Veterans Affairs Committee on Nov. 3rd, 2009

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

No, no, I've never asked for retroactivity.

[Judy Sgro, Liberal, York West, ON]

So then you're talking about from here on into the future.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Whenever it happens, yes.

[Judy Sgro, Liberal, York West, ON]

But had they not already...in the sense that those who are receiving the benefit, or who will receive the benefit, are very well aware today that this is the way the system works?

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Yes.

[Judy Sgro, Liberal, York West, ON]

Don't you think we need to change the way it works?

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Yes. That's one of the things I'm trying to do, Madam.

[Judy Sgro, Liberal, York West, ON]

We need to simply change the way the system is working so that....

You can't have it both ways.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

I realize that, and what we're asking for is a complete change in this regard. I've given enough latitude to government that if this is adopted, if it's accepted, which I don't think one side will do—and I can't speak for you or the Bloc—then I leave it up to the government to determine the best way to do that. The bill basically asks for just the ending of it; it's what it really does. It's not a very thick or complicated bill. It basically asks for the end of the benefit reduction, or, as my friends in the armed forces and RCMP call it, the end of the clawback.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Stoffer and Madam Sgro.

If the committee would allow me the luxury of one question, there is one I'd like to ask, after hearing all the testimony.

[Roger Gaudet, Bloc, Montcalm, QC]

Yes, Mr. Chair.

[The Chair, Conservative, David Sweet]

Merci beaucoup, Monsieur Gaudet.

Mr. Stoffer, just listening to the last hour of testimony on the complexity of this pension with an annuity, with a merging of CPP, with the members' contributions as well as the government contributions, I guess I have just a simple question. Why wouldn't you have instead made a motion to the House to review this pension plan, to come up with the best path forward—as, in fact, was kind of the note that Madam Sgro's question was on—rather than put a bill of specifics for which there would have to be an extraordinary amount of amendments and in fact a full review anyway?

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

That's completely understandable, but Mr. Sweet, as you know, I have moved several motions in the House of Commons, which were adopted, and I'm still waiting for the adoption of those motions. Motions only advise the government what to do; they're not binding on government.

One of the most frustrating things is when you move a motion, as I did—my veterans charter motion in 2006—which everybody voted for except for the Conservative Party.... In fact, it was the first in 2006 that they whipped against legislation. So when my colleagues ask me why I voted against this, I could ask them why they voted against the VIP extension, why they voted against the marriage-after-60 act, why they voted against the.... No, but really, I could do that if I wanted.

The reality is that it was a motion passed by the House of Commons, by the majority of members of Parliament in 2006. It was a motion. As you said, why didn't I move a motion? I did move a motion, and unfortunately after three years, I'm still waiting for the enactment of that motion. As you know, motions are not binding on government. They're just an advisory tool to say to government that here's what we think you should do in the House of Commons.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Stoffer.

We'll now take a brief break to change our panel of witnesses.

Ladies and gentlemen, we need to get back to it. We just have an hour left.

Mr. Hawn, you have opening remarks. Do other witnesses have opening remarks as well?

[Laurie Hawn, Conservative, Parliamentary Secretary to the Minister of National Defence]

No, sir.

[The Chair, Conservative, David Sweet]

Then please proceed, sir.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

I'm not sure where they all are, but I have three colleagues with me from the Office of the Chief Actuary of the Public Sector Insurance and Pension Programs: Michel Rapin, Mario Mercier, and Lynne McKenna-Fleming, who is the acting DG, compensation and benefits.

Thank you, Mr. Chair, and thank you for the opportunity to discuss Bill C-201 with the committee.

My remarks will be directed to the Canadian Forces Superannuation Act, but apply equally to the RCMP plan.

First, I want to thank this committee for their good work on behalf of serving members and veterans.

Although I don't support this legislation, it has nothing to do with the profound respect and admiration that we all have for the Canadian Forces and RCMP. I'm proud of my own military service and the people I served with, and I'm very proud of the men and women in uniform today. They and their families do so much, and they have every right to expect that the Government of Canada will take care of them in return. That is what we are doing and what we continue to try to improve.

