National plan would grow to cover half of current salary
Given the aging demographic of employees in many unionized sectors — primary, manufacturing, healthcare, public service — it comes as no surprise that unions have spent a lot of time and energy on pensions recently. First, it was the fight to save the defined-benefit pension plan. At roughly the same time, many collective agreements were trading wage increases for pension increases.
The fight for DB pensions was often lost: even the Steelworkers making it a strike issue was not sufficient to stem the tide. Still, as last week’s Teamster demonstration in support of Nortel retirees shows, failure has not been admitted in every case. However, these efforts strike the observer as a rearguard action designed to save what can be rather than one to shore up or even add to the number of DB pensions.
And, given recent developments, should we even strive for a DB plan? Teamsters president Robert Bouvier explained his union’s interest in the Nortel case: “Other bankrupt Canadian companies are anxiously waiting to see what the courts will decide before determining if they, in turn, will abandon their responsibilities to their retirees.”
The Canadian Labour Congress (CLC) has proposed that, rather than the current 25 per cent, the Canada Pension Plan (CPP) would grow to replace 50 per cent of average earnings. The change would be phased in and result in a 3.0 per cent increase in contributions. In addition, the CLC is calling for a national insurance plan to protect a portion of pension benefits. The plan would be funded by contributions from plans.
The Communications, Energy and Paperworkers’ members in the pulp and paper industry and, more recently, in broadcasting, have seen their pension plans placed in jeopardy when employers file for protection from creditors. The CEP’s response is that, rather than forcing these employers to wind up their plans and face the current underfunding for future obligations, legislation should be changed to allow the plans to be continued under a government trustee. That, the union argues, would lower the company’s financial obligation (likely an unpaid one) to the pension plan and increase the benefit employees would eventually see from the plan.
One common element of the CLC and the CEP proposals is that employers would benefit as well as retirees. A richer CPP would allow employers to cut back or eliminate their current plans, making them more competitive with employers who did not have plans. The CEP’s plan would lessen the burden on companies restructuring under creditor protection.