OFF TARGET

Threat to workers’ pension payouts lost in ‘conflict of interest’ charges

pants

Montreal police wore “casual pants” to protest pension changes in 2014

BILL MORNEAU MAKES COLLEEN COFFEY ANGRIER AND ANGRIER. She gets angry because he wants to pass a law that will make him richer. She gets even angrier because his law will make many thousands of  workers poorer at the worst possible time in their lives—when they are old.

Colleen Coffey is an activist wth the Public Service Alliance of Canada. She says the federal finance minister is way off the mark with his Bill C-27 proposal to permit employers to shift away from Defined Benefit to “targetted benefit” (TB) pension plans.
“A TB plan is about as secure as a lottery ticket,” says Colleen. “That’s no way to have to face old age.”

Bill C-27 has just one objective: to give a select few pension plan administrators a chance to make even more money at even less risk. Just four firms in the country will benefit from the proposed new pension administration rules—one of the four is a big client of Morneau’s company.

Morneau is not only the federal finance minister, he is also a multi-millionaire businessman. He is the largest shareholder in Morneau Shepell, a company that specializes in pension administration. His holdings in the company are worth more than $40 million. They will be worth millions more if the government passes his Bill C-27.

Bill C-27 will not be nearly so good for thousands upon thousands of pensioners. In fact the bill will place many thousands of them in extreme financial jeopardy. For Morneau this is simply collateral damage. A minor detail that has been lost in the swirl of controversy over Morneau’s prospects for personal financial gain.

Threat to workers’ pensions biggest concern

Employers want to weasel out of pension payout promises now guaranteed in law. Their plan is to use TB pension plans to do this. Their come-on is that this will benefit both employers (clear enough) and pensioners (not clear at all.)

Benefits in a TB plan are not secure, legal obligations. Rather, they are just “targets” based on projections of return on investment that are notoriously inaccurate. Even worse, the targets can be legally reduced if the pre-determined contributions to the plan are not sufficient.

Therefore what pensioners will get is never certain. But what employers get is always rock solid: their contribution rates are fixed and unchangeable. Employers just love this.

Employers can clawback benefits

One fly in the ointment for employers is that pensioners have to agree to make the switch to a TB plan. Unions can do this on behalf of their members in any given plan. It is not clear whether unions would, could or should seek approval from all their members before making such a decision.

“Nobody is going to willingly accept it,” says Hodder. “Unless they are too old to really understand what they are being asked to do. Maybe that’s what the employers are counting on. Tricking old people into switching.”

Unions have long used collective bargaining to set conditions in pension plans. TB plans do not offer that possibility. In fact, employers may demand a switch to a TB plan as a tactic in bargaining.

Whether willing or forced, once such a shift to a TB plan is made pensioners will almost always lose all say in how the plan is run and yet bear all risks: present, future and past. Employers can even claw back promises made under the old plan.

Thin end of the wedge

C-27 only directly affects federally-regulated employers. However, if it becomes law it would give approval to a troubling pension model which other jurisdictions may want to soon follow. And so potentially put at risk the ongoing security of all Defined Benefit pension plans in Canada.

In 2012 the Conservative government in New Brunswick made the province the only place in Canada where employers are allowed to back out of promises to payout on already-earned Defined Benefits pensions. Since then the province has been plagued with class action lawsuits, constitutional challenges, and plummeting defined-benefit plan membership.

The saddest pension fact of all

The saddest pension fact of all is that most of us don’t have one.

StatsCan figures reveal that just  37% of men and 40% of women have any kind of  private pension coverage. The only pensions most of us will ever get will be payouts from the public Canada Pension Plan.

Organized labour has fought hard for long years to improve pension coverage and payouts for all Canadians—from private plans and/or the CPP. TB pension plans will do nothing to make that happen. A fact openly confirmed by Bill Moreau’s own company.

A “vision” statement put out by the Morneau Shepell company states:
“If the goal is to augment overall pension coverage in Canada, TB pension plans will not help much, if at all.”

Just one more thing Bill C-27 wants us all to ignore.

primer

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