Industry Committee on Nov. 30th, 2010

[Phil Benson]

According to Labour Canada when I talked to them, Teamsters Canada represents about 70% of their business. We are the largest private sector federally regulated union in terms of numbers, in what we do. This kind of a bill has a great impact on a lot of our members.

As to retroactivity, I'm not going to get into a legal argument, but most bills that come out of here aren't, and I'd be surprised if it is.

In terms of impact, of course, I wish it were. Obviously, for our membership, we're getting pinged. I think that's an issue you should have your legal people certainly examine.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Benson.

Now we'll move on to Mr. Wallace, for five minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to thank our guests for coming this morning.

I have a couple of questions, but I do have to make a comment. I am on the finance committee, and we have looked at the banking system.

Mr. Rafferty talked about our banking system being in the same position as some of our friends south of the border. That is just not the case. There was one bank that was more exposed than others to the bundling of paper that wasn't worth anything, but it still wasn't enough to make a significant dent, and some of the banks didn't touch it at all. So we're in much better shape, and I do take some offence to that comment that our banking system is in the same shape as the U.S. That's just not accurate.

My first question, I guess, would be to you, Mr. Benson, since you've been around a little bit on the Hill on this. I have a fundamental....

And this is me speaking, not my side of the table here or anything.

Here we have a bill to deal with pensions that's eight clauses long. It makes significant changes.

And just so you know how a private member's bill operates, you call over and say, “My slot is up, I want to make a bill that says the sky is blue. Can you send me the legalese to make that happen?” They send you a few paragraphs, if that's all it takes to make that happen, and there's no review by the department in terms of its legality or from a policy perspective. There's no analysis. It's my bill: I can go forward and do it.

And in fact in this case, Mr. Rafferty picked it up from somebody else. It wasn't even his doing.

I'm not criticizing anybody for doing it. Private members' bills in my view do a great job of bringing the issue forward and making it part of the discussion of Parliament, committee, and so on. But in my view, if we are going to make significant changes to the pension system in Canada, the pressure should be on the government of the day, which is us, to make proper legal acts.

Normally when we do a bill at this committee or any committee, we get a binder. Some binders are bigger. In finance they're huge. Most bills come with a binder full of stuff. They're well studied, well analyzed.

Do you have any concerns that we're making such changes...?

I think there are eight clauses in here, and we have eight amendments to seven clauses or something like that.

So my view is that this bill is flawed in that it's not at the level of scrutiny it needs to have to make a significant difference to our pension system.

I would appreciate a comment on that.

[Phil Benson]

Thank you, Mr. Wallace.

As you know, in the last year or so I have appeared twice before the House committee of finance talking about pension reform, and in front of the Senate committee. Also Mr. Flaherty was very kind to invite us to his round table on pension reform, and Mr. Menzies was quite kind.

Going back to the documents I gave you--they in fact go back to 2004--we were trying to get this issue clearly front and centre long before Nortel was addressing this issue.

Yes, it would please me--I'd be very happy--if the minister and the government would pick up this bill and make it part of, if you like, a total reform package on pension reform. I think nothing could be better or wiser. It's always great when it's total reform. But having been around this place for coming up 25 years, sometimes you take your chunks where you can get them and you move forward.

I do agree with you somewhat. A lot of private members' bills do raise the issue and bring it forward. They do push governments, opposition, and people to work together to move forward to get something.

At this time, we have nothing except this bill.

[Mike Wallace, Conservative, Burlington, ON]

Okay. I appreciate that.

Ms. Clark-Stewart, I have a question for you. You're in a DB plan, or were?

[Anne Clark-Stewart]

I still am, until next year.

[Mike Wallace, Conservative, Burlington, ON]

If you were talking to a young person today, would you advise them that a DC plan is a better way to go? You have your money and you get your share, you put your share in and you control it. Or do you prefer still the DB approach?

[Anne Clark-Stewart]

Personally, if I had my druthers, I'd do a defined contribution plan and I'd look after my own investments.

But I'm a fairly sophisticated investor. Most people who work in large corporations do not have that ability. So I think we need to have a level of protection for people.

[The Chair, Conservative, David Sweet]

Thank you, Madam Clark-Stewart.

