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© Copyright 2000 Rogers Media. The following article first appeared in the May 2000 edition of
BENEFITS CANADA magazine.
Abandoning ship
Some Crown corporations are pulling out of the public services pension plan. It seems members don't
like paying the full cost of participation.
By Dian Cohen
For many years, federal public servants and Crown corporations have contributed to the Public Service
Superannuation Account (PSSA), also known as the public service pension plan, and got an incredible
bargain--a Cadillac pension for a Volkswagen price. These organizations have been pitching in a meager 5%
to 6% of their payroll to their pensions, when the real cost was 12%. You and I have contributed the
difference, thanks to the federal government generously allocating some of our tax payments to the public
service pension scheme. Now all that may be coming to an end.
NEW DECREE
Legislated back in 1998, Bill C-78 states that on April 1, the Public Service Investment Fund would be
formed to invest the funds of the Public Service Alliance, the RCMP and Armed Forces Superannuation
Accounts in capital markets. As well, Canada Post, the largest of the Crown corporations in the PSSA, will
get its own plan on Oct. 1.
The small print decrees that as of April 1, everyone who remains in the PSSA has to pay the full cost of
participation--an increase for Crown corporation employers of over 200%, according to William M. Mercer
Limited principal Michael Cohen. His clients include two major Crown corporations. "According to Bill C-78,
the employee contributions will also increase after 2004,"
These Crown corporations have decided to pull out of the PSSA on the grounds that they can get more
flexibility and better value elsewhere if the full costs must be borne. Quelle surprise. These firms have
realized that times have indeed changed, and the PSSA can be improved upon to attract and retain the best
talent available.
Starting their own plans, says Cohen, will give these parties "better pensions, better benefits, more
choice, better service and more control." He adds that: "some of these employees will now be able to choose
contributory or non-contributory in one case, or defined benefit or defined contribution in the other."
That's great for plan members. But doesn't it make you think about what taxpayers have been paying for all
these years--a plan that these organizations abandon at the first available opportunity because taxpayers
are no longer footing the bill.
Let me vent for a moment. For how many years did Finance Minister Paul Martin raise taxes ostensibly to
deal with a $30 billion budget deficit? All the while he was subsidizing Crown corporations to the tune of
$500 million to $1 billion a year. It wasn't as though no one in the Treasury Board knew what was
happening. For the last five years, at least, Treasury told the Crown corporations something to the effect
of: "for this year, we'll make up the shortfall between your matching contributions and the cost, but we're
reviewing the whole arrangement ..."
So now some 57,000 people are out, leaving 210,000 who work for central agencies still in the PSSA. They
have no option to leave. But who else might? The newly named Canada Customs and Revenue Agency, for one.
It's 40,000-members strong and trying to become a forward-thinking organization. Surely, it needs top
talent.
Even thinking about who else might abandon the PSSA raises an interesting question: Is this
initiative--spurred on by both the government (in writing C-78) and the two Crown corporations that are
voluntarily leaving--a prelude to privatization? It has become clear to many (and I trust to many more
after my new book written with long-time associate Guy Stanley comes out at the end of the year) that the
role of government in a world of e-commerce and a networked economy that's already replaced the industrial
economy, needs a vast rethink.
A new, networked civil society already exists to shoulder much of the burden of industrial age governments,
and markets are broader and deeper than they were when Canadians decided they didn't work as well as
government intervention.
Mercer's Cohen observes that there are "several other clients who are examining their options with regard
to PSSA membership." No doubt when they decide, we'll know about them, too, and more about the future of
the stub of the PSSA that remains.
Dian Cohen is an economics consultant with a special interest in pension issues.
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