Government Operations Committee on Sept. 27th, 2016

[Lynn Dollin]

Rural Ontario requires its postal service. Many of the places in rural Ontario do not have reliable Internet. The post office becomes an economic development tool for a downtown. If people have to come downtown to the post office, they might be more likely to stay in the downtown, and that's a downtown revitalization tool.

In the area where I live, I'm in a fairly large municipality of 35,000 people, and yet in the part I live in, it's rural. There are a lot of farms and a lot of seasonal workers. They ride their bikes to the post office to wire money home to their families.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

So there is the wiring of monies there. Partially, banking is being done.

I'll go to you, Mr. Mazer. You have a very complicated work you have presented to us, and that's the pension. In terms of the pension, we were listening to members of the union, as well, who say the financial situation presented by the corporation is not as dire as it seems, but we have Ernst & Young, which has done an audit, so we have some juggling and balancing to do. Ernst & Young claims, despite the fact that the corporation keeps on saying they are in a deficit, that Canada Post keeps showing profit.

You say that converting from DB to DC will be problematic. You state that Canada Post Corporation doesn't have the capability to manage a pension. Would you suggest that the Canada Post pension be merged into the PSAC pension? If so, what impact would it have?

[Alex Mazer]

There are a couple of different questions there. I'll try to address them both.

The first was around what is the financial state of the plan. Part of that debate, which I think you have been hearing at the committee, is around whether the pension should have to make solvency payments, because pensions are funded in two different ways. That's either on a “going concern” basis, which assumes the corporation continues as a going concern, or on a solvency basis, which assumes the corporation winds up.

In Ontario, which I think is the right approach, it's basically saying that you only have to fund on a solvency basis if you don't adopt certain governance changes. If you make some changes to improve the plan—

[Yasmin Ratansi, Liberal, Don Valley East, ON]

What sort of governance changes would you suggest?

[Alex Mazer]

The main change I'm suggesting is moving from a single employer-sponsored plan, with the plan sponsored only by the employer, to one that's sponsored together and governed together with the union. That's the approach that has been adopted by many public sector plans in Ontario, such as the Ontario Teachers' Pension Plan, or the Healthcare of Ontario Pension Plan.

The second question is around merging the plan with other public sector plans. That could have some benefits. I think that's something worth examining, but you need to look at the specifics of what that would involve, which is partly why I'm suggesting a structured process that's taken out of the context of this broader review of Canada Post and taken out of collective bargaining.

These are complex questions requiring some expertise, but there are potential efficiencies of scale to come from such mergers or consolidation that are worth examining.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Because this is a very complicated environment, Mr. Chair, can we send some questions over to him?

[The Chair, Conservative, Tom Lukiwski]

I'm sure the question of pensions will come up again with other members of our committee.

We now go to Mr. McCauley.

[Kelly McCauley, Conservative, Edmonton West, AB]

Let's go to pensions.

Thanks for your comments. We don't have enough time to listen to you fully, but I want to get to a couple of things.

You mentioned defined benefit versus defined contribution plans. We were chatting about this yesterday. We saw with Unifor and GM that everyone was grandfathered on the defined benefit but everyone new is on the contribution plan. You commented on comparable benefits. That plan is not on the comparable benefit one, and I think what had been suggested for Canada Post was not a comparable one as well.

If it's not on a comparable benefit, is it a practical solution to save money, much as General Motors or Unifor has done? I recognize that everyone would like to have more money, but reality is reality.

[Alex Mazer]

What I'm suggesting to the committee is looking at this on the basis of the evidence. What is the most financially sustainable approach and what does produce the most retirement security for the dollar? The answer to that question is often a bit counterintuitive. You hear a lot of debate in the media about how the DC is more efficient, but in a situation like this, where you have an existing defined benefit plan, making that shift can be very expensive. An example—

[Kelly McCauley, Conservative, Edmonton West, AB]

But if you're not shifting to identical and benefit, then it is more efficient and less costly?

[Alex Mazer]

The evidence sometimes suggests the opposite. It can be the opposite because you still have the liability from the plan that you've been running over the years, and in producing retirement security, the new plan that you're setting up can be less efficient for every dollar you put in.

[Kelly McCauley, Conservative, Edmonton West, AB]

But less costly.

[Alex Mazer]

It depends on how you measure the cost. I would urge the committee members to look at that paper done by Dr. Robert Brown, because it is probably the best recent example of work done by an expert in this area.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay. I understand the solvency issue. We know that Canada Post is not going to stop operating, and therefore it's a bit counterintuitive to have the solvency issue, but it did come up that competitors to Canada Post—FedEx, UPS, etc.—do have to follow those rules. Is it not unfair to the competitors of Canada Post to force them to follow such solvency rules for their pension and make such contributions when government-funded Canada Post does not?

[Alex Mazer]

I think the best approach for looking at funding rules for pension plans is the governing structure of those plans and how they are overseen.

When the Ontario Expert Commission on Pensions wrote its report in 2008, it recommended that jointly sponsored plans be exempted from solvency payments, not because they were in the public sector or the private sector, but because they had a superior governing structure that allowed for better risk management and oversight.

I'm suggesting a principled approach, as opposed to just saying that because you're in the public sector you're never going to go out of business, and therefore you shouldn't have to make these payments.

[Kelly McCauley, Conservative, Edmonton West, AB]

I appreciate that. Again, thanks for your comments.

Ms. Dollin, thanks to you as well for your comments. They were very well said, and I appreciate the comment on whether we can go back to the table with Canada Post, because we've heard again and again that there were not great consultations with the municipalities. I live in a riding where it's half community and half door to door, and it's just a way of life for both. It's difficult to change.

I appreciate that Canada Post says to go back to the table and they'll work with you. Where would it not work, under any circumstances, to go a community box in an urban riding?

[Lynn Dollin]

My suggestion is that it would be very difficult in very rural, or remote, or northern Ontario communities. You will understand that if somebody with a disability, maybe, is trying to get to their mailbox and there's a snowbank in front of that mailbox, they're not going to call Canada Post. They're going to call their mayor, their deputy mayor, or their councillor, and they're going to be on the front page of the local community newspaper.

[Kelly McCauley, Conservative, Edmonton West, AB]

Or put your phone number on the Canada Post website.

[Voices]

Oh, oh!

[Lynn Dollin]

Exactly. That becomes an issue.

[Kelly McCauley, Conservative, Edmonton West, AB]

But inside the city itself—

[Lynn Dollin]

Inside communities, I think it's really important, as was demonstrated in Hamilton, that it also work, understanding that municipalities also have rules. Before you plunk down a community mailbox somewhere, know that maybe in that municipality road widening is going to happen, or that maybe there's a better location for it, or that maybe it doesn't fit in with the rezoning that's going to happen on that corner. That type of conversation could be very helpful and could solve a lot of headaches before they happen.

[Kelly McCauley, Conservative, Edmonton West, AB]

Is it fair to say that municipalities generally are open, but talk to them and respect them?

[Lynn Dollin]

Absolutely.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you.