Good morning. I am Siim Vanaselja, executive vice-president and chief financial officer of both BCE and Bell Canada. I am appearing today with Mr. John Farrell. John is the executive director of FETCO. And I'm also appearing with Mr. Brian Aitken, the chief financial officer of Nav Canada. We're appearing on behalf of Federally Regulated Employers - Transportation and Communications.
FETCO is an organization consisting of a number of employers and associations in the transportation and communications sectors, and they all come under federal jurisdiction. FETCO members employ approximately 586,000 employees. Many members are sponsors of pension plans, which are federally regulated.
The current funding regime governing defined benefit pension plans has led to a critical juncture where the very ongoing existence, I'd say, of defined benefit plans is being severely threatened. We are here today to present the way forward, one that we believe strengthens the security of benefits while not unduly constraining the financial flexibility of plan sponsors to maintain appropriate levels of investment in their business. Our recommendations have already been made to the government as part of the public consultation process led by your parliamentary colleague Mr. Ted Menzies, and we greatly appreciate this opportunity you've given us to present our recommendations to the finance committee members.
Pension funding is a burning issue, as you know full well. In the case of federally regulated companies, many large plan sponsors are having difficulty continuing to fund their pension contributions under the current rules without significantly reducing investment in their businesses in the form of capital expenditures that they desperately need to remain competitive and healthy. The pension situation predates the current economic downturn, but I'd say the financial market turmoil has most definitely exacerbated this situation.
The current rules for measuring the solvency position of pension funds as well as the current requirement to fund solvency deficits over a short five-year period result in a severely volatile system that can cause swings from surplus to deficit positions, or from small to large deficits from one year to the next, and from requirements for massive cash injections to positions of over-contribution or trapped capital amounting to hundreds of millions of dollars. Clearly, such volatility and uncertainty is untenable in managing business operations that have long-term capital projects, particularly in today's economic climate.
It is our firm belief that without the reform measures we are proposing, companies will have to significantly lower their capital spending programs that fuel economic growth and employment. Sponsors of defined benefit plans are also at risk of having to eliminate their defined benefit plans altogether in order to remain competitive. That does not spell good news for companies, for employees, or for the government.
FETCO represents some of the largest and most well-known companies in Canada, as I've said. And in terms of capital spending plans, I would cite BCE as one example where our plans call for investment of more than $3 billion in Canada this year alone.
For the last four years, our member companies have been advising Finance Canada that the solvency rules require urgent change. Twice in the past three years the government responded with a temporary regulatory fix that addressed only the funding period. I believe the government recognizes that the temporary fixes are no longer sufficient and that permanent change is necessary. In January, the government launched its consultation process on pension reform.
Let me turn to our proposals, which we believe address the important principles of balance, transparency, and benefit security.
FETCO's recommendations were developed with two key objectives in mind: first, to protect the health of pension plans and the security of pension benefits for all plan members; and second, to address the counter-cyclical and highly volatile nature of solvency funding which impedes the capital investment needs of large plan sponsors. I'd now like to turn to my colleague Brian Aitken to describe the specific proposals that we believe achieve these important objectives.
Brian.