Finance Committee on Feb. 28th, 2012

[Daniel Kelly]

Yes.

[Shelly Glover, Conservative, Saint Boniface, MB]

As Monsieur Dubreuil said, please don't force our employers to have to go into this kind of a plan. If we force those low-income and modest-income earners who are the small-business owners, what could happen to them?

[The Chair, Conservative, James Rajotte]

Very briefly.

[Daniel Kelly]

Not only would the small-business owner struggle to do that, but the employee who is at that modest level of income may find himself or herself out of work altogether if there were a payroll tax increase on the employer.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

We'll go to Mr. Marston, please.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you, Mr. Chair.

Mr. Kelly, you talked about one of the municipalities having an unfunded liability. I want to bring this back to the federal--since this is a federal committee. I want to quote Greg Hurst of Benefits Canada, because I think it's important.

...truth is that the federal government took steps more than 10 years ago to rein in the growing value of the Superannuation Account and improve management of its unfunded pension obligations. Both employer and employee contributions for pensions in respect of service after March 31, 2000, are invested by the Public Sector Pension Investment Board, and the latest reports of the Chief Actuary show that those pension obligations are fully funded with modest surpluses. ... Thus, there is no crisis of unfunded pension obligations for the federal public service.

The other point I'd like to make is that Environics will tell you that the average public sector pension is $18,000 a year. I think it's important to put that on the record because of the fact that yes, there are unfunded liabilities across the nation, and I'm not disputing that with you, but I just think it is very important.

Mr. Wrobel, I'll come back to you for a second. Neil Mohindra of the Fraser Institute is not necessarily a good friend of the NDP, so I point that out. He said,

The unnecessary compliance costs associated with the new regime will make it difficult for PRPPs to be offered to employers at a lower cost than existing types of group plans. This completely defeats the purpose behind the creation of PRPPs.

One wonders why we would have another voluntary private sector plan at all.

[Marion Wrobel]

I think what Mr. Mohindra is suggesting is that the regulatory environment needs to be more efficient and more appropriate to the nature of the PRPP. I think it's unfair to dismiss the value of a PRPP because there's a regulatory environment that imposes a lot of burdens on it.

Our message is that it's important that there be harmonization—that there be a single set of rules applying to PRPPs, and that the level of regulation be appropriate to the nature of the product. If that's done, we in the banking industry believe that we can deliver it efficiently at low cost and to the benefit of employers and employees.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

I have a question for Dr. Turnbull, if I may. One of the things you talked about was the defined benefit plans. Some people believe—and I've heard it said here—that there is an incentive for people to move some of their plans from a regular pension plan as we know it today. There will be an incentive for corporations to move them over to this. Do you have any thoughts on that?

[Dr. Jeffrey Turnbull]

Perhaps you don't know, but the Canadian Medical Association, through one of its wholly owned subsidiaries, has a management financial organization called MD Management Limited. We would now have the opportunity, as a medical association, to move and be able to balance our RRSPs to defined contributions and provide the appropriate mix for our members, tailored to the specific individual needs of our members, and we would be held fully accountable to that. So by allowing us the opportunity of blending, mixing, and having the flexibility that would meet the unique needs of our membership, we would be able to do that quite readily to meet the needs of our members.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

In your case, I suspect that's something they look forward to.

Ms. Eng, perhaps you'd be interested in answering this. My concern is that if one uses a place like Bell Canada, for example, where I used to work, they have a defined benefit pension plan at this point. Would there not be an incentive for them to move that plan away from the defined benefit plan because in that particular relationship the collective agreement does not cover the benefit--it's something separate from the collective agreement?

[Susan Eng]

At this point, there is already a lot of migration from defined benefit plans to defined contribution plans in the general sector, which is why people are not getting the vehicles that help them save for retirement.

I think it's important for us to look at the broader picture. We are trying to look at a savings vehicle that will help a person save over an entire working career. Nothing is going to happen immediately.

If you had an extra $1,000 or $10,000 to spend a year, the question is whether you would spend it on supplementary CPP payments, for example. Would you put it into a PRPP? Would you put it into a defined contribution? Those are the choices. We maintain that of those choices, the most useful for the average person trying to save for his or her own retirement adequately and effectively would be to buy the next layer of CPP.

