Someone in the CBC news department coined the term “pessimism porn” for the current exaltation over bad economic news. The greater the uncertainty some individuals face, the greater their glee at seeing someone else falling victim to the very danger they fear.
Most recently, Premier Dalton McGuinty became the hero of the pessimism porn aficionados when he stated the obvious truth that the province’s Pension Benefits Guarantee Fund (PBGF) would be unable to cover the shortfall if the General Motors Canada pension plan failed.
The International Assn. of Machinists has been presenting its arguments before the federal Department of Finance consultation hearings on private pension reform in support of a national insurance scheme like (ironically) Ontario’s PBGF to guard against pension defaults. The IAM’s experience with the underfunded Air Canada pension plan — and its unsuccessful legal campaign to force Air Canada’s parent, ACE Aviation Holdings, to put money into the plan rather than to disburse it to shareholders — is the impetus. The CAW and the Canadian Union of Public Employees also have members under that plan.
Pension rules have been relaxed in the recent past for some large employers: with the unions’ agreement when Air Canada asked in 2003 for 10 years rather than five to remedy the underfunding of the plan; without it in 1992 when GM was allowed 15 years to address its underfunding.
Now, the Ontario budget implementation bill has a provision prohibiting the PBGF from running a deficit, effectively eliminating anything but a tiny amount of help should GM’s pension not be able to meet its obligations. In the past, pensions at Massey-Ferguson and Algoma Steel were covered by the province; this time the conditions are different and the cost greater.
Michael Nobrega, the head of the Ontario Municipal Employees Retirement System or OMERS, offered on April 19 to take over management of smaller pension plans that are currently facing crisis or are simply too small to be efficient. His argument is that the consolidation of a number of small pensions would allow that money to be invested in assets such as real estate that require huge investment and rule out participation by funds with limited resources. He mused that Ontario might be able to support a couple of “superfunds” with over $100 billion in assets.
Finally, following on the “bigger is better” theme, there has been increased interest in provincial pension plans modeled on Saskatchewan’s, which is 23 years old. Harry Arthurs in the report of the Expert Commission on Pensions from last fall suggested creating one in Ontario. It would allow smaller private-sector employers to provide pensions for the 65 per cent of employees in the province who are not currently covered, without the expense or the legal ramifications. Alberta, British Columbia and Nova Scotia have also suggested something similar.
The western plan would encompass Saskatchewan, Alberta and British Columbia, where 80 per cent of private-sector employees do not have a pension plan. The design would be similar to Saskatchewan’s, which is entirely voluntary, flexible, portable and open to anyone. The value of an amalgamated plan would, in the opinion of the three premiers, be operational efficiency, reduced risk and greater asset size. A check of the CLV Reports database did not turn up any unionized employers using the Saskatchewan plan.
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