Finance Committee on April 22nd, 2010

[Tony Wacheski]

Right now, it's 69%; that's what they think. It will be calculated at the end of the year. The Ontario pensioners get the benefit of the pension fund.

As a severed employee, I took out the commuted value at 69%. If I would have got my full 100% of the commuted value, I would have been able to buy an annuity at only 62% of what the pension was worth. I'm behind twice.

The pensioners are in a better place than the LTD people, who are getting nothing. The severed people are losing all of their severance, as well as whatever pension deficit they have equal to the pensioners.

[The Chair, Conservative, James Rajotte]

I'd like to follow up, but we have to go to the next round.

We have Mr. McKay, for five minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

My first question is to Ms. Nielson. With respect to item six of your top ten, “Equalize the payroll tax assessment on different forms of retirement savings”, currently contributions to RPPs do not track EI and CPP, and RRSPs do. I don't understand that, and I don't understand the rationale behind it.

[Norma Nielson]

I think that's my point. I don't know that there is much of a rationale behind it.

Essentially we're seeing a lot of retirement savings occurring through group RRSPs, which is a mechanism that was designed with individuals in mind. When we see an employer deciding whether to do a defined benefit plan, a true DC plan, or a group RRSP, one of the factors they may think about is that if they go with a DC plan, they save this 5% of payroll and this 1.4% of payroll. If they go with a group RRSP, which tends to be the smaller employers, because it transfers the administrative responsibility largely to one of the larger insurance companies or large institutional investor-type companies, they pay the contribution into the group RRSP, and they pay the 5% of payroll to CPP on the same dollars, up to 47%.

[John McKay, Liberal, Scarborough—Guildwood, ON]

This is plan-to-plan. This is DC-to-DC and DB-to-DB.

[Norma Nielson]

This is when the employer is choosing whether to offer a DC plan or a group RRSP. If they choose to offer the group RRSP, they're implicitly choosing to pay higher payroll taxes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

But is that necessarily a defined benefit plan?

[Norma Nielson]

No, group RRSP, by definition, is closer to a DC plan.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Exactly. So there doesn't seem to be any rationale one way or another as to what attracts--

[Norma Nielson]

No, it seems to be an evolution in the marketplace. The RRSP, which was originally designed for individuals to go to the bank on February 28 to stick money in an account, has been adapted to provide efficiencies and economies of scale by covering a few hundred people at a time.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So one costs the employer another 5% on top of whatever the--

[Norma Nielson]

And it perhaps costs the employee. It more likely leads to lower enrolment by the employees because they have that much less disposable income.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Cadieux, the issue you seem to be most concerned about has to do with the state of voluntariness, shall we say, with respect to the deductions. You make a good argument that a voluntary deduction won't cut it. The question then becomes is it a mandatory deduction, or is it one of these automatic deductions with an opt-out—a negative option billing concept? Between those two choices, what would you prefer?

[Serge Cadieux]

Neither one. It has to be a mandatory contribution deducted from income, just as there is a mandatory contribution to employment insurance. A wage earner does not have the choice of not contributing to Employment Insurance.

The last 40 years have been a failure. Voluntary contributions have meant that 70% of Canadians do not have an RRSP.

[John McKay, Liberal, Scarborough—Guildwood, ON]

And would you apply that mandatory to...? Would you treat private plans in the same manner as you would a hybrid CPP or a QPP?

[Serge Cadieux]

Some places have defined benefit pension plans, but others do not. Sixty per cent of workers do not have a pension plan. The majority of those who do, have integrated plans. So, if we enhance the public plans, pressure on the private plans will be reduced. In a way, it would be a transfer of contributions. And people who have no pension plan would have access to a more decent pension income—$22,000 rather than $11,000, which is the current amount.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you.

Mr. Wacheski--

[The Chair, Conservative, James Rajotte]

Very briefly.

[John McKay, Liberal, Scarborough—Guildwood, ON]

--you're proposing that you amend the BIA and CCAA immediately and retroactively?

[Tony Wacheski]

Yes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Have you talked to lawyers about that?

[Tony Wacheski]

Yes. This all comes down to the deal that was struck and some of the difficulties that happened around it. As I said, the bond holders and the creditors realized that if the BIA was changed they would be negated. So they came to us and said they had a deal if we gave up all our rights to sue, all our rights to everything, including any future changes to the BIA because there might be criminal activity, and they'd give us for the severed a $3,000 loan on our money and then for the LTD a little more health care in the rest of the year.

Retroactively, I'm saying the law can change now for any case that's in CCAA now or BIA now. Not so long ago the credit default swaps were changed retroactively to help the asset-backed paper problem we had a couple of years ago. That was changed during this thing for the banks, and why can't we do the same thing for the people?

[The Chair, Conservative, James Rajotte]

Okay.

Thank you, Mr. McKay.

Ms. Block, please.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much, Mr. Chair, and thank you all for being here today. I've really appreciated the discussion we've had so far.

We have heard from a number of witnesses over the past few weeks who have shared with us from many different perspectives, but I believe they have agreed on a number of things, and the first is the importance of consulting.

Mr. Cadieux, I heard you speak today about the importance of a pension reform summit and the need for us to do that, and you even noted the apparent rush by our colleagues across the way to come up with solutions before we've completed that process.

Ms. Nielson, you identified the fact that our system is evidently being served relatively well. In fact, this would be supported by a number of things we have heard along the way.

Finally, you also noted there is tremendous room for simplification and harmonization of retirement income legislation and regulation, and you recognize this is not something the federal government can do in isolation, so we've also heard we need to be working with our provincial counterparts in terms of looking for solutions.

I'm just wondering if that's what you meant by that comment, if you would like to expand on that.

[Norma Nielson]

That is precisely what I meant. I have a 22-page booklet with 11 rows listing the different requirements in 11 different jurisdictions for pension law and pension compliance. It adds an incredible administrative burden and has to add to the cost of any employer's plan. If you want more employer plans or a slower demise of employer plans, make them more manageable and more affordable.