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.
1:50 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
That strikes me as a relatively important point, given that the formula for the defined benefit at Canada Post is structured around a certain assumed level of Canada pension plan.
1:50 p.m.
Actuary, Mercer (Canada) Limited
I'll address that.
The plan is designed as a plan structure, a benefit formula, that does recognize an expected level of CPP benefit. That is true. But it is not tied directly to CPP so if someone takes their Canada pension plan earlier than the assumed retirement age of 65, or decides to defer and take it later, that doesn't affect the benefit that comes from the Canada Post plan. There is a very approximate reflection of expected benefits from the CPP, but not direct.
With the increases that have been announced to the Canada pension plan, we are talking to our clients, including Canada Post, to encourage them to look at their benefit formula, and if it's not an automatic shift—which for Canada Post it's not; for most plans it isn't—do they want to rethink the benefit level because some members, especially at the lower end of the earnings ladder, will have significantly higher benefits under the CPP, and maybe then it would be appropriate to scale back the benefits under the registered plan, but not in all cases.
1:50 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
I take your point that there's not an automatic coordination between the Canada Post plan and the CPP, but I think we agree the Canada Post plan was clearly structured the way it is, based on an assumed level of CPP—
1:50 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
—and if the CPP is now being expanded, that will relieve some of the pressure on the Canada Post plan if it's adjusted in response.
1:50 p.m.
Actuary, Mercer (Canada) Limited
If it's adjusted. That sudden adjustment would need to be negotiated with the unions, though.
1:55 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Okay. It would. It just strikes me that this is one potential solution to some of the pressures facing the plan.
Ms. Hemmings, Ms. Ratansi often likes to tell this committee that she's an accountant. I didn't have enough personality to be an accountant so I had to be an economist. Specifically, I was an economist with the Department of Finance so I want to welcome you to this committee. I do want to ask specifically about the possibility of a permanent exemption for the Canada Post pension from solvency requirements.
You used Air Canada as an example. It's a private company that could go bankrupt. It could have to pay out all its pension obligations at once so solvency valuation might make sense for a private company like Air Canada.
Given that no one's proposing to privatize Canada Post, and it therefore can't go bankrupt, shouldn't it just be exempt from solvency valuation?
1:55 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
The intent of the solvency funding requirements is to protect the pension benefits that beneficiaries will receive by ensuring there are sufficient assets to meet the plan's full obligations to pay out a pension.
All plans—crowns and private sector—are subject to solvency funding. If you eliminate solvency funding from one plan, you're going to end up with an unlevel playing field, and you're going to have many other plans lining up for the same type of treatment. We have 19 crowns, and then as I said, roughly 280 DBs in the private sector.
1:55 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Okay, but if for Canada Post and other federal crown corporations for that matter there's no real prospect of going bankrupt and having to pay out all the pension obligations at once, why should they be subject to solvency valuation?
1:55 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
Again, it's to protect people's pensions in the event the plan is terminated.
1:55 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Okay, but if we're confident the plan isn't going to be terminated, then we wouldn't think that's an important benchmark.
1:55 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
Yes. It's one of the options that was put forward in the report.
1:55 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
As a basic tenet of the PBSA, solvency funding is there to protect people's pensions. It's true some provinces have backed off from having their crowns fund on a solvency basis. Quebec has eliminated it right across the board. I'm not sure that's such a great thing. Other provinces are reviewing their solvency funding regimes to see what might replace it.
We're always open to considering new proposals to help federal plans address their funding challenges.
1:55 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
It just seems to me that there's a pretty fundamental distinction between a crown corporation and a private company like Air Canada.
Since you mentioned the Ontario situation, I want to go to Ms. Cover and ask her the same question.
Given that Canada Post has a very large pension plan and given that it's in the public sector, would it not be reasonable to exempt it from solvency evaluation in the same way that your pension has been exempted?
1:55 p.m.
Director, Pension Strategy & Enterprise Risk, Ontario Teachers' Pension Plan Board
I think I need to steer clear of opining on what Canada Post can do, but I can reiterate that what is very important about our solvency exemption is that JSPP structure. The employees are at the table, and they make decisions about contribution and benefit levels. They understand that, if our plan were ever to wind up and we were underfunded, they would take a reduction in benefits. They're a part of that decision-making, and that's the important part of our structure.
1:55 p.m.
NDP
Erin Weir NDP Regina—Lewvan, SK
Joint trusteeship is certainly something the postal workers have proposed.
1:55 p.m.
Conservative
1:55 p.m.
Liberal
Nick Whalen Liberal St. John's East, NL
Thank you very much, Mr. Chair.
Oh, pensions—unlike Mr. Clarke, I love math, so I'm really happy and excited about this discussion.
I think the elephant in the room that's dogged us around the trail of our discussions is that the largest risk to Canada Post seems to be its ongoing pension liabilities and the changing pension landscape that everyone has to deal with. As I try to juxtapose Canada Post and the level playing field and other government employees, I'm faced with a question similar to the one Mr. Weir has. If the public sector pension plans and the public service pension plan for Canada aren't managed on a solvency basis, why should Canada Post's?
Maybe this is a question for you, Ms. Hemmings. Is there something particular about the going concern assumptions that don't apply to Canada Post because of its precarious financial position, or could it simply be wound up into the public service pension plan, as observed by the task force?
2 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
You mentioned something about the going concern assumptions. Is that what's attributing to the Canada Post issue?
2 p.m.
Liberal
Nick Whalen Liberal St. John's East, NL
I'm just wondering whether that is a reason. Are going concern assumptions not applicable to—
2 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
Well, they're in a surplus on a going concern basis right now.
2 p.m.
Liberal
Nick Whalen Liberal St. John's East, NL
Okay, but is the overall business and cost structure a reason to give us concern about allowing them to manage their pension plan on a going concern basis?
2 p.m.
Senior Chief, Payments and Pensions, Financial Sector Policy Branch, Department of Finance
Obviously, mail volumes are declining. You need to build a healthy business to support your obligations to the pension plan. I think the business model that Canada Post develops going forward is very important and critical to the health of the pension plan over the long term.
2 p.m.
Liberal
Nick Whalen Liberal St. John's East, NL
Is there any particular concern that you would have about simply winding the Canada pension plan up into the public service pension plan, as recommended by the task force? This was suggested as a solution that would be highly effective with medium ease of implementation.
