Against Target Benefit Plans: CLC letter signed by CAUS and seniors organizations

This is a letter signed by CAUS and seniors organizations protesting the federal government’s  plans to replace defined benefit pension plans in the public sector with target benefit plans which will result in lower pension payments and take away employer/federal government  responsibility for secure pensions July 25, 2014.

The Honourable Kevin Sorenson,

P.C., M.P. Minister of State (Finance)

House of Commons Ottawa ON K1A 0A

Dear Minister:

The collected retiree groups that have endorsed this letter represent hundreds of thousands of retired pension plan members in Canada. We are writing you to express our serious concerns regarding the government’s recent ‘consultation’ on a potential framework for target-benefit pension plans in the federal private-sector and for Crown corporations.   Our concerns are two-fold: first, we object to the unfair, opaque, and inadequate way that this consultation was conducted. Second, we oppose the Federal Government opening the way for employers to convert defined-benefit (DB) plans to target-benefit (TB) plans; thereby allowing sponsors to retroactively eliminate DB pension liabilities and potentially reduce pension cheques paid to retirees.

With respect to the first concern, all stakeholders have cause to be alarmed at the way in which this consultation was handled. Retired members of DB pension plans under federal jurisdiction have a significant and immediate material interest in the development of a framework for converting pension plans. Yet there was no indication that individual retirees were invited or permitted to participate in the process, only retiree groups. As a consequence, most retirees were not properly notified of the consultation and the proposed framework, and they were not made aware of the potential personal consequences of what the Federal Government is

We are also concerned with the lack of transparency characterizing the consultation. The endorsing retiree groups were not informed or invited to in-person consultations with the Minister, and learned of them only when the Minister declared the consultations closed. In effect, this was no consultation, but rather an invitation for some interested parties—but not all—to submit written comments to the government. Other aspects of the consultation were simply baffling. The consultation document inexplicably invited only plan sponsors to address fundamental questions, such as, “Should TBPs be an option available to employers and employees of federally-regulated DB or DC plans?”

The lack of proper notification and consultation compounds the fact that there is already significant misinformation and myth surrounding these plans. target-benefit pension plans and “shared-risk” plans are persistently and routinely characterized incorrectly in the media. For instance, “shared-risk” plans are commonly described as providing “guaranteed” benefits, when—in fact—benefit levels are not guaranteed, but instead are contingent on the funded status of the plan. In New Brunswick, the government has admitted that communication with plan members prior to “shared- risk” plan conversions has been inadequate, and retirees have initiated legal action in response to inadequate and misleading information.

The stakes could not be higher for retired plan members, who are typically least able to manage the risk of plan underfunding and adjust to reduced pension benefits in retirement. Furthermore, the stakes are particularly high for the retired members of the Canada Post Corporation pension plan. The conversion of DB plans to TB arrangements contemplated in the federal consultation paper would allow Canada Post to retroactively eliminate its DB pension liabilities. In one fell swoop, this would make the corporation significantly more attractive to a private-sector buyer.

Recently, Blacklock’s reporter revealed that the Prime Minister commissioned research detailing the privatization of the United Kingdom’s Royal Mail. What that research would have detailed, was that similar treatment of the Royal Mail’s pension liabilities was an important step in the process of preparing it for privatization. Despite this, only a tiny fraction of the nearly 30,000 retired members of the Canada Post Corporation pension plan were included in the government’s target-benefit pension consultations.

With respect to our second concern, we call on the government to repudiate the notion that employers should be allowed to retroactively eliminate existing DB plan liabilities. These pension benefits were paid for through the deferred earnings of retired members, and formed part of their compensation and terms and conditions of their employment. It is unconscionable that the government would permit employers to retroactively escape their legal obligations in this manner. It is also highly offensive and unacceptable to Canadians; a June 20th Ipsos poll found that 94% of those surveyed agreed that “employers should live up to the commitments they have made to pensioners and employees.”

