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.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
I really don't think it's appropriate for me to comment on that as an option in advance of the minister making any decisions as to how he wants to approach the pension plan issue.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay. Can you comment on its effectiveness? The task force says that it would be an appropriate way to transition the pension plan from its current status into one which allows it to be treated as a going concern and to be paid out accordingly.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
Again, I would have no comment on that.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay.
Mr. Skinner, do you think it would be effective if we wound the pension plan up into the public service pension plan as a means to avoid this problem in the future, at least for existing pensioners and existing benefits?
Actuary, Mercer (Canada) Limited
That's an important clarification. It's not immediately clear to me in the report what the intention was. There are a few different variations on that approach on repatriating the Canada Post plan back into the public service plan. One option might be just to bring the assets and liabilities corresponding to retirees, or maybe retirees plus the accrued service of existing actives, or perhaps everyone would participate in the public service plan going forward. It's not clear what's meant there.
I'd say that the answer would depend somewhat on what's left behind at Canada Post.
Liberal
Nick Whalen Liberal St. John's East, NL
Sure. Of those three examples, do you think it would work just for existing pensioners?
Actuary, Mercer (Canada) Limited
I think it would be a help in terms of affordability, certainly.
Liberal
Nick Whalen Liberal St. John's East, NL
Do you think it would be helpful and would work in respect of existing benefits for workers who are still in the service and haven't retired?
Actuary, Mercer (Canada) Limited
I think that financially it's probably of greater effect. I think it's administratively, logistically probably more cumbersome. That's going to be difficult to split their membership between.... We'd have to do a lot more analysis of that option.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay.
Then in terms of new workers, new benefits going forward, why put Canada Post workers on a different playing field from other Government of Canada workers?
Actuary, Mercer (Canada) Limited
That's not a question for me. It's a policy question.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay, fair enough.
I have another line of questioning.
When I was looking at the historical solvency discount rate for Canada Post and I was trying to find similar numbers for the public service pension plan and other government pension plans, how does this 1.25% compare as a discount rate to the other government plans? Maybe Ms. Hemmings can mention the plans that the Finance department oversees. What discount rate are you operating on and how does a 1.25% discount rate for Canada Post compare?
Actuary, Mercer (Canada) Limited
If I could jump in, the public service pension plan doesn't report on solvency, so there's no direct comparator rate under the public service plan.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay.
When you talk about the inflation rate that you're using, one of the other suggestions given by the task force was that we would mark inflation to market rather than use some target inflation level which is higher. Which number is being used here in the chart that you provided for us today? What would be the net result of using a mark to market inflation rate instead?
Actuary, Mercer (Canada) Limited
Yes, the solvency inflation assumption that we're using in our calculations is 2% per year, so that is a bit higher than the about 1.5% as an approximate basis, which I think is how they put it in the task force report. I don't have the numbers in front of me, but I remember I did a rough calculation of the number that was in the task force report, and that seemed about appropriate. It seems about right.
Having said that, I'm not myself very comfortable in reducing the inflation assumption as low as what the task force report would say. I think so-called marking to market is probably more complex than it sounds, and we're really looking at a long-term assumption about inflation. The number of 1.5% is based on a particular read of some bond yields, and I think there are a number of items that can distort that reading.
Liberal
Nick Whalen Liberal St. John's East, NL
How is the Canada Post pension plan doing in terms of returns? How did it do last year?
Actuary, Mercer (Canada) Limited
It did well last year. I don't recall; I'd have to look it up, and I know you're very tight for time, but they exceeded their assumption for investment returns, so there were gains.
Liberal
Nick Whalen Liberal St. John's East, NL
What was the assumption, then, for investment returns for this year?
Liberal
Nick Whalen Liberal St. John's East, NL
Ms. Hemmings, how did the public service pension plan do last year?
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
I'm sorry, but I'm not able to respond to that. I only look after the federally regulated pension plans and the public service pension plan is not part of our portfolio.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay.
In terms of the federally regulated, how did Canada Post do vis-à-vis its competitors?
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
In terms of returns, amongst the crowns it was pretty on par.