Pensions for Crown Corp or Federal Public Sector Employees Are Under Siege

pensions at forty fiveIf you or your partner work or have worked for a Crown Corporation or a federal private-sector employer, you need to become informed about Bill C-27. Then you may want to act to protect your pension investment.

As women, all too often the bulk of our retirement funds are tied up with our partner as we took time out of our career to raise children.  We may not have enough details about their pension until it is too late. For those of us who have contributed to our own pension plans, we need to be proactive to secure and maximize our retirement funds. In either instance, we need to stay diligent and be aware of issues that may affect our future financial security.  Bill C-27 is concerning on a number of points.

Why Should I Care?

If you are:

  • On a pension after paying into it for years, the amount could be reduced going forward or even retroactively.
  • Soon able to retire, the amount you are expecting could be unexpectedly reduced even though you have been paying into the pension plan for years

Often those defined pensions were negotiated as a future benefit in lieu of an actual wage increase at the time of negotiation, when company profits were low.  Now with the option to turn defined pensions to targeted, those benefits could be threatened. As well, if companies are holding two types of pension programs, in future negotiations, the defined program will always be on the company’s list for concessions in bargaining for some of the reasons noted below.  It will be harder for Unions to keep that benefit for retirees in the face of proposed benefits for their working members. In other words there is a very real potential for erosion of retirees benefits over time.

What is Bill C-27?

Bill C-27, An Act to amend the Pension Benefits Standards Act, 1985 is a new piece of legislation that removes the employer’s legal responsibility to fund the pension plan benefits.

Tabled in the House of Commons with its’ first reading on October 19, 2016, this bill sets out a new framework for the establishment, administration and supervision of Targeted Benefits (TB) as opposed to the current Defined Benefits (DB). It would allow, subject to consent, the conversion of defined benefit pension plans to target benefit plans both future and past.

What is the difference between Defined Benefit (DB) and Targeted Benefits (TB)?

On research, these are the points I understood, expressed in layman terms. You will want to talk to your financial advisor to get clarification on how this will affect you. Your Union will also have trained people available for more information.

Point Defined Targeted
Pension Fund Shortfall The employer responsible, but employee groups such as Unions have also anted up for the shortfall Reduced benefit if funding falls below threshold
Pension shows on Employer Financial Statement Liability Yes No
Guarantees Set benefit based on earnings/yrs of work/age and other factors) No guarantee, pre-determined guidelines link benefits to funds available
Benefit Amount Promised pension commitments Targeted benefits, reducible,  that may or may not be delivered
Contributions Employee & employer Employer amount is capped
All Ready Earned Benefits Protected Legally Yes No
Managed/Governed Employer or Institution Plan
Investment Risk/Reward Sponsor/Employer Employee

The Liberals Are Breaking An Election Promise!

This bill was originally put forward by the Harper Conservatives, but scuttled by the outcry. At the time Trudeau said, “Defined Benefit plans, which have already been paid for by employees and pensioners, should not retroactively be changed into TBPs’. Now, the Trudeau Liberals have contradicted their election Retirement Security promise “to stabilize and improve retirement security” by announcing this bill without consultation or advance notice and to a degree greater than the Conservatives..

What Is The Next Step?

It’s been years since I was in school so I needed to refresh myself on the parliamentary system. You probably do too. The next step is the Second Reading, where members debate the principle of the bill.

This is where your action is important. Your Member of Parliament needs to be informed and know your opinion and the bill can be changed.

Send Your Member of Parliament An Email!

Your Member of Parliament and the Finance Minister need to hear your opposition loud and clear.

  1. Write to your Minister of Parliament. Click on this link to a list of all the Member of Parliaments with their email address and contact information.
  1. Write to the Finance Minister Bill Morneau. Here is his contact information.

Make a point to review your pension plans and discuss concerns with your partner, your union and/or your financial planner.

References For Further Information

https://openparliament.ca/bills/42-1/C-27/

http://www.cia-ica.ca/docs/default-source/2015/215043e.pdf

https://www.liberal.ca/files/2015/10/New-plan-for-a-strong-middle-class.pdf

http://www.lop.parl.gc.ca/About/Parliament/GuideToHoC/making-e.htm

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