As the committee knows, the Canadian Forces Superannuation Plan was integrated with the Canada Pension Plan in 1966. The pensions were blended and not stacked, meaning that part of our pension contributions now went to pay for CPP benefits. This kept the overall contribution from increasing.

Just like payments into the plans, benefits of the two plans are also blended and not stacked, meaning that we get benefits from both plans. Total premiums and total benefits remained essentially the same, and we are getting 100% of what we have paid for. The CFSA compares favourably with other pension plans, and only about 30% of Canadians have such defined benefit pension plans.

There is no doubt that the integration of the pension plans was not well communicated. I have spoken with people who did get briefed, but most did not. I don't personally recall any briefings, although, as was pointed out, I was probably so preoccupied with going through pilot training at the time, as an 18-year-old, that I probably wouldn't have remembered anyway. I don't doubt that it was covered in the daily routine orders that were published every day. The situation is briefly referred to, and I think that was mentioned earlier, in the Digest of the Canadian Forces Retirement Benefits, which every member gets on leaving, and on page 19 it says:

Annuities under the CFSA are subject to a reduction when an annuitant reaches age 65....

It goes on to say more.

Ultimately, every member is responsible for knowing and understanding their pay and benefits. The system didn't make it as easy as it could have in 1966, for sure, but that is now history.

Let me just state how I personally relate to Bill C-201 and the issues that surround it. I joined the Royal Canadian Air Force in 1964 at age 17 and served 31 years, retiring in November 1994 at age 47. I started drawing my pension of 62% of the average of my best five years' salary. The amount remained the same until cost-of-living indexing kicked in at age 55 and after I had reached the 85 point in years of service plus age. Eight years of indexing were added to my pension in one lump, and that amounted to about a 10% increase, because obviously those were times of fairly low inflation. Annual indexing for the past seven years has brought very modest annual increases in these times of low inflation.

I've paid for 25% of my pension and the taxpayers have paid the other 75%.

Part of that pension is the lifetime benefit and part is the bridge benefit. The bridge benefit is generally about 30% of what the newly retired member receives as an initial pension, and it is intended to bridge the time between when the member retires from the service and when the member collects CPP, normally at age 65. At age 65, the bridge benefit disappears. It's got nothing to do with CPP per se. At age 65, the bridge benefit disappears and is replaced by CPP. This ensures a smooth flow of total pension income throughout retirement years.

One thing this government did was change the formula for calculating CFSA benefits to increase the lifetime portion. This is to the advantage of every pensioner and should mitigate to some degree the concerns that gave rise to Bill C-201.

This is an emotional issue and I understand that. I take no pleasure in opposing a position strongly held by people I care about, but I have to be honest with them. Even though I would stand to benefit from this bill, it would have been inappropriate for me to support it given all the facts.

I believe that several points are relevant. The CF and the RCMP are not unions, were not unions in 1966 and are not unions today, and we don't get to negotiate pay and benefits. On the CF side, that makes us just about like every other military in the world today. It is wrong to suggest that we are picking on the CF and the RCMP.

The public service superannuation, other federal pension plans, provincial plans, most teachers' plans, and many others are set up exactly the same way. We are getting exactly what we paid for, and the CFSA is based on two simple things: how long you served and what were your best five years.

Before age 65, military and RCMP pension plans deliver 2% per year of service, based on the average salary for the best five years. In the case of the CF and the RCMP, it is common to retire in our forties or early fifties. We collect our pensions immediately, where others do not. CPP was set up on the assumption that Canadians would generally work until age 65. People can choose to work or not--most can after retirement from the CF or RCMP--but everyone should do a bit of homework to figure out what's coming down the road. People don't plan to fail; they fail to plan.

When someone retires before age 65 and works at something until 65, their contributions to CPP will generally ensure that the CPP they collect will at least offset the bridge benefit that disappears at age 65. That's the way the bridge benefit was calculated in the first place. If someone does not contribute to CPP after retirement from the CF until 65, they will probably get less, for sure, because they haven't contributed to it. In my case, my CPP will exceed my bridge benefit by about $300 a month. We get what we paid for.

