Defined contribution pensions raise union ire

DB plans are "critically important," says union

If the labour dispute at Air Canada is anything to go by, companies should expect union opposition to attempts to move from defined benefit to defined contribution pension plans.

Unions representing Air Canada employees were hostile to airline suitor Trinity Time Investments’ desire to introduce a DC pension plan the moment it was put on the table. Trinity proposed to put new hires and employees whose age and service total less than 60 years under a defined contribution plan. Older workers would remain under Air Canada’s existing defined benefit plan.

At Bell Canada, an attempt to put new workers on a defined contribution plan will likely become the main issue at the bargaining table, said Sean Howes, national representative of the Communications, Energy and Paperworkers Union of Canada.

“It’s critically important. We’re going to fight it, because we think it’s not nearly as beneficial for our members to be assuming the risks” associated with defined contribution plans, he said. “We’re completely opposed to a two-tiered pension system we’ve seen employers use it as a Trojan Horse. They say we have no reason to worry because it’s just for new employees. But after a few years, they will say DB plans are too expensive and thrust DC plans on everyone. We fear it in the long term more than anything else.”

At Queen’s University’s School of Industrial Relations, professor Pradeep Kumar said workers are concerned about the security of their pensions. Employers, on the other hand, don’t need to be so intransigent on the issue, given the fact that defined benefit plans potentially benefit employers under favourable market conditions.

Employers feeling the pressure to move to defined contribution plans may be “short-sighted,” said Kumar. “The same employers were moving to defined benefit plans in the 1970s and 1980s. When market conditions were good, defined benefit plans were providing employers all kinds of benefits. Some of them were even taking contribution holidays.”

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