Jo-Ann Hannah is director, pensions and benefits, with Unifor, Canada’s largest private sector union. She provides an organized labour perspective on ensuring adequate retirement income for employees.
Q. What is Unifor’s feeling about the proposed Ontario Retirement Pension Plan (ORPP)?
We are impressed! It’s a bold and commendable move, especially as it’s a mandatory pension plan with only a few exceptions. The ORPP wouldn’t work if it was voluntary. We hope more provinces will join Ontario and set up similar plans to enable portability. If the Liberal party is re-elected in Ontario, we’re looking forward to seeing the details of the ORPP. [The provincial election will take place on Thursday.]
Q. What is Unifor’s position with respect to expansion of the Canada Pension Plan (CPP)?
Twelve million Canadian workers have no employer-sponsored pension plan. The easiest way to address the issue of retirement income adequacy is to expand the CPP (and the Quebec Pension Plan)—the mechanism for making contributions is already in place, and the plan is well run.
However, the federal government shut—even slammed—the door on that opportunity, in spite of research that supports expansion of the CPP as the best route to providing Canadians with secure retirement income. Unifor will continue to work with the Canadian Labour Congress to advocate for the enhanced CPP.
Q. You recently spoke at the annual meeting of Municipal Retirees Organization Ontario, an association that represents OMERS retirees. Why is a private sector union interested in supporting the pension rights of public sector workers?
As more private sector employers drop out of providing DB pensions or any pension, we’ve seen the gradual development of a very destructive attitude to public sector DB plans. The reaction is one of, ‘I don’t have a pension plan, so why should they?’ Unifor’s focus is on setting a higher standard—one where all Canadian employees are able to have adequate retirement income—rather than eroding the pensions of public sector workers. Good DB pension plans in the public sector should set the benchmark for the private sector.
It is short-sighted when employers make cuts to their pension plans in order to save money. In doing so, they affect the spending habits of an ever-growing consumer group that could help them build their long-term business and act as a source of tax revenue for all levels of government. Pensioner spending, or lack thereof, will become a significant issue in our communities in the future.
Unifor’s position is that both public and private sector employers have an obligation—and a good business case—to help their employees save for retirement. If they cut benefits or close pension plans, they are, in effect, offloading their responsibility to the taxpayer, as today’s workers without pensions may be tomorrow’s social welfare recipients.
Q. How does Unifor feel about proposed target benefit plans (TBPs)?
TBPs are preferable to DC plans in that plan members have the advantage of professional investors and don’t face the high cost of annuities at retirement. What TBPs lack, of course, is the certainty of a known benefit.
Some governments are introducing TBP legislation as an ‘opportunity’ for employers to provide workplace pensions. But this, in our view, is nonsense. Employers without workplace pensions would have offered DC plans if they really wanted a pension for their employees. Employers with DC plans will not go through the administrative hassle to convert to a TBP.
TBPs will, however, hold tremendous appeal for DB plan sponsors—especially if they can convert the accrued DB obligations to the less secure TBP funding rules. What employer—public or private—wouldn’t want to reduce DB pension liabilities on their accounts? TBPs will not help to expand pension coverage but instead will erode DB plans currently in place.
Then what about TBPs just for new hires? Employers are very strategic in negotiations. They may offer an increase in the DB plan for current employees but close the DB plan to new hires with a DC plan—or now a TBP—going forward. This will create a two-tier hierarchy in the workplace, where more recent hires—mostly younger people—will not have the same working conditions as the previous generation. Unifor is concerned about union solidarity. Employers should consider the kind of work experience they offer today’s youth.
The bottom line, however, is that Unifor believes the DB plan is a good and cost-effective model. We want to work within that framework and explore options with employers to reduce or share costs.
Marcia McDougall is a freelance writer and president of InteGreat Marketing PR Events Inc.
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