October 20, 2014 at 3:00 PM
A Unifor Local 2002 Perspective: Understanding the Federal Framework for Target Benefit plans
On April 24, 2014, the Harper government released a consultation paper
proposing a federal framework for Target Benefit (TB) pension plans that would
enable Crown Corporations and employers in federally-regulated sectors to offer
single-employer Target Benefit plans. The framework would also allow for the
conversion of existing Defined Benefit plans to Target Benefit plans. This would
not only apply to future service but all past defined benefit service as well,
including pensioners.
What is a Target Benefit plan?
TB plans are similar to Defined Benefit (DB) plans in that they are designed
to provide set retirement benefits. However, the key difference is that in the
case of DB plans, the employer is responsible for making up any funding
shortfall to provide the set benefit. In TB plans, in the event of funding
shortfalls, pension benefits can be cut. The Harper government refers to this
practice as ‘risk sharing’ but what we can really expect are future cuts to
retiree benefits.
So why is the Harper government proposing a federal framework for Target
Benefit pension plans?
The TB Framework, if legislated, could allow Crown Corporations and employers
in federally-regulated sectors to convert DB plans to TB plans, including
accrued benefits for active members and pensioners.
The TB framework will
impact a strict scope of workers: those working for Crown Corporations and
employers in federally-regulated sectors. Air Canada employees work in a
federally-regulated sector so they fall under the scope of the TB proposal.
Will Air Canada plan members (actives or retirees) have to consent to their pension being converted from a DB plan or Hybrid plan to a Target Benefit plan?
Similar to retiree benefits, the Conservative government has
not specified whether plan members will have to consent. There is a legitimate
possibility that the Harper government would enforce this conversion without
your agreement, and in fact, many employers are lobbying for this exact
provision.
If TB plans were introduced at Air Canada, which age groups would suffer most?
If Target Benefit plans were legislated and Air Canada
converted our pension plans (the Hybrid plan and the DB plan) all Local 2002
members would be impacted, regardless of age or experience.
For Janet, our
Sister with 20 years of experience who is approaching retirement, her Defined
Benefit pension could be converted overnight to a Target Benefit pension. The
underlying difference is that Janet’s monthly pension is no longer defined, it
is now based on factors like how much the employer wants to contribute, how well
the plan is being invested and so forth. Janet has gone from a situation where
she can plan for her retirement to a situation where she is exposed to
tremendous risk.
For Andrew, our 25-year-old Brother with a year and a half
worth of experience and a member of the Hybrid (DC/DB) plan, the future is also
uncertain. Converting Andrew’s Hybrid plan to a Target Benefit plan would mean
that his generation would experience a lower level of retirement security as he
no longer has a DB component to rely upon.
Could TB plans cut retiree benefits for former Air Canada employees?
The Conservative government has
proposed this as an option at this point in time. This means that pensioners and
survivors who rely on their Air Canada pension could see their monthly cheques
reduced.
Why is the Harper government looking to cut pensions within Crown Corporations and federally-regulated sectors specifically?
Local 2002 members
know, perhaps better than most, the challenges associated with pension plan
management. Today, the Air Canada pension is in a small surplus, but over the
past 15 years, the plan has gone through deficits and surpluses. Although the
funding swings even out, Air Canada, a billion dollar corporation, does not want
to deal with the swings. They want their employees to take on the risk.
The
driving force behind the TB Framework is reducing pension liabilities (ie. the
pension benefits promised to plan members and retirees) within Crown
Corporations and federally-regulated sectors. Across all federal pension plans,
there is an estimated $100 billion in pension liabilities that could be cut from
corporate accounts if these plans are converted to TB.
How are employers responding to the Harper government’s call for Target Benefit plans?
The
Unifor Pensions and Benefits Department has been monitoring public responses
made by employers to the Government of Canada Finance Department on this exact
subject.
Employers, for the most part, have been overwhelmingly supportive
of the TB Framework and are actively lobbying the government for the opportunity
to convert accrued DB pensions for active members and pensioners to the less
secure TBs.
As a Union, we must be aware that Canadian employers are taking
this matter very seriously and our work is cut out for us.
As a Local 2002 member, what can I do to fight back against the Harper government’s Target Benefit Framework?
We need to be having these
conversations in the workplace. If the Conservative government knows that we are
fighting back on this issue they could very well back down before the upcoming
federal election. Let your employer know where you stand on this proposal.
Write to your Member of Parliament.
Demand that the Harper government withdraw the federal framework for Target
Benefit plans.
Please copy [email protected] and it’s a good idea to copy your employer. When
Air Canada sees how seriously Unifor members value retirement security it sends
the right message.
Lastly, write to Kevin Sorenson, Minister of state for Finance and give him your thoughts on Target Benefit plans at Air Canada.
Who do I contact for further information on Harper’s Target Benefit Framework?
For further information, please contact: [email protected]
/14-11 Unifor Understanding the Federal Framework for Target Benefit plans HTML en.txt
Tags: #unifor #benefit #pension #plan #db #tb #harper #gov #patrickrettig #cherylrobinson