Quebec report takes aim at pension, group insurance plans

The Quebec government should act quickly to amend its labour standards law to prohibit employers from treating employees differently for coverage under retirement plans, group insurance plans and other employment benefits based solely on when they were hired, a government task force recommends.

In a recently released report, the task force also suggested that the government work with other provinces to examine the feasibility of other jurisdictions taking similar action. 

The government set up the task force in December 2016 to examine the issue of employees being treated differently in employer pension plans based only on their date of hire. The task force opted on its own to include group insurance plans in its study.

The move to establish the task force came in response to calls from labour and youth groups concerned that there is a growing problem of younger workers not benefitting from the same type of pension plan coverage as older employees with defined benefit pension plans.

 “Cases of disparity in treatment based solely on hiring date occur mainly in plans that were originally defined benefit plans only. These plans are amended to add a defined contribution component for new members,” said the task force report, called Groupe de travail sur la question des causes de disparité de traitement dans les régimes de retraite: Current situation and potential solutions.

To conduct the study, the task force analyzed pension plans supervised by the government body Retraite Québec, as well as collective agreements that provide for a pension plan. It looked specifically at plans that met two criteria: they provided plans with defined benefits for employees hired before a certain date and defined contributions for workers hired on or after that date.

Its analysis did not find that differences in treatment based solely on an employee’s hiring date were widespread in pension plans in Quebec.

Only 97 of 668 defined benefit pension plans supervised by Retraite Québec had a defined contribution component for employees hired after a specific date, affecting about 14.5 per cent of plans and about 9.6 per cent of plan members.

It also found that fewer Quebec employers were implementing disparity clauses compared to a few years ago. The task force traced the beginnings of the clauses to the early 2000s when declining interest rates, increasing life expectancy and financial crises made pension plans, particularly defined benefit plans, more expensive to operate.

Instead of decreasing pension benefits for all workers, some employers changed their plans to make them less generous for newer employees, the task force said.

Retraite Québec statistics show that the number of plans that introduced disparity-in-treatment clauses based solely on date of hire peaked between 2010 and 2013, after the 2008 financial crisis and the beginning of a drop in bond rates. In 2012 alone, 18 plans were revised to include them, compared to 11 in 2011 and four per year from 2007 to 2009.

Since 2015, when the National Assembly passed amendments that changed funding rules for defined benefit pension plans, the report said the number of plans adding disparity-in-treatment clauses has significantly declined.

“In 2015, only one plan introduced disparity in treatment clauses. No new plan was identified in 2016,” the report said.

When it looked at collective agreements with pension plans, the task force found that differences in treatment based solely on date of hire were rare, affecting no more than one per cent of the agreements and two per cent of workers.

For group insurance plans, the task force looked at two types of coverage, contracts where coverage ends when employment terminates and contracts that provide post-retirement coverage. With both types, the report said it was difficult to determine how common disparity-in-treatment clauses are across Quebec.

“Unlike pension plans that are under the supervision of Retraite Québec or labour standards monitored by the CNESST, group insurance contracts and other benefits are not registered with a government body,” said the report.

“As a result, the Québec government has very little data on group insurance plans. It is not possible to illustrate the phenomenon’s scope and nature using real cases or analyze the issue based on comprehensive data with the information the government has,” it said.

The Canadian Life and Health Insurance Association told the task force that differences in coverage based solely on date of hire were uncommon for plans that provide group insurance coverage until termination of employment.

For plans providing post-retirement coverage, the association said there were a few cases where plans had differences in treatment based on hire date, but that these were limited to businesses with a large number of permanent employees.

Consultations with the Fédération des travailleurs et travailleuses du Québec (FTQ) turned up only five examples of group insurance plans that provided different treatment for employees based solely on date of hire in 2017, among companies affiliated with the labour organization.

Despite what the statistics show about pension plans and the lack of data on group insurance plans, the FTQ told the task force that disparity clauses were a growing problem.

Even though most of the disparity clauses for pension plans are found in plans for non-union workers, the task force said the FTQ was concerned that if employers implemented them for non-union workers, especially those in management, they might try to expand them to their collective agreements.

The report also said the FTQ was worried that disparity clauses in group insurance plans could increase social inequality and lead to greater poverty for younger workers.

To address the concerns, the task force recommended adding prohibitions on disparity-in-treatment clauses for pension plans, group insurance plans and other fringe benefits to the act respecting labour standards.

The legislation already prohibits employers from providing less advantageous conditions of employment to employees doing the same tasks in the same workplace, based solely on their date of hire. The prohibition applies to standards such as wages, hours of work, statutory holidays, and vacations.

Despite the recommendation, the task force advised the government to act cautiously, saying more regulation could hurt Quebec businesses and create challenges for employers trying to administer pension plans governed by more than one province.

While the task force said a ban affecting only group insurance plans might be easier to implement because the plans do not have the same level of regulation as pension plans, it added that there was still the potential for problems.

It cited the possibility that employers with benefit plans providing post-retirement benefits could opt to end them for all employees, which could result in workers close to retirement having to buy a new, expensive policy or being unable to obtain insurance.

The report said another possible problem with a ban affecting pension and group insurance plans is that no other jurisdictions in Canada have clauses in their labour standards laws that prohibit differences in treatment based solely on date of hire.

The report warned that if Quebec acted alone, it could prompt employers to eliminate their plans in the province, offer less generous plans to Quebec employees, or relocate their business to another jurisdiction.

“If similar legislation were to be introduced in all the other provinces, that would limit the impact on competitiveness and the ability of Quebec businesses to invest, as compared to their competitors in other provinces. It would also remove the application difficulties for pension plans governed by other jurisdictions and multi-jurisdiction plans,” the report said.

The task force recommended that the government hold off on implementing prohibitions until other Canadian jurisdictions enact similar legislation.

Labour and youth groups said they were disappointed with the report’s recommendations.

Force Jeunesse, an organization focused on improving employment conditions for young workers, said the government must act now rather than consult with other provinces. The FTQ called the recommendation that Quebec work with other jurisdictions before banning disparity clauses “absurd.”

“Since when has Quebec needed the permission of other provinces to adopt a workplace law?” said Serge Cadieux, secretary general of the FTQ.

He added that the recommendations contradict each other, with one calling for labour standards changes now and another suggesting that the government wait to see what other jurisdictions do.

Employer groups also expressed concerns. The Conseil de patronat du Québec (CPQ), which represents more than 70,000 mostly private-sector employers in the province, said it opposed adding disparity-in-treatment prohibitions to labour standards legislation.

Yves-Thomas Dorval, president and director general of the CPQ, said the move could hamper business competitiveness in Quebec and could hurt workers if some employers chose to eliminate their pension plans. He also disagreed with suggestions that defined contribution pension plans were not as good as defined benefit plans for workers.

The government has not yet said how it plans to respond to the recommendations.

“From the standpoint of working conditions and retirement plans, we have a duty to treat fairly young people and future generations,” Finance Minister Carlos Leitão said.

However, he also noted that the issue is complex and that the government needed time to analyze the proposals to find the best solution.