Conservatives’ version of target benefit pension plans a threat to retirement security

The Conservative government has just finished a consultation process about their proposal to change the federal Pension Benefits Standards Act to include target benefit pension plans. They’re enthusiastic about this type of pension plan which is a good reason to pay attention.

PSAC members would be affected

The federal Pension Benefits Standards Act applies to federally-regulated private sector employers (such as airports) and Crown Corporations.

While the government has said that this proposal does not apply to the Public Service Superannuation Act (PSSA), if their proposal becomes law it would set the stage for similar changes to the PSSA and federal public service pensions.

The government’s proposal makes retirement income less secure

Target benefit pension plans might be better than no pension at all. But that doesn’t compensate for all the problems the government’s proposal will create. The government’s version of a target benefit pension plan:

  • will give employers an opportunity to downgrade existing defined benefit pension plans;

  • will allow employers to reduce pension benefits being paid to retirees; existing federal law, supported by court decisions, does NOT allow employers to reduce retirees’ pensions except when a plan is in bankruptcy;

  • will put a limit on contributions, even if the employer and employees want to pay more, virtually guaranteeing that benefits would be reduced at some point;

  • will shift a lot of the pension plan risk from employers to individual employees

The next step is to legislate target benefit pension plans

The government says that the input received through the Department of Finance consultation process will guide it when preparing the new legislation. Meanwhile it continues to spin the supposed benefits of its proposal.

PSAC, other unions and the Canadian Labour Congress have panned the government’s proposal because we know that only employers will benefit. There are no incentives for employers to create new pension plans or improve existing defined contribution plans. They’ll just be encouraged to reduce their risk and reduce employees’ pension benefits.

PSAC will be organizing against this new attack on pensions

In addition to making our position known to the government, PSAC is working with others in the labour movement to push back the government’s proposal.

We’re working to counteract the government’s rosy spin and make members aware of the real pitfalls of the government’s plan. And, we’re working to promote alternatives that will improve retirement security for all Canadians.  

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July 10, 2014
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