Whether we can make that mandatory is another debate. We would argue that if you made it mandatory, more people would stay in. If people can't stomach it being mandatory, then make it so attractive that they would go naturally.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Marston.

As the chair, I'm going to take the next round.

Mr. Turnbull, I wanted to follow up with you. I met with the Ontario Medical Association regarding their proposal, which is what you've mentioned today with respect to allowing the association to act in that way. I wanted you to expand on that proposal. Would it be the provincial associations that would act in this way in terms of offering the PRPP, or would the CMA do this as well?

[Dr. Jeffrey Turnbull]

It could be a combination of either, Mr. Chairman.

The OMA, a large organization of 26,000 members, with an established track record, has its own investments and its own insurance processes. That group would probably take that on in their own interest, and they would probably lead that initiative. However, small provinces—Prince Edward Island, Nova Scotia, etc.—would probably turn to a larger umbrella organization, such as the CMA, and the CMA would take a leadership role in coordinating and implementing that for its members.

[The Chair, Conservative, James Rajotte]

Could you just explain the details? You obviously have a physician with an office. It's a small business, in a sense. The PRPP could apply to them. If you're having the Ontario Medical Association act in this manner, where would the fiduciary duty, which is in the legislation now, lie? Where would that lie? Would that lie with the OMA?

[Dr. Jeffrey Turnbull]

It would lie with the OMA, and they would be held accountable for that through the regulators, but also they would be held accountable by their members.

[The Chair, Conservative, James Rajotte]

Okay.

I know that this is a bit off topic, but we've been having a very good debate on the PRPP, the CPP, and everything else. You touched on something, frankly, that was an issue raised with me in my town-hall pre-budget consultations with respect to long-term care. I wanted to take this opportunity, because I think it's related to the whole issue of retirement income and income security. You mentioned it at the end of your presentation. I wanted you to expand on what you were recommending with respect to some of the options for long-term care.

[Dr. Jeffrey Turnbull]

Thank you very much for this question.

This is something the CMA feels very passionately about. I think that most Canadians don't recognize the overwhelming cost of long-term care for them individually, and they're not well planned for the additional expenses incurred for the ongoing care of our elderly.

We think there are many different options and ways to address that problem. We think you could have things such as a tax-free registered retirement long-term savings plan. That's one option we could consider. You could consider working on other social insurance plans. You could use your taxation system, as has been suggested, to help informal caregivers in the home.

There are many options we can engage in to support this burgeoning problem of supporting our elderly in the home or in long-term-care facilities, the cost of which is going to be overwhelming for many families.

[The Chair, Conservative, James Rajotte]

On the first one you mentioned, with respect to long-term tax-free savings, are you recommending somehow expanding the tax-free savings plan we introduced, or something related to it, or something different?

[Dr. Jeffrey Turnbull]

Yes. That would be one recommendation we would like to have. We could consider creating a plan such as that, a registered retirement long-term savings plan. Money could be invested at this point in preparation for you as you age. That's intergenerational fairness. You're actually saving for your own retirement and long-term-care support.

[The Chair, Conservative, James Rajotte]

I appreciate that very much.

Mr. Wrobel, I wanted to come back to Mr. Jean's point, because I think he was trying to clarify with the CBA. I've talked to a lot of your members and I've laid out the concern that a lot of people have who oppose this type of initiative. They say it's going to be people investing, but the fees are going to be so high that the banks and insurance companies are going to make money but individuals are not going to be able to save for their retirement. I think he was looking for you to provide some assurance that this is exactly not what the banks and insurance companies are going to do, and I think your answer was not quite clear.

[Marion Wrobel]

Mr. Chairman, thank you for that.

I think everyone expects and understands that this is going to be a fairly simply product. It's going to be therefore a low-cost product. That's what the government wants. I think we are building these plans with that expectation. We do have a variety of products that are out there right now that are fairly low cost, in terms of management expense ratios. Again, they're kind of simple investment products, and we think that's the kind of thing that would fit into a PRPP. So that is exactly the way we are planning on delivering this product.

[The Chair, Conservative, James Rajotte]

Thank you.

My own time is up, so I'll go to Mr. Brison, please.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Chair, I would really appreciate you asking Ms. Eng the same questions that you put to Mr. Turnbull. If we all agreed—

[The Chair, Conservative, James Rajotte]

Sorry, I'm not getting translation here.