The Harper Conservatives are poised to make small
but high-impact changes to pension law that will let
companies duck pension responsibilities and use
pension money for other purposes. At the same time,
they government has rejected a method it could use
immediately to inject $200 billion stimulus into the
economy through pension insurance.
With the economic crisis, Canadians in every trade
and profession have become worried about their
pensions and the stability of the plans that back
them.
"I don't think there is a pension plan in this
country that is not in some serious jeopardy at this
point in time," NDP pension critic Wayne Marston
(Hamilton EastStoney Creek) told a Parliament Hill
news conference. "There isn't one that you can say
is secure." The NDP has introduced legislation
(C-361) intended to ensure public sector pensions
investments are low-risk only and that executive
bonuses are carefully supervised.
Joel Harden of the Canadian Labour Congress (CLC)
says companies are blaming the economic crisis for
underfunding of their pension plans. Although there
are companies in serious trouble, research by the
CLC shows that as recently as last November,
corporations in Canada had 18.3 times as much in
assets as in pension liabilities. Pension fund
money, he says, has been shifted on balance sheets
to other purposes.
"We also know that employers for many many years
have been building up surpluses on their balance
sheets so that they could gamble that financial
economy," says Harden. Now, with the market
collapse, they are claiming they have no money to
meet their pension obligations. The CLC wants
legislation that prevents the diversion of pension
money and prevent employers from walking away from
obligations.
The government is proposing a small accounting
change that will let employers say their pension
funds are worth more than they are. Under the rules,
companies with enough money presumed to be in
pension funds can use money for other purposes.
"We're talking about money that ought to be going
into pensions that is being diverted elsewhere,"
says Harden. "For financial investments for
executive compensation, we don't know." Another
small change with massive impact is to give
companies "flexibilty" to invest pension fund money
without repayment for a longer period of time - ten
years, instead of five.
The CLC and NDP are promoting the same sort of
public insurance for pensions as with bank deposits
and other services, and say it would be affordable.
"For all the important things in our life, we need
mandatory insurance," says Harden. "For our house,
for our car, for our job, workers compensation or EI
- unfortunately most people cannot collect on their
EI insurance. But for some reason for the longest
time, apart from the province of Ontario, where
there's a minimal insurance system, we don't insure
pensions. In moments like this we really realize why
it's so important to do so."
Conservatives say insuring pensions will give
companies incentive to be irresponsible, knowing
they'll be bailed out by the government if they
fail. In the US, abuses have occurred with pension
insurance, says Harden, due to lack of regulation to
keep pension funds from going into financial
speculation and extravagant bonuses.
He points to the Air Canada story with concern.
"They were given more flexibility in their pension
funding when they filed for bankruptcy protection in
2004. The workers there took massive wage cuts to
protect their defined benefits secured pension plan.
They were told that would happen.
"What's happened since? Air Canada got that flexible
pension funding in the five years since, they have
paid out massive bonuses to executives, both to
Robert Milton and Monty Brewer, who got severance
packages of 46 million dollars and 32 million
dollars respectively. They've sold off two billion
dollars in assets. They've split the company into
five parts, and they've underfunded the pension. The
pension plan today at Air Canada is underfunded to
the tune of 3.2 million dollars.
Harden calls this a "cautionary tale, when you allow
employers more flexibility in their pension funding"
and no regulations concerning executive payouts.
"When you give people flexibility with no oversight,
we worry that pensions will be lost with lateral
damage. Our view at the moment is that we have
examples that suggest permanent across-the-board,
weaker pension rules are not what we need right now.
We need stronger pension rules. We need an improved
Canada Pension Plan. We need measures that will help
people have more pension income and more pension
security. Sadly what the federal governments
discussion paper suggests is that the government is
actually listening to the employers now, and inching
in the other direction."
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