Veterans Affairs Committee on Nov. 3rd, 2009

[Guy André, Bloc, Berthier—Maskinongé, QC]

Mr. Hawn, thank you for your excellent presentation based on your personal experience. You know the situation very well, and you have clearly shown that by telling us about your own career.

In previous testimony, the question of the cost of this initiative came up. The witness told us that he could not explain the cost of putting the bill into effect, calculated at $6.2 billion.

Have you looked at that? Can you give us more details about it?

As well, it has been said many times that members of the Canadian Forces and the RCMP have paid into an employment insurance program all their lives that they have never benefited from. One of the proposals put forward was to postpone those contributions to the age of 65. That could help to even out the measures proposed in this bill.

I would be interested in your views on that.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you very much for the question.

You were talking about EI in the second part of your question. I'm going to ask for more input on this, but we got a cost of about $7 billion from the Office of the Superintendent of Financial Institutions. That was a one-time past service.... We're not talking about retroactivity.

The other was a $110 million annual increase in operating costs that would result from Bill C-201.

The point about EI is a great one. The fact is that between 2,700 and 3,000 members every year from 2006 to 2009 collected EI for maternity or paternity leave. In those four years 11,300 people retired from the Canadian Forces with pensions; and 9,800 retired without pensions and are eligible for EI.

So if we diverted all the EI premiums to pay for Bill C-201, the thousands and thousands of people who are eligible for and/or collecting EI due to their service to the Canadian Forces would be cut off. That would not be fair.

The other salient point is that in 2008-09, the total EI contributions from the regular force and the reserve force totalled $56.5 million, which is only about half of what the annual costs for Bill C-201 would be. So it doesn't add up that way either.

I'll turn to my colleague Monsieur Mercier for any further amplification, particularly on the $7 billion figure.

[Mario Mercier, Actuary, Fellow of the Canadian Institute of Actuaries, Office of the Chief Actuary, Public Sector Insurance and Pension Programs, Office of the Superintendent of Financial Institutions Canada]

Maybe I'll just give you a short introduction. I'm an actuary. I work with the Office of the Chief Actuary, and I was asked by the Department of National Defence to prepare numbers and costing of removing the integration from the CFSA plan, and I've also done an evaluation of the RCMP pension plan.

The numbers that were given to you today are what I came up with after doing an actual valuation in accordance with actuarial principles. The increase in the liability of the Canadian Forces' plan would be $5.5 billion, as was said today. This plan already has an accrued liability, that is, the cost of what was promised already in accrued services to date to all members of the pension plan. Right now, the liability is in the vicinity of $51 billion. If integration were to be removed, that would cost the accrued services an additional $5.5 billion.

I have done the same with the RCMP pension plan. This plan has an accrued liability of roughly $15 billion right now. If the integration were removed, there would be an additional cost of about $1.7 billion. That's with respect to what has been accrued right now as of the valuation date, March 2009.

On top of that—and this is what Mr. Hawn was saying—if the plan were to be amended, it would be a different plan, because members who retired would not have their benefits reduced when they attained the age of 65.

The way a pension plan is funded is through the active life of the employees. The cost of the CFSA plan is 22.4% of the pensionable payroll, which would probably be close to $1 billion. The cost of the RCMP plan is a bit lower, at something around 20%. If the plan were amended, then every year the contributions would increase. For the CFSA plan, that would be an increase of 1.8%; and for the RCMP plan, it would be an increase of 2.1%. That number of $10 million was.... This increase will be for next year, fiscal year 2010.

[The Chair, Conservative, David Sweet]

Mr. André, there are six minutes—

[Guy André, Bloc, Berthier—Maskinongé, QC]

Mr. Chair, is this actuarial study going to be tabled at this committee?

[Mario Mercier]

Yes.

[The Chair, Conservative, David Sweet]

Thank you.

I have Mr. Stoffer for four minutes.

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

Thank you, Mr. Chair.

And thank you, Mr. Hawn, for your presentation and your 31 years of service, continuing now as parliamentary secretary.

My first question is more directed at Mr. Mercier. In reaching a figure of $7 billion, how many members of the RCMP and CF did you include in your deduction?

