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| Pension Plans: Who's Minding the Store By Louis Erlichman Canadian Research Director |
| About a third of the Canadian labour force (two-thirds of union members) belong to employment-based (or private) pension plans. Pension plan members pay, directly or indirectly, for their pensions, as part of their compensation package. Even in “non-contributory” plans, they trade wages for pension benefits. How do they know that they are getting what they bargained for? Pension plans in Canada are governed by a variety of legislation. The federal Income Tax Act (administered by the Canada Customs and Revenue Agency – CCRA) sets the upper limits on the level of pension benefits which are eligible for the tax advantages provided to registered pension plans, as well as pension fund investment rules. Each province (except P.E.I.) and the federal government also have legislation which sets minimum standards on things like vesting (when you have a right to a benefit), portability, survivor benefits and other elements of the plans covering workers in their jurisdiction. Workers in federally-regulated industries, like air transport, are covered by the federal Pension Benefit Standards Act. Each jurisdiction has a regulator, either within a government department or in a separate agency (like Ontario’s Financial Services Commission and Quebec’s Regie des Rentes), responsible for overseeing pension standards legislation. Pension regulation can involve complex technical and legal issues. As a plan member, can you rely on the regulators to protect your interests and ensure that you are being fairly treated – that plans meet the requirements of the law and also are being administered as they ought to be? From the introduction of the first Canadian pension standards legislation (in Ontario in the early 1960s), regulatory oversight has been far from ideal. Regulators have always been given limited resources, and it usually took a long time for them to even read and approve plan texts and amendments as compliant with the law. In many ways, regulators tended to act on behalf of employers and plan sponsors, rather than looking to protect the interests of vulnerable plan members. This was highlighted by the 1986 Dominion Stores/Conrad Black case, where the Court found that the regulator had not even shown a minimum level of interest in protecting the rights of plan members when surplus was to be taken from their pension plan. While regulators have been somewhat more conscious of the rights of plan members since the Dominion Stores case, public sector cutbacks have cut already-inadequate regulatory resources and made their job even harder. A further disturbing trend is the shift from (inadequate) direct regulation and oversight to a system that relies increasingly on the certification that the plan meets legal requirements. It is a sort of unacknowledged de-regulation. Now, rather than requiring the regulator to read and approve plan texts and amendments, the new system means that, in most cases, the regulator accepts the plan documents certified by the plan sponsor/employer and their actuaries (who also act as consultants to the employer – a clear conflict of interest). With some exceptions, the regulator’s role is simply to respond to complaints. So, is anyone minding the store? Unfortunately, it is increasingly left up to plan members to ensure that the plan meets legal requirements, that it reflects what was bargained, and that things like benefit calculations and options are correct. Pension issues are frequently very technically and legally complex, and pension plan texts seem often to be written to confuse rather than explain (even for pension “experts”). While the law requires the disclosure of pension information to plan members through annual statements, and provides for member access to plan texts and actuarial valuations, most people don’t even know what to look for, what questions to ask, let alone the requirements of the law, or whether benefit calculations are correct. Even so, it is up to plan members to be vigilant. Unionized workers can use the resources of their union. A key is membership education and training, to provide all members with a basic understanding of pensions and their plans. Each group and each local needs to develop pension expertise. It is important that there be active pension committees at a local level (these are mandatory in Quebec, and available on request in most other jurisdictions) to keep an eye on the administration of the pension plan, and to build a local store of knowledge on pension issues. It is a good idea to always have at least two active pension representatives, so that there isn’t a sudden “pension knowledge gap” when the local pension “expert” leaves or retires (or becomes the employer’s pension administrator). The IAM puts on pension training programs, at the Winpisinger Centre and at the local level, as do the Canadian Labour Congress and the provincial labour federations. If you have pension questions, or want to get some training, get in touch with your local rep, or me at the Canadian Office. |
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