[TURC] Fw: Manitoba defends workers' pensions
- From: "Lynne Fernandez" <lynne@xxxxxxxxxxxxxxxxxxxxx>
- To: <turc@xxxxxxxxxxxxx>
- Date: Thu, 26 Feb 2015 12:58:52 -0600
Here’s a piece by Paul Moist on pensions in Canada. Please circulate widely.
Lynne
From: Canadian Centre for Policy Alternatives Manitoba Office
Sent: Thursday, February 26, 2015 10:00 AM
To: lynne@xxxxxxxxxxxxxxxxxxxxx
Subject: Manitoba defends workers' pensions
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Bucking the trend: Manitoba Defends Workers'
Pensions
Each day Canadian newspapers carry a version of
the same story: working Canadians are not prepared for retirement.
Statisticians and economists who look at the problem conclude that about half
of middle-class baby boomers will experience a steep drop in living standards
when they retire. They also show that with each successive generation of
retirees subsequent to the boomers, this problem is projected to get worse. We
used to be told that after a career of hard work all workers deserved to retire
with dignity and security. Now with decent and secure retirements harder and
harder to come by, this important part of middle class life seems ever more out
of reach.
What’s behind this trend? Fewer Canadians have
access to workplace pension plans, particularly in the private sector.
Shockingly, 6 in 10 workers in Canada don’t have a pension plan at work. The
alternative – the individual approach of the RRSP – is a flawed solution that
hasn’t worked over nearly six decades of operation. Each year only a quarter of
eligible Canadians contribute to an RRSP and we are approaching nearly $1
trillion of unused RRSP room. Facing wage stagnation and increasingly
precarious employment prospects, it’s no wonder Canadians have been unable to
save on their own. Most importantly, our public pension system (the Canada
Pension Plan and Old Age Security) remains far too modest to pick up the slack
from these other failings.
Yet in the face of these trends, most provincial
governments across Canada have responded not by improving pension coverage or
securing existing plans, but largely by attacking the pension plans that remain
and doing nothing to improve pension coverage or benefits elsewhere. For
example, governments in the following three provinces have undermined or are in
the process of undermining the pensions of thousands of workers.
The previous Conservative government in New
Brunswick unilaterally converted its province-wide public service pension plan
from a secure defined benefit plan into a “target benefit” model, where
benefits earned under the plan can be reduced in the future, even for retirees.
The Liberal government of Prince Edward Island unilaterally pushed through
similar cuts last year. The Quebec Liberal government is in the midst of
legislating changes on hundreds of standalone municipal defined benefit plans
in the province, no matter the health or history of those funds. The law will
force retroactive revisions to longstanding pension deals that will see risks
and costs being shifted to employees, who will pay more for lower, more
precarious benefits. Other provincial governments and smaller employers have
pursued similar attacks. In general, the goal is for workers to pay more for
lower, much riskier benefits; pension security and coverage is being eroded.
These employers and governments generally use
temporary pension deficits as a pretext for their agenda of obtaining permanent
pension cuts and/or wholesale plan conversions. In most cases, these deficits
are largely the result of the extraordinary market downturn that resulted from
the 2008 financial crisis. The good news is that our pension funding rules are
designed to accommodate and eliminate plan deficits over reasonable
amortization periods. Pension plan health has been recovering steadily across
the country and many plans are back in surplus positions already. Another
contributing factor to plan deficits was the reluctance of employers and
governments to properly fund the pension commitments they were making, which in
many cases included the systematic use of “contribution holidays.” This
practice occurs when an employer uses pension plan surpluses – which many plans
had during the 1990s and early 2000s – to reduce, or even eliminate entirely,
their own annual pension contributions. Workers have a difficult time accepting
the argument that employers should benefit from pension plans while those plans
are doing well, but workers should bear the burden when those plans face more
difficult times.
The Canadian Union of Public Employees (CUPE)
does not agree with the notion that pension plans need to be gutted to be made
“sustainable.” In some cases we are told that plans with healthy surpluses just
a few years after the biggest financial crisis in 80 years are no longer
sustainable. In certain cases where plans did face genuine challenges, we have
been willing to make difficult decisions if necessary that don’t involve
abandoning the concept of decent defined benefit pension benefits.
The agenda of pension attacks has been evident at
the federal level as well, where the Conservatives have enacted unjustified,
significant cuts to the public pension system. In 2012, the Conservatives
announced that the federal government will be unilaterally increasing the age
of eligibility for Old Age Security (and for federal pensions for low-income
seniors) from 65 to 67. They had not campaigned on this change, nor had they
consulted any provinces or stakeholders on it. Pension experts rightly argued
that the change was unnecessary, that the plan was fully sustainable already
and that the burden of this move would fall on single, low-income senior women.
