Tories unveil pension reform plan
TheStar.com – Business – Tories unveil pension reform plan: New rules for private firms to cut volatility and protect members
Published On Wed Oct 28 2009. Les Whittington, Ottawa Bureau
OTTAWA–Facing mounting concern about the state of public pensions, Finance Minister Jim Flaherty Tuesday proposed reforms to pension plans at federally-regulated companies.
But the Conservatives were criticized for bringing in measures that will only help a fraction of Canadian workers and will not apply to retirees who have already seen their expected pensions undermined in the recession.
“It is forward-looking,” Flaherty acknowledged.
“This is another step along the road in improving pension regulation and legislation.”
The improvements will apply to only about 10 per cent of private-sector employee plans at airlines, banking, communications and other companies regulated by Ottawa.
The other 90 per cent of private-sector plans are governed by provincial legislation.
“Unfortunately, it only applies to a very small percentage of the pensions that are out there, but it’s a start that we’ve been calling for,” New Democratic Party leader Jack Layton said.
Flaherty told reporters Ottawa isn’t ready to deal with the problems of workers whose pensions are threatened by their companies’ collapse – a situation that has been highlighted by the plight of thousands of former employees at bankrupt Nortel Networks Corp.
“On bankruptcy, that’s another issue,” Flaherty told reporters after releasing the proposed legislation. “There’s nothing in this today dealing with that.”
He said he will take up the problems of provincially regulated pension plans when he meets with his provincial counterparts in December and he hopes there will be agreement to move forward quickly with wider reforms.
Liberal MP John McCallum said the government failed to take “significant action” to help employees of bankrupt companies or solve the longer term problem of retirement security at a time when fewer than one in three Canadians have sufficient savings for their golden years.
“I certainly hope that this is not the end of the road in what the government is planning,” McCallum said.
The government needs to look at solving the wider retirement security issue through such possible means as building up benefits under the Canada Pension Plan, he said.
Under the legislation, companies that fold up pension plans will have to pay all the benefits owing their workers, not just the portion that had been paid up.
And Flaherty moved to do away with the practice under which federally regulated companies could take a “contribution holiday” as long as their workplace pension plans were not in deficit.
Now, companies would not be able to suspend contributions unless their plan had a 5 per cent funding cushion.
Doing away with a rule intended to keep down Ottawa’s revenue losses, Flaherty is proposing to redraft tax law to encourage both federally and provincially regulated firms to hold bigger pension fund surpluses.
Flaherty wants to increase the threshold by which plans can be in surplus from 10 to 25 per cent.
This is meant to provide a cushion so pension plans will not become underfunded as a result of an economic downturn or financial disruption.
“These reforms will provide enhanced benefit security for workers and retirees while allowing pension plan sponsors to better manage their funding obligations as part of their overall business operations,” Flaherty said in a statement accompanying Tuesday’s announcement.
He told reporters that improving pensions is a long, arduous process.
“This is not simple, because when you’re dealing with bankruptcy law you’re dealing with priorities, and priorities of creditors, and that can affect the ability of companies to borrow and carry on their businesses,” Flaherty said.
“We’re working hard at it, it’s a complex issue, it’s difficult.
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