We therefore call on the government to clearly and unambiguously repudiate any changes to pension standards legislation permitting plan sponsors to eliminate past- service DB liabilities by way of converting to a target-benefit or “shared-risk” plan. We call on the government to cease any further development on framework legislation or regulation for DB-TB pension plan conversions, and instead act to stabilize and sustain existing DB pension plans in order to protect the benefits of all current and retired plan members.

We look forward to your response to this letter.

Yours sincerely,

Peter Whitaker

List of Retiree Groups Endorsing This Open Letter:

Jean-Claude Parrot for a group of 32 Canada Post Corporation retirees

Canadian Alliance of United Seniors (CAUS)

National Pensioners Federation (NPF)

Congress of Union Retirees of Canada (CURC) and its Area Councils Congress of Union Retirees of Canada—Hamilton, Burlington, and Oakville Chapter

BC Federation of Retired Union Members (BC FORUM)

Canadian Union of Postal Workers Metro Vancouver Retirees Organization

sd:COPE225   …

Target Benefit Pension Plans denounced by unions

The CLC Calls on the Federal Government to Move Forward, Not Backward, on Retirement Security

Posted: Wednesday, 2 July 2014

OTTAWA ― Hassan Yussuff, the President of the Canadian Labour Congress, says that the labour movement in Canada has clearly and forcefully told the federal government that it has no business encouraging employers to tear up past pension promises and cut seniors’ pensions.

“Don’t be fooled by anything the government says about this initiative. It’s about attacking defined-benefit pension plans, pure and simple. If the government thinks the labour movement is going to stand idly by and watch employers tear up retirees’ pension cheques, they’ve got another thing coming,” said Yussuff.

Yussuff was commenting on the federal government’s consultation on a framework for converting defined-benefit pensions to target-benefit plans in the federal private sector and for Crown corporations. The proposed framework would involve workers paying more for reduced and less secure benefits. It would also allow once-secure pension benefits, earned for past service, to be reduced if the plan suffers a shortfall. On Wednesday, the Department of Finance hastily declared the end to consultations on the initiative.

Yussuff went on to say, “The government’s proposed plans don’t ‘share risk’, they shift it onto the backs of workers and pensioners. This will do absolutely nothing to address the crisis in retirement security, and will actually make the problem worse. Picture 75-year-old pensioners relying on monthly pension cheques having to cut their food budget and turn down the thermostat, all because their pension plan has a temporary funding shortfall. That’s what we’re talking about here.”

The CLC, its affiliates and a host of retiree associations all criticized the government’s target-benefit initiative. The CLC called on the federal government to withdraw its proposal to allow employers to walk away from pension promises already made to workers. Together with union affiliates, pension experts, youth groups, anti-poverty associations and retiree associations, the CLC calls on the federal government to improve retirement security for all Canadians by expanding the Canada Pension Plan.

The Canadian Labour Congress, the national voice of the labour movement, represents 3.3 million Canadian workers. The CLC brings together Canada’s national and international unions along with the provincial and territorial federations of labour and 111 district labour councils

Web site:

Follow us on Twitter @CanadianLabour

Contacts:  Chris Roberts, CLC Senior Researcher: Tel. 613-618-0610

Related Issues

The national average rent for seniors’ housing is $2,043

PEI seniors pay highest rents, Quebecers pay lowest as rates rise across Canada

 Garry Marr | June 23, 2014 | Last Updated: Jun 23 11:49 AM ET

The national average rent for seniors’ housing residences is $2,043 as the number of residents grow 6.2% from last year.

The cost of seniors housing by province is the highest in Prince Edward Island and lowest in Quebec, according to a new survey from Canada Mortgage and Housing Corp.

The Crown Corporation said the average monthly rent for a bachelor unit or a private room was $2,782 in P.E.I. but $1,497 in Quebec. Nationally the average rent is $2,043.

