Evidence of meeting #22 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plan.
A recording is available from Parliament.
Chief Operations Officer and Senior Vice-President, Canada Pension Plan Investment Board
Our annual report, I think, gives 14 pages of disclosure on our compensation plan, and our annual report this year will be as thorough as it was in the past in its disclosure.
NDP
Thomas Mulcair NDP Outremont, QC
Isn't it possible that it's because you can't gain the public market's benchmarks as easily as you can gain the private benchmarks?
Conservative
Conservative
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you.
This is following that up. Here we are a public board and the compensation is pretty impressive, by anybody's standards, yet simultaneously we have private corporations, such as the banks, in which many of the CEOs and senior management of the banks have eschewed their bonuses and backed off their opportunities and, if you will, legal entitlements to receive compensation far in excess of their base salaries. It seems to me that the board could learn a great deal from the private industry, particularly the financial institutions, in their handling of their entitlements.
I'll leave it at that, because it's ultimately a moral decision on the part of the board.
I want to talk to Mr. Ambachtsheer here. You put forward a fascinating idea. The understanding I have of it is that it appears to be kind of a parallel plan to CPP. I want to go into the flexibility issue here. I'm looking at it for a person who has an RRSP. The attractive thing for a person with an RRSP is that you would get an employer contribution to the money that would be put in by you as an employee, whereas with an RRSP you wouldn't necessarily get an employer contribution. On a kind of a negative option billing, which is kind of your idea here, I'm almost forced into this plan by virtue of the fact that my employer is not going to make any contribution if I opt out. Is that correct?
Director, Rotman International Centre for Pension Management
My proposal is described in 16 pages. You're asking a question that would be on page 17.
Clearly, there are a lot of specifics that would need to be put in place in order to press the go button on this. In my proposal, what I suggest is that the contributions start above $30,000. In other words, low-income workers are largely, from an income replacement point of view, covered by OAS, GIS, CPP. So this is a middle-income issue that would start at $30,000 and take it up to the maximum wage where you get full deduction, which I think is currently about $150,000. Over that range, a 10% deduction would lead to a target income replacement, including pillars one and two, of about 60% of final earnings.
That's what the target benefit is designed to be in my proposal. If you do the math on what kind of contribution rate you need in order to hit that target, it works out to about 10% of pay, from $30,000 up to the maximum.
Another question is, where does that 10% come from? In my proposal it would be split 5%-5% between the employer and the employee. Again, you get to the question of mandatory versus optional. In my proposal, both parties have an option to opt out.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
If it looks like CPP, walks like CPP, and talks like CPP, why isn't it CPP? Why not just simply make it CPP?
Director, Rotman International Centre for Pension Management
Here's my answer, and Monsieur Ménard may want to add to this. I have a serious problem with those people who say, why don't we just double the CPP and forget all this other stuff? So we move the contribution rate from basically 10% to 20% and drive on. That's a hugely complex issue, because if you move all workers, 25-year-olds and 64-year-olds, all with a 10% increment, then that next year's benefit that the 64-year-old is going to earn starts one year later because he hit 65. The 25-year-old pays the same 10% of pay and his incremental benefit doesn't start for 40 years.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
That also raises the interesting question, this is a payroll tax, isn't it? The third rail of politics around here is any phrase that includes “taxation”. Isn't this a payroll tax? It has to be?
Director, Rotman International Centre for Pension Management
If you go to a mandatory approach and if you have a target of doubling the CPP, then it has to get paid for. So if you want to call it a payroll tax, that's fine.
Director, Rotman International Centre for Pension Management
But my problem is the wealth transfer aspect. If you increase--double--the system, it doesn't stabilize for a long time, and on the way through the young are subsidizing the old, and I don't think that's fair.
Conservative
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chair. Good morning, ladies and gentlemen. I would like to extend a special greeting to Mr. Gagné, from the Communications, Energy and Paperworkers Union of Canada, and to Mr. Auclair. I think it is really important that you are appearing before us this morning. You are here in response to our invitation. I think the situation you described is more down-to-earth than what we usually hear. All those who administer pension funds describe the situation using a lot of figures, but I think they are quite far removed from the real situation people face.
Mr. Auclair, I think that you spoke a little earlier about a pension protection plan that Ontario already has. Is that correct?
Member of the Retirement Committee, Smurfit-Stone, Communications, Energy and Paperworkers Union of Canada
Yes.
Member of the Retirement Committee, Smurfit-Stone, Communications, Energy and Paperworkers Union of Canada
Yes, that is correct. I am not that familiar with the legislation myself, but I think Renaud knows more about it than I do. I believe that an act on pension plans was recently passed. It is designed to protect workers from losses. I do not know whether it is in force yet or whether it will be soon, but I am sure Renaud will have a better idea than I do.
Vice-President, Quebec, Communications, Energy and Paperworkers Union of Canada
Yes, there is a $100-million reserve for pension plans. There is also a system whereby employees who lose their jobs at age 50 do not have to wait until they are 65 to transfer money into a lock-in retirement account or LIRA. These people can therefore find a job or get employment insurance for a while, and still get their pension at age 55. This system was used when the Domtar plant closed. The half of plant employees who lived in Ontario were able to use this system, but not those who lived in Quebec. The impact is quite significant when someone who is 54 can get their pension at 55 and not have to wait until they are 65.
This illustrates how difficult it is to restructure the markets. We know that some plants have to close, as I was saying earlier. We have been working on consolidation for three years now. In order to allow employees with the most seniority to leave, we even took some of the vacation pay of wage earners to finance those taking early retirement, as a way to avoid or lessen the expected actuarial reduction; we did this because the employer simply had no money. We did virtually everything we could to help older workers leave. The biggest problem is that, once companies come under the protection of the Companies' Creditors Arrangement Act, they stop paying into the pension plan. This worsens the solvency deficiency, and if the companies later go bankrupt, there is a 30% reduction in the pay cheque for 10,000 retirees in Quebec, as Mr. Auclair said.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Given how urgent the situation is, I think we have to come up with some solutions quickly. Mr. Auclair, you also talked about a federal program that would ensure companies had managers, despite their financial difficulties.
Member of the Retirement Committee, Smurfit-Stone, Communications, Energy and Paperworkers Union of Canada
In the United States, the senior management of Smurfit-Stone gave themselves a $47-million bonus. Meanwhile, in Canada, they are turning to the CCAA, the Companies' Creditors Arrangement Act, and threatening to close down some plants, and, if they go bankrupt, to cut workers' pensions.
Member of the Retirement Committee, Smurfit-Stone, Communications, Energy and Paperworkers Union of Canada
Yes, I am, at the moment.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I will now turn to Ms. Warmbold and Mr. Raymond to talk about the bonuses that are paid despite companies' financial difficulties and poor performance.
I would like to join those who say that this is absolutely scandalous. People are not getting their pensions, and the companies are performing poorly. I have my own investments on a small scale, and they, too, have gone down, just as most investments have at the moment. Although we are told that we have to look at the long-term performance of these investments, this is still unacceptable. And it is scandalous to hear that, in a year of poor performance, the people who invest our money are getting bonuses despite the poor performance they achieved.
We know that some very substantial compensation....
