable employees and retirees with limited ability to absorb income cuts is quite in keeping with the Harper government’s determination to lower the boom on public sector workers and improve the profitability of their corporate friends in the private sector. Instead of showing leadership by improving retirement income security for all Canadians, it wants to “level down,” threatening young workers and seniors across the country.
This is not the way to go, obviously. The Canadian Labour Congress has for some time been calling for an increase in the Canada Pension Plan/Quebec Pension Plan (external - login to view), which the Harper government is strongly resisting and has successfully blocked (external - login to view) up to now.
An emergency resolution from the PSAC at the recent CLC convention, calling for pressure on all levels of government to prevent the introduction of Target Benefit Plans, was warmly supported by the delegates, and with the CLC’s new leadership, real action on this front can be expected. The Harper government wants
“consultation” on the matter, and is about to get an earful, I suspect. Closer to home, Minister Tony Clement says he has no plans to convert the pension plan of federal government workers anytime soon. But we should take this with the usual fist-sized grain of salt: Clement, I suspect, has his hands full already, trying to grab our sick leave in this round of collective bargaining, and he doesn’t want to open up another front in his on-going war with the unions.
Next year, who knows? Sorenson’s trial balloon has barely been launched at this point. But forewarned is forearmed: we’d better prepare for the worst, because sooner or later under the present government the worst always seems to arrive.
Pensions next? - Headwinds / Vents Contraires (external - login to view)