The Conservative federal government has launched an unprecedented attack on the retirement security of all Canadians. Their proposal is to push target benefit pension plans on federally-regulated workers that have defined benefit plans.
This proposal was made on April 24, 2014 by the Minister of State for Finance, Kevin Sorenson who announced that rushed consultations on its proposal will be held. This proposal would also require the amendment of federal pension laws.
The government wants to provide significant incentives to employers to get rid of the much better defined benefit plans and convert these to targeted pension plans. This will be at the expense of stable retirement income that workers have already paid for through their pension contributions.
What are target pension plans
- They provide for the reduction of pension benefits for both contributing employees and pensioners
- There is no guarantee that the promised benefit will be maintained in retirement.
- Risk is completely shifted from governments and corporations to vulnerable employees and retirees with limited financial capacity to absorb reductions in income.
A proposed solution to a problem that doesn’t exist
- Current federal pension legislation and regulations provide sufficient protection against the reduction of accrued pension benefit entitlements of existing pension plan participants and retirees.
- With the improving investment returns and gradual increases in long-term interest rates, the funding status of defined benefit pension plans is improving significantly.
- For example, the defined benefit pension plan for Air Canada reported for 2013 a solvency deficiency of $3.7 billion. However, in January of 2014, Air Canada had announced the complete elimination of the pension solvency deficiency.
Is the Federal Public Service Pension Plan the next “target”?
The government’s announcement emphasized that the proposals for the establishment of target benefit pension plans would not impact the core public sector pension plans, governed by statutes such as the Public Service Superannuation Act, the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act.
However, the introduction of target pension plans in the federal sector opens the door to other legislative changes and puts all defined benefit pension plans at risk.
PSAC calls on the Canadian Labour Congress to mobilize opposition to replacing defined benefit plans with target pension plans
The PSAC has submitted an emergency resolution to the Canadian Labour Congress for consideration at the triennial convention next week.
The resolution calls on the CLC to mount an aggressive and strategic campaign to defend workers and pensioners against any and all attacks to pensions, including attempts by governments and employers to convert defined benefit pension plans to target plans.
At the same time, the PSAC continues to support the Canadian Labour Congress (CLC) “Retirement Security for Everyone” campaign as the most effective means of securing the future retirement incomes of working Canadians. The CLC campaign consists of three basic components:
- The doubling of existing Canada Pension Plan benefit entitlements;
- Increases to the Guaranteed Income Supplement
- Establishment of a national pension plan insurance fund