Many people take CPP as early as age 60 and take the 0.5% reduction per month before 65. So it's a 30% reduction if they take it the full 60 months early. If they take CPP at age 60, what the CF and RCMP members are doing for that five years is double-dipping their CPP and the bridge benefit, and that's a good thing.

The bridge benefit will still disappear at age 65, and contrary to what was said, it has nothing to do with CPP. It's apples and oranges. It's the bridge benefit that disappears at age 65, regardless of when you take CPP. There's no relation at all. So if you have taken CPP early, you are taking a reduced CPP. When your bridge benefit disappears at age 65, which it will do under the Canadian Forces Superannuation Act, then yes, you will probably wind up getting less.

If you do the math, in most cases you are still better off taking the CPP early, but there's a crossover point, depending on your personal circumstances, that somewhere down the road the benefit of double-dipping is going to disappear. Figure out what that age is, and if you think you're going to live longer than that, maybe don't take it early. But who knows?

Taking CPP early is a personal choice, but I emphasize that CPP is here and CFSA is there. The only relationship is that, at age 65, the bridge benefit part of CFSA disappears. It has nothing to do with what your CPP is.

Those in favour of Bill C-201 sometimes put forward arguments about how much members have suffered and sacrificed during their careers. I can personally identify with those arguments, but they are emotional and should not devalue the worth of a properly constituted and financed plan that operates exactly as it is supposed to. In my military career, I've moved about 20 times. My wife was a registered nurse. She managed to work wherever we were. I served out of choice. She served out of choice in following me, so far, for 41 years, possibly out of curiosity, but we chose to serve. I can tell you, it was the best job I will ever have in my life. As much as I enjoy this one, nothing will ever top my military career in terms of my personal satisfaction and enjoyment.

I get a lot of letters and most of them are unfriendly. What I'm typically getting is people sending me their CFSA pay slips with the notice that their CFSA pension will decrease by some amount at age 65, as per the plan, and they're mad as heck. What they're not sending me is their CPP statement, showing how much their CPP will be. They're also upset that they will lose indexing on the amount of the bridge benefit deducted, but what they are not understanding is that they will pick up indexing on the CPP amount. It really does add up. We didn't pay for a stacked pension and we're getting exactly what we paid for. That makes us the same as other pension plans.

People bring up the money that was transferred from our pension plans to general revenue in the 1990s. That total amount was actually $32 billion from the RCMPSA, PSSA, and the CFSA, with the CF share being about $15 billion. As egregious as that may have been, it was carried out by the government of the day and is now history. There is simply not an extra $15 billion or $32 billion out there to put it back. The bottom line on our pensions is that, whatever happens to the actual investments to support it, our pensions are guaranteed by the Government of Canada.

Another red herring that is totally apples and oranges and is regularly used, and was used several times today, is that people have been led to believe that somehow MPs and others have exempted themselves from a clawback. In the first place, we have zero input into our compensation package. Second, MPs come and go at any age and do not collect a pension until age 55. Third, there is no clawback at 65 because we didn't get a bridge benefit from or to any age and there's simply nothing to claw back. It's a complete red herring, and it is there simply to stir up outrage at people who are easy targets. Being an easy target is part of this job, but this is disingenuous at the very least.

Folks also point to a petition that was signed by over 100,000 people. I said it in the House and I'll say it again: if somebody gives you a petition and says if you sign here you might get extra money, you're probably not going to question it. And that doesn't make someone dishonest or dumb; it just makes them human. I've talked to many who signed the petition without question or who knew that it wouldn't or couldn't amount to anything. There are also many generals who are rightly known as “people people” who have not signed the petition and who understand the reality of the situation.

Mr. Chair, the false premise upon which Bill C-201 is based is not the only argument against the proposed legislation. There is also a prohibitive cost attached. There would be a one-time past service liability cost of $7 billion, and those numbers come from the Office of the Superintendent of Financial Institutions. We can delve into more of that if we wish.

In addition, plan members and Canadian taxpayers would have to bear the burden of increased and future contributions. This could add up to significantly increased pay deductions. Would it be fair to ask taxpayers to pay the increased burden when most of them do not have company plans of their own?

