Evidence of meeting #53 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was post.
A video is available from Parliament.
2:20 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Yes, but it protects the base pension. It's just the indexing.
2:20 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Okay.
Ms. Cover, do you share the same opinion that this is perhaps a strong alternative?
2:20 p.m.
Director, Pension Strategy & Enterprise Risk, Ontario Teachers' Pension Plan Board
Extremely strong, and it gets more powerful every single year from the line in the sand that you choose. In our case, it was 01-01-2010, and only six years later we're already seeing a very large impact in terms of the ability to reduce deficits by lowering inflation protection.
2:20 p.m.
Conservative
October 31st, 2016 / 2:20 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
It's very worrisome this testimony we've been hearing, and certainly what we know. In fact, if we were not talking about Canada Post as a going concern business, we also would be very concerned about the pension itself.
Can we wrap this up a bit? Can the panel tell us what are the elements of a well-run pension plan? What would be the elements that we would need to have in place to see this as a going concern going forward, to see this as a viable pension plan going forward?
I'll start with Mr. Skinner.
2:20 p.m.
Actuary, Mercer (Canada) Limited
I would say that some of the things we've talked about would be very helpful.
If I can put it this way, one thing that's difficult for a traditional plan like the one in place today is the lack of flexibility around benefits. In terms of all the benefits, first, they're generous in the marketplace—they're essentially exactly like what's in the public service pension plan—and fully guaranteed. That level of guarantee and that level of benefit are expensive to provide.
If, when times are bad, there is a safety valve, if I can put it that way, to scale back on those benefits, even temporarily until things recover, then you can restore them, and that kind of flexibility has a huge impact on the risk sharing and on the sustainability—that, combined with sound investment practices. Also, I think joint governance does help, because it can remove some of what can be an adversarial approach to pensions and get all the parties pulling in the same direction.
2:20 p.m.
Liberal
2:20 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
Yes, of course.
Ms. Hemmings or Ms. Pezzack, especially in the realm of crown corporations, along that line.
2:20 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
It's difficult for me to speak to what I think would be the key things that would make a pension plan a success without giving away some of the considerations that we would take into account in developing options. It's not appropriate for me to get into too much detail on that.
2:20 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
Okay, I understand.
What would be the way forward if we were to look at something? It strikes me that it's the tail wagging the dog here. If we were to decouple, to separate the pension plan entirely from the plan administrator at this point, the current sponsor, what would that look like?
What would that involve? Are we talking about insurmountable hurdles or can we anticipate...? These are very turbulent times, to use one of those old clichés, but it is true in the pension world that things are not as they were. In fact, they never really were for very long, and all of us here are old enough to remember very different times as well.
Is that possible? Can you see management and unions getting together and making this work?
2:25 p.m.
Actuary, Mercer (Canada) Limited
[Inaudible—Editor] comment on the labour management issue here, but I will say two things on whether or not joint governance can be the solution for Canada Post. The first is alignment of interest. The various stakeholders need to have interest that is possible to align. The second one is there has to be cost sharing between the stakeholders, and I'm willing to say between all stakeholders, including retirees.
These two issues are a major challenge. I do not want you to think they're easy to achieve.
2:25 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
Okay, thank you.
Briefly, would someone like to comment on what came up fairly recently about Canada Post retirees taking the commuted value of their pension and going outside to buy annuities? Mr. Skinner?
It looks like it's a fairly recent decision from the Office of the Superintendent of Financial Institutions that is allowing Canada Post retirees to actually remove their commuted value.
2:25 p.m.
Actuary, Mercer (Canada) Limited
I don't think that's true. I'd have to see the comment to put it in context, but I believe that it's not possible under the current rules for a retiree to commute his future benefit into a lump sum. It is possible when somebody terminates employment—in certain age ranges—that they could take a lump sum.
2:25 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
I thought it was very interesting when government members asked about the solvency valuation of the federal public service pension plan. Of course, the answer is that there isn't one. It wouldn't make sense to assume that the federal government would have to wind up its pension plan and pay out all the benefits at once.
I guess my question would be, why is Canada Post different from that? Why are we treating Canada Post as a private company rather than like it's part of the federal public service?
2:25 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
I wasn't around back in 2000.
There was a review, I believe, in the late 1990s—and I may be getting my facts mixed up—where the government of the day was looking for cost savings. They looked at various crown pension plans that were under the PSPP, did a review, and made the decision to move it out from under the PSPP into the PBSA. There may have been some rationale, some consideration, given to the fact that mail services were not part of core government and therefore it should be spun off.
2:25 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
During the 1990s, the period you referenced, the federal government was also privatizing a number of crown corporations. Certainly if the government were in that mode, it would need to get their pensions on a solvency valuation, which would appropriately be required in the private sector. Given that no one is actually proposing to privatize Canada Post, I wonder whether it might make sense to treat it more like the rest of the federal public service.
I'd welcome views from Mercer on this as well. I asked similar questions to the other witnesses in the last round, but certainly if folks from Mercer have any views, I'd welcome them.
2:25 p.m.
Actuary, Mercer (Canada) Limited
I would say it's an issue of policy, about how much of a distinction you want to make in the rules between public sector and private sector pension plans.
Ms. Hemmings made the point earlier about a level playing field. To the extent that especially if a crown corporation is competing in the private sector, there could be an argument that it's unfair competition.
2:25 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
I don't think the private courier companies have defined benefit pensions, so that's a fairly hypothetical argument. However, I take the point.
2:25 p.m.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much, Mr. Weir.
I want to thank all of our witnesses for being here.
I have one quick question for Ms. Cover.
I'm curious about the joint governance structure that you have in your pension plan. I know the Ontario pension plan has made many investments over the years. The one I'm most familiar with recently is that in the last two or three years you purchased the Assiniboia Farm Credit Corporation. Would those investment decisions be made in a joint governance structure as well?
2:30 p.m.
Director, Pension Strategy & Enterprise Risk, Ontario Teachers' Pension Plan Board
Yes, our board actually has oversight. Because of the structure, our board is tasked with the investments, so the plan sponsors do not have direct influence over the investments that we choose to make.