Talks between Canada Post and the Canadian Union of Postal Workers have stalled once again, hours before the union’s strike mandate expires at midnight.
“If nothing changes between now and tomorrow, we will be issuing our 72-hour notice of strike activity,” the union said in a release on Aug. 24. “The [National Executive Board] will not make this decision without careful thought and serious consideration.”
The federal government stepped in on Thursday, saying it would appoint a special mediator in hopes of breaking the stalemate. “I expect both parties to work with this special mediator to come to a resolution and avoid a work stoppage,” Labour Minister MaryAnn Mihychuk said in a brief statement. “I continue to closely monitor the situation.”
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Should the union pull the plug on bargaining, there could be disruptions in mail delivery by Monday.
However, if the strike mandate expires, Canada Post employees would likely have to vote again on an extension. That could take upwards of two months to complete, which would set the stage for a potential delivery disruption at the start of the busy Christmas mailing season.
Canada Post also has the option to lock out workers after today.
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One of the biggest sticking points in the negotiations is Canada Post’s plan to close the defined benefit pension plan to new employees and replace it with a defined contribution plan, a move that has already been implemented for employees represented by other postal worker unions.
As it fights for the plan’s continuation, the union argues Canada Post, which falls under the federal Pension Benefits Standards Act, should be exempt from solvency testing. And the best explanation as to why, the union’s research director Geoff Bickerton says, comes from Canada Post itself, albeit the Canada Post of 2008.
“This [solvency] requirement creates a significant and unpredictable drain on cash, even while the likelihood of Canada Post being wound up is remote due to its Crown corporation status,” Canada Post’s submission to its 2008 strategic review reads. “It requires the Corporation to put theoretical pension considerations ahead of operational and investment requirements.”
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The submission goes on to recommend that Canada Post be treated the same way Crown corporations are in other jurisdictions, and either be absolved from funding solvency deficits or have the government cover the deficit if Canada Post is ever wound up.
Instead of solvency funding, the union argues, Canada Post should rely on a going-concern funding valuation.
“There’s no realistic possibility that the pension plan will be wound up, so why cause bankruptcy to Canada Post because of the solvency requirements?” Bickerton says. “ … We have $1.2 billion surplus on a going-concern basis.”
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As of Jan. 1, 2016, defined benefit pension plans in Quebec are rated on their going-concern valuations, and no longer have to fund solvency deficits. Instead, plans contribute additional funds when markets are both good and bad, creating a buffer for when more challenging economic times arise.
“In my view, it’s much better than solvency funding,” says Ian Edelist, a principal at Eckler Ltd. in Toronto. “There are a number of problems with [solvency funding]. One of them is huge volatility in the contributions that an employer has to pay year to year. And another is that you need to solvency fund when the economy is bad and your company is hurting, and by that time it’s probably too late to really make sure there’s enough money in the fund in case the company goes bankrupt. So this is a better alternative because it overfunds the plan during good times … to build up a buffer of funds.”
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Ontario and Saskatchewan are considering eliminating solvency funding for some pension plans. While replicating Quebec’s model is an option, there are other methods on the table, Edelist says. These include requiring plan sponsors to fund retirement but not early retirement benefits, or fund to 90 per cent solvency instead of 100 per cent.
“Ontario has an insurance fund called a [Pension Benefits Guarantee Fund] that helps pension plans that are underfunded when the corporation goes bankrupt,” Edelist says. “My reading of the [Ontario] consultation is there will be more premiums going into it to recognize that there may be more risks by removing solvency funding. And even going by the Quebec model, that may not be enough to cover the full risks of solvency funding, so [the consultation suggests] increasing premiums to this Ontario insurance pension fund.”
Editor’s note: Story updated Aug. 25 at 2 p.m. to reflect new information about the special mediator.