[Mario Mercier]

The RCMP pension plan has 21,000 active members, and all of the members who are part of the plan were included. So if we're looking at the RCMP, we're talking of 21,000 active members and about 15,000 pensioners. If we subtract the survivors, the number will be around 13,000. The Canadian Forces plan has about 67,000 active members and about 80,000 pensioners. All of the members who are receiving or will receive an annuity were included in my study.

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

I have great difficulty understanding where the $7 billion figure came from. Would you, sir, be able to provide to the committee written documentation of how that's calculated, because the Parliamentary Budget Officer and others can't find that figure anywhere? This is one of the reasons why we have great challenges with how over 96,000 members can end up costing the government $7 billion. It just isn't something that appears on the surface to be a credible figure in that regard—which is not to question your judgment at all. But I would sure love to see your documentation and numbers.

You didn't include retroactivity on that, I believe.

[Mario Mercier]

It wasn't included. The actual evaluation was based on what was told to me if the plan were to be amended prospectively, that is, in the future. So there's no taking into account retroactivity.

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

For the record, sir, I'd sure love to be able to see all of that written information and who provided you that information and the breakdown of it all. For the committee, I think it would be most helpful.

Mr. Hawn, it's the first time I've ever heard the expression “double-dipping”. I was wondering if you could elaborate a bit more on that. I'm sure an awful lot of men and women who may be listening would be rather surprised if they're double-dipping at age 60. I've never heard that expression in this debate before. I was wondering if you can explain it a little bit more.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Quite simply, this double-dipping is a good thing. When somebody is getting their Canadian Forces superannuation, part of it is the lifetime benefit and part of it is the bridge benefit they will collect until age 65 no matter what. Most people take CPP at age 65. For those people, at age 65 the bridge benefit drops off and CPP kicks in.

People can take CPP early, at age 60, at a reduced level; it's reduced by 0.5% per month before age 65. From 60 to 65, they're still collecting the bridge benefit, because the plans are totally separate. The bridge benefit still only disappears at age 65, but they're also collecting their reduced CPP from age 60 to 65. So they're collecting the double benefit. That's fine. That's a good thing.

At age 65, when the bridge benefit disappears, which is not related to CPP at all, that reduced level of CPP is going to stay there, and yes, they will see a reduction, because they have made the choice to take a 30% reduction in their CPP. At age 65, the bridge benefit still goes and the CPP remains forever, but at that reduced level.

Those people will undoubtedly see a reduction in total pension amount at age 65. That's the decision they made. They get five years of extra benefits, or double-dipping, but at 65 that comes to an end. They need to figure out how long that benefit lasts. For some people, it might be seven years and for some it might be 10, or whatever; it depends on their circumstances. But there's a crossover point sometime after 65 where the benefits of that double-dipping wear off.

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

Thank you.

[The Chair, Conservative, David Sweet]

That's your time, Mr. Stoffer.

Now we'll go to the Conservative Party for four minutes, with Mr. Mayes.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

Thank you, Mr. Chairman.

Thank you to the witnesses for being here today.

I'd like to direct my first question to Mr. Hawn. One of the things that seems to be thrown out there, and I get e-mails and letters to the editor on this, is how unfair this is to the veterans and how the members of Parliament, the senators, and the Federal Court judges are better off.

Mr. Stoffer played that up, I guess to get sympathy for the cause, but ultimately the facts are these. When you were paying into your superannuation and they came along and said, okay, your CPP contribution is going to be deducted out of your premium for your superannuation--correct?--you really had more take-home pay than you would have had if you had paid the CPP premium independent of your superannuation. Is that correct?

[Laurie Hawn, Conservative, Edmonton Centre, AB]

The blending of the pensions meant that contributions were blended, so my total deductions for pension stayed about the same. It's just that some went to CFSA and some went to CPP. So I really took home the same pay.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

But in your pension as a parliamentarian now, if they said, okay, we're going to take your premium for your CPP out of your superannuation contribution, you'd have more take-home pay, about $2,000 a year. Is that correct?

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I'm not totally following your logic, but--

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

The fact is that when you were contributing to your Canadian Forces pension, you didn't have to pay into CPP.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Well, no, part of that contribution went to CPP--

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

That was part of the blending of the contribution.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

--and it showed up as a CPP contribution.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

Yes, but you didn't pay two premiums. Today you are paying two premiums. Is that not correct? One is to your superannuation and one is to CPP.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I'm collecting superannuation now.

I'm sorry, you're correct: part of that goes to pay for CPP. You're absolutely correct.