The government does have a responsibility to our service members, and we also have a responsibility to the Canadian taxpayer to exercise careful stewardship of the money they entrust to us. There are some legitimate issues, and we digressed—as always happens in these things—to discuss some of those in the first hour. There are legitimate issues out there that should be addressed and should be discussed, but none of those are discussed under Bill C-201. So Bill C-201, in my view, is not a starter for the reasons I have mentioned, as regrettable as that is. I'd love to be able to collect something I haven't paid for. I'd love for all of us to be able to do that. But it just doesn't work that way.

Mr. Chair, thank you, and thank you to members of the committee. We'd be pleased to answer your questions.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Hawn.

We will go expeditiously, then, to the Liberal Party for four minutes.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Mr. Chair.

Thanks, Mr. Hawn, for both your time and your presentation, which is actually quite helpful to me in trying to understand this.

I hear both your care and concern for veterans. There may be a conflict of interest in this for you under our guidelines, as a member of the House of Commons, as a possible fiduciary beneficiary of such a thing. So I would be hopeful that you're mindful of that booklet on what you can and cannot vote on as a member of the House of Commons.

The government members of the committee have been pretty critical of Mr. Stoffer for his request to bring it to this committee as opposed to the defence committee. It's here at his request, and we accept that and understand it, and I actually welcome it. But that doesn't mean that the department doesn't have a responsibility for ongoing regular consultation with pension plan members and members of the regular forces who have a pension fund. I'm wondering, what conversations is the department having about this bill with military personnel, pension experts, and groups that advocate for military personnel?

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you for the question, Mr. Oliphant. To your first point, I'm voting against something that would be of benefit to me, so I don't think that qualifies as a conflict of interest or exercising ambivalence.

But in any event, to your second question, and it's a good question, members of the armed forces and members of the RCMP are not in a union. Things like this are negotiated on their behalf by people in the benefits and compensation branch who do talk to members in uniform. But it's not like a union of members who get together and vote this way or that way. There is consultation, and I would ask Lynne McKenna-Fleming, as I'm not too familiar with the specifics of that kind of consultation, if she has some more information on that. I'd appreciate it.

[Lynne McKenna-Fleming, Acting Director General, Compensation and Benefits, Department of National Defence]

Largely triggered by the new reserve force pension plan that came into effect on March 1, 2007--the first time reservists ever had a pension plan--we really became aware of some lack in our communication processes. So we spent a good bit of time and money doing focus groups, talking to regular forces and reservist people, and talking to experts in the field of communication. It has all culminated in what will be a much improved pension handbook that we expect to have out in about a year. But we expect to have our new website up and running sooner than that.

Our website will take into account a vast range of questions that people will have about their pensions. It will target both reserve force and regular force members and will be specific to their needs. It will contain about 300 pages of text on pension questions. We're very optimistic it will go a long way toward answering folks' questions.

[Rob Oliphant, Liberal, Don Valley West, ON]

Good.

I am a member of a defined benefit pension plan with the United Church of Canada, and we have fairly regular consultations. We're also not in a union. I think it would be helpful for us to know the concrete results of the discussions that DND has had with forces members about pensions.

I would like to have in writing to this committee the nature of the consultations, the time, the number of armed forces personnel who were interviewed, and the distribution in rank and status of those service personnel, so we have a sense of the kind of consultation the department is doing on this issue.

It's tough. I also have about a 300-page booklet for my own defined benefit pension plan, and it doesn't get opened. I'm concerned about those conversations and whether the department is actually undergoing those conversations as well. So It would be helpful if I had a report in writing stating what the department has done in terms of consulting.

Has there been any--

[The Chair, Conservative, David Sweet]

Thank you, Mr. Oliphant.

I want to make sure the witness knows that we'll have a report from the Department of National Defence regarding the dialogue.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

We will.

In large part, just to tie this one up, the Canadian Forces members, and I assume members of the RCMP, trust the leadership to look after them. I've never been disappointed.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Hawn.

Monsieur André.