Evidence of meeting #20 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was retirement.
A recording is available from Parliament.
Executive Vice-President and Chief Financial Officer, BCE and Bell Canada, Federally Regulated Employers - Transportation and Communications (FETCO)
I'm not sure of all the rules governing this, but I believe it may be a company-specific issue. I know that in the case of Bell Canada, we have the ability for people to continue working beyond age 65.
Chief Financial Officer, NAV CANADA, Federally Regulated Employers - Transportation and Communication (FETCO)
And in my company, Nav Canada, there is no fixed retirement date. So I believe it is very company-specific, to a certain extent.
John Farrell Executive Director, Federally Regulated Employers - Transportation and Communications (FETCO)
Perhaps I can comment. I have worked for a number of federally regulated companies and for employers in provincial jurisdictions.
Where the provinces have moved to a non-mandatory retirement scheme for age 65, employers were initially concerned that it would create certain problems. But the fact is that it hasn't created any undue hardship for employers, and employees who want to work longer have benefited from a non-mandatory age 65 regime.
Independant analyst, As an Individual
I think it's important that we start giving more flexibility to people. For example, I leave the caisse or PSP Investments and I want to take my pension moneys, in my own pension fund, and put it with my current employer. I can't do that. There is no pension portability.
These things have to be legislated. You have to give people the right to move their assets from, let's say, one federal employer to another, because that's what they want to do. I mean, this is something that should have been done a long time ago. I don't understand why it hasn't been done yet.
Vice-President, Canadian Association of Retired Persons
And with the universal plan, you don't need to worry about portability.
Liberal
Carolyn Bennett Liberal St. Paul's, ON
In terms of flexibility, let's say you leave your pension there but decide, when you have to draw it down, to keep working, even part time. You want to keep an income that's the same as what you were used to. Is there a way that we should change it such that people can move to part-time work and a partial pension, leaving the rest in place?
Executive Vice-President and Chief Financial Officer, BCE and Bell Canada, Federally Regulated Employers - Transportation and Communications (FETCO)
I think that's a very good idea. Again, within the Bell Canada system, we do have a lot of that flexibility today. Sometimes we have to negotiate that with each individual employee, but in terms of the example you've put forward, we have individuals specifically under those types of systems.
Vice-President, Canadian Association of Retired Persons
But it is a patchwork. It depends on each separate private pension contract. Some people have it, some people don't. Some people have employers that provide that flexibility, some people don't. You need to look for some kind of minimum standard that provides flexibility for everybody, that provides portability. You need to make sure that the ethics of allowing people to work, of keeping the dignity of work, of keeping their access to their funds for their own retirement, are constants throughout all of the pension plans in existence, including any new larger plan.
Conservative
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Thank you, Mr. Chair.
Thank you, guests, for your very interesting analysis.
Mr. Vanaselja, you mentioned in your statement that your proposals are balanced and won't expose pensioners to more risk. That's obviously of great concern to the pensioners and to all the members of this committee who represent those pensioners in their constituencies. Can you elaborate further as to why you say pensioners wouldn't be faced with more risk.
Executive Vice-President and Chief Financial Officer, BCE and Bell Canada, Federally Regulated Employers - Transportation and Communications (FETCO)
Yes, I'd be happy to.
I think one of the most significant risks that pensioners face today is on the termination or wind-up of a pension plan. Today there's no debt contract created between the retirees, the employees, and the sponsoring company. Our proposal is that when a company terminates its plan there would be a debt obligation created whereby the sponsor of the company would have to fund those pension obligations, either up front or over a period of five years. We would like to balance that proposal, which strengthens the benefit security for employees, with the ability to extend the funding of solvency discount rates from five years to ten years, again recognizing the long-term nature of those liabilities and recognizing that the reality is that most companies are going concerns. Nav Canada, Bell Canada, many of the members we represent have been in existence, like Bell Canada, for over 100 years, and will hopefully be in existence for another 100 years. If we can protect employees at the time when a plan is terminated or wound up, we believe it's appropriate to extend the time horizon for funding.
And also, recognizing that the going concern valuation already allows 15 years of funding, it seems to us quite punitive to have a short five-year period on solvency funding.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
In regard to your proposal on increasing the amortization period to 10 years, are you aware if any other countries have a similar rule?
Executive Vice-President and Chief Financial Officer, BCE and Bell Canada, Federally Regulated Employers - Transportation and Communications (FETCO)
Yes, the U.K. has a longer rule for funding, and the U.S. has longer as well. There are other countries.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Thank you.
Mr. Lamoureux, in your presentation you mentioned that tax changes are required to allow larger cushions to be accumulated before attracting tax. Could you elaborate on that a little? I wasn't quite clear on that.
Special Advisor, Canadian Institute of Actuaries
What happens now in a pension plan is that you can only accumulate a surplus equivalent to 10% of the liabilities. So you can see that with the volatility...the stock market, for instance, has a volatility of 18%. So you have to run the pension plan, and I can give you examples of plans that went into excess surpluses. At that point the employer has to stop contributions, and most of the time that means the employees stop also, so in a span of two years you can go from having too much money to not having enough. You have to run your plan between, essentially, equal to your liabilities and a maximum of 10% above those liabilities. It's a fairly narrow corridor, and what I'm advocating is that this corridor should be extended, because clearly you want to have the assets equal to the liabilities. I think there's room, in fact, to make it.... If it were 90%--I don't think people should necessarily die on the hill--then you could extend the amortization period, but that's really the idea. The tax law makes it so that you get only the maximum surplus, which is 10%.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Have you made a specific recommendation on changes to the Income Tax Act to the Department of Finance?
Special Advisor, Canadian Institute of Actuaries
A number of pension plans were exempted about seven or eight years ago, the pension plans where the employees take the risk, and these were mainly large Ontario pension plans. As I said, on those, the maximum is something like 25%. But this has never been extended to any other pension plan.
Conservative
Vice-President, Canadian Association of Retired Persons
Yes, I'd like to point out that the tax rules don't prevent you from contributing to the surpluses. You don't get tax deductions if you put it into your plan. If you wanted to set up a surplus fund or a contingency fund outside of getting a tax deduction for it, nothing stops you from doing it; it's just that nobody will. That's one thing.
The extension of the five-year to ten-year deficiency funding rules troubles me considerably, because it means that pensioners are at risk for a longer period of time, with no condition, no protection. I think it is something that needs to be fixed in the rules, so that there actually is some kind of protection for the pensioner when there is a need for extending the deficiency funding.
Conservative
The Chair Conservative James Rajotte
Either you can have him comment or you can have a question, but you have 30 seconds.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Okay.
Ms. Eng, I wonder if you could comment on how the extension of pension income splitting has benefited your members in the past.
Vice-President, Canadian Association of Retired Persons
It was a huge benefit, because the tradition up to now is that there's usually one pension-earning spouse and one non-pension-earning spouse, and obviously when you split that pension income between two taxpayers, you have a net tax savings to the family. It's been huge for many families. It comes to hundreds and thousands of dollars in tax savings, so it has been a great boon and real support for people in their retirement.
Conservative