CMHC says across the country there are 219,052 spaces in seniors’ housing residences with 76.5% being what is called standard spaces — a space where the resident does not receive more than 1.5 hours of care per day.

The number of residents is expanding rapidly, up 6.2% so far this year from 2013 levels while the number of standard spaces rose 5.2% during the same period.

Overall, the vacancy rate for standard seniors housing space was down to 9.7% in 2014, from 10.3% in 2013. Vacancy rates in the seniors sector tends to be higher than the traditional rental market because of higher rents and more frequent turnover, said CMHC.

Calgary to take away low seniors’ transit fares

Calgary is becoming the first major city to do away with low transit fares for seniors



Marsden: Calgary Transit fare hikes would take seniors for a ride

City council is being asked to throw seniors under the bus as Calgary Transit struggles to raise an extra $17.7 million a year for expanded service.

The annual $15 pass for low-income pensioners and the $95 annual pass for regular seniors will no longer be offered to new registrants after July 2015, if politicians accept Calgary Transit’s recommendations. Now granted, $15 is too little to charge for a year’s worth of access to the system; it might as well be free at that price. But council would be hard-hearted to increase the fee for seniors of ordinary means to the same rate that youth pay, as they’re being urged — $2 for a single-trip ticket today and $60 for a monthly pass.

As a comparison, Edmonton provides its seniors with a pass for $125 a year and $54 a year for those living on a low income. Heck, Calgary Transit even provides its retirees with free annual passes, using the fares paid by other seniors to subsidize the cost of a ride for former employees.

Calgarians as a rule are respectful of seniors and won’t tolerate their mistreatment — by thugs on the street corner or by bureaucratic bullies trying to pluck more revenue from those existing on modest incomes. The fact is that the truly well off are likely to prefer their own car to riding the bus, regardless of age. Seniors who are using transit are by and large doing so out of necessity, so they deserve to be in a category all their own, rather than being treated as no different than young people or others who are poor.

It might be tempting to cheer the plan to charge every low-income person $44 a month, regardless of their age, as egalitarian. The problem, though, is that seniors’ financial conditions are unlikely to improve, while young people are often in dire straits for only a short time. As well, when younger people are able-bodied, they’re capable of improving their lot — a choice that isn’t usually available to seniors.

The other reality the proposed fee structure overlooks is seniors’ travelling habits. They’re not likely to be crowding onto the bus or CTrain first thing in the morning and making their way home during the afternoon rush hour. They usually choose to use transit when ridership is at its lightest, leaving other adults and youth to compete for space when service is most in demand. And unlike other riders, who use transit to get to work or school five days a week, most seniors use the service more sparingly, justifying a break on what they’re asked to pay each month or year.

Besides, there’s no guarantee that putting the screws to old people will have the desired result. Neil McKendrick, Calgary Transit’s manager of operational planning, has conceded a series of hikes to the adult fare hasn’t raised the required revenue, because people are motivated to switch to options that offer better value.

“If the objective of increasing the fare was to raise more revenue so we could increase our service, we weren’t meeting our objectives very well,” said McKendrick.

Who’s to say that seniors will fall under Calgary Transit’s spell and continue to buy their passes at the greatly increased price? They’re just as likely to turn away from public transit and call a taxi or ride the bus or CTrain less often than they used to.

The sorry fact is that expanding transit service is forcing the fleecing of seniors. It’s understood that public transit is subsidized, but one would think that adding routes and extending hours would generate fresh revenue to help finance the improvements. When Starbucks opens a new outlet, or Passport Canada adds another office where Canadians can get their travel documents, they don’t increase the price of their products.

Quite honestly, if Calgary Transit needs to raise another $17.7 million a year for its growth, hurting seniors in the process, it calls into question the prudence of its plans. Under no circumstance should seniors be made to pay the price for transit mandarins’ dreams of a bigger and more costly system.

David Marsden is a member of the Herald editorial board.