By 2029 when these cuts are fully phased in, the Conservatives will have
removed more than $10 billion per year from the pockets of senior Canadians,
including $2 billion from low-income seniors, while at the same time giving
massive tax cuts to wealthy Canadian corporations. This is a major policy shift
in precisely the wrong direction.
The current federal government has also
stubbornly refused to support the labour movement’s campaign to expand the
Canada Pension Plan, where plan benefits can be doubled through a modest
increase in contributions. The federal government opposes this plan, despite
incredibly strong support from stakeholders, the public and pension experts for
this common sense proposal. Eight of ten provincial governments support CPP
expansion, yet they unilaterally decide to oppose it.
These various employer and government attacks on
pension plans are completely at odds with the trends discussed above, which
show that, more than ever, Canadians need more pension coverage instead of
less. We should be securing and maintaining the plans we do have, reversing the
unnecessary cuts to Old Age Security, and improving the Canada Pension Plan
(CPP) so that all workers can retire with dignity and security. Where plans
have been systematically underfunded, we should be funding those plans so we
can sustainably deliver on the promises we made and continue to make.
Thankfully, this is just what the provincial
government of Manitoba under the NDP has been doing for the past decade and a
half.
This province has clearly recognized that the
real pension crisis is the lack of pension coverage for Canadian workers and
has been a strong supporter of the campaign to expand the CPP, which would
bring decent pensions to all workers in Canada. Since amending the CPP requires
certain levels of provincial support, Manitoba’s positive voice is crucial in
this debate. Premier Greg Selinger also wisely criticized the federal
government’s unnecessary cuts to Old Age Security. We need strong voices of
dissent against the sitting federal government’s agenda as the Old Age Security
cuts only start in 2023, meaning it is still possible to easily undo these
changes.
Within its own borders, the Manitoba government
has acted to keep pension plans secure and stable. Manitoba has changed its
pension laws to ensure that part-time workers are covered by pension plans.
Pension plan committees are now mandatory and joint-sponsorship has been
enabled in certain cases: having worker voices at the table helps to keep
pension plans on track. The government has also put rules in place against
employers unilaterally taking pension plan surpluses out of the funds. And
where appropriate, the province has relaxed certain funding rules to help plans
through difficult times while making sure they remain able to deliver on their
promises. All of these changes help to keep workplace pension plans strong.
Most importantly, in dealing with the Manitoba’s
own pension plans, instead of reneging on the commitments made to provincial
public sector workers and pursuing massive pension attacks, as other provinces
have done, Manitoba has begun properly funding its pension promises as it
always should have been doing. For example, the government is now finally
matching the contributions employees make to the public service plans, for the
first time since the 1960s. Additionally, government contributed $1.5 billion
into a fund to begin addressing the obligations for past pension promises in
these plans, fixing a 25 year funding problem. In the pension for healthcare
workers, the province has introduced funding to create an indexing account for
these workers, with the hope that their pensions may keep pace with the
ever-increasing cost of living. The province has also assisted single-employer
plans as well. They created legislation to enable the City of Winnipeg
Employees pension plan and provided a 10 year funding commitment to stabilize
the United Way of Winnipeg Plan.
CUPE deals with provincial governments across the
country and I have no doubts that Manitoba’s pension record over the past
decade and a half is the strongest of any government in Canada. The Manitoba
government has recognized that we need to be expanding pension coverage to
workers without pensions and securing workplace plans where they exist.
Manitoba has seen the importance of our various pension plans to a middle class
life, the prospects of which are increasingly under attack in Canada.
The Manitoba government has wisely recognized
that we cannot simply eliminate the costs and risks of funding decent and
secure retirements for our workforce. Other governments and employers have
tried to simply reduce pension costs and offload retirement risks onto
individual workers without regard for the long-term consequences of these
actions. This may hide or obscure these costs and risks for a time. However, in
the long-run, these costs will be borne in more difficult and painful ways.
Following this agenda will mean future generations of Canadian seniors having
to make difficult decisions to turn down their thermostats or let prescriptions
go unfilled. Workers without decent pension plans are forced to depend more on
the social and income support programs that cost all levels of government
significant public funds. Quite simply we can pay now or we can pay more later.
The agenda of pension attacks and inaction is short-term thinking that does not
account for these significant future costs, both fiscal and personal.
The Manitoba government should be applauded for
avoiding this opportunistic, short-term thinking on this critical middle class
issue. It has recognized that all workers need good pensions and it is standing
up for what’s right, as so few other provinces have been willing to do.
Paul Moist is National President of CUPE,
Canada's largest union with 630,000 members.
Download a pdf of this Work Life HERE.
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