Thank you, Mr. Wallace.

Now to the Bloc, Mr. Cardin, cinq minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Good day and welcome to our witnesses.

To follow up on Mr. Wallace's comments, I'd like to relate to you my experience as a municipal councillor some years ago, in 1986 and 1987. I was appointed to serve on the committee responsible for my municipality's pension fund. The plan was a non-defined benefit plan and the municipality was responsible for any unfunded actuarial liabilities. Someone said earlier that a pension fund was merely compensation deferred. A pension fund is comprised of employer and employee contributions, but it is also at the mercy of other unknown factors that are controlled by external and internal authorities, namely the pension fund managers. How well the fund performs is an unknown.

On looking at the actuarial liability, I was thinking that if the pension fund was simply compensation deferred, than the actuarial liability was simply additional taxation deferred. We're talking about direct services and this is an additional form of taxation.

I had a question about non-defined benefits or defined contributions. You answered my question when you said that a defined contribution plan called for a certain level of expertise on the part of the persons investing the money. In terms of management, companies must stay in business to sustain pension funds over time. Businesses need to perform well. In the case of Nortel, some weaknesses were apparent. Generally speaking, pension funds have long been manipulated by employers, who would seize any actuarial surpluses. We all know what happened to companies that were facing bankruptcy or that had an agreement with creditors. In future, important measures need to be taken with respect to pension fund management.

As for employers who manipulated pension funds, greater control is needed over pension fund management to minimize long-term risk. To say that the company is responsible for all actuarial liabilities isn't right. The company cannot predict these liabilities any more than pensioners can.

Summing up then, what steps can we take to protect pensioners and those who are set to retire soon so that their retirements are secure and companies do not face too many unknowns, which could hamper their growth? It always comes back to that question.

[Phil Benson]

Thank you. I think you asked two questions there.

On the first question, to make sure they're secured--that's what this bill does, I think. This type of bill would make them secured.

The second question, interestingly, is our number two position. We only have three, and that's number two. That's the need to ensure that the promises that are made are realistic and are kept, there are no vacations, money goes into the funds, and they are invested prudently. “Prudently” is bonds or bonds equivalent; they're not in the market.

I know there is a lot of talk that stocks beat bonds. Every time I pick up the paper I see that truism. However, just two weeks ago there was a lovely study that showed that, in fact, over the last 30 years bonds were 9.9 and stocks were 9.4.

Thank God the Teamsters Canada actuary--God bless him, he passed away a few years ago--had done this going back to the 1900s and insisted, for safety reasons, that our pension plan would be in bonds and not in stocks, to the point that we were less than 4% invested in the market.

The only way to guarantee it is to ensure the money is there and is invested prudently and correctly.

As to the final comment, if I may, though employers will always say we pay, this is one thing that economists will agree with, and you can bring a string of them in: at the end of the day, it all belongs to their pay package. The only people in Canada, in my view, who get paid correctly are construction workers. You will hear that artisan construction workers make $50 an hour, $48 an hour in a union setting. What people don't realize is that $10 of that goes to their pension fund, $4 goes to this fund and $3 goes to that.

In reality, that's how we're all paid. We just don't often see it on our paycheque.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Benson.

Thank you, Mr. Cardin.

That is our time, but Mr. Rafferty has asked for one question.

If you could do that as briefly as possible, Mr. Rafferty, I think the committee would be okay with it.

Does Mr. Van Kesteren have a brief question as well?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

No.

[The Chair, Conservative, David Sweet]

Oh, he is leaving now.

Okay, briefly, Mr. Rafferty.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you, Chair.

You know, I had to smile last week. I was thinking of company after company, corporation after corporation, that kept on coming forward and saying, oh, this is going to be the end of defined benefit plans; this is going to be awful; this is going to be horrible. And then....

Mr. Wallace can confirm this, but my light bulb comes on occasionally here.

[Mike Wallace, Conservative, Burlington, ON]

Can you see through all that hair?

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Well, I'm trying.

At any rate, I had to smile to myself, because I thought, “Why are they saying that? Why are they bemoaning the fact that defined benefit plans will disappear?”

Well, they're bemoaning the fact because they won't have access to other people's money. That's why they were bemoaning the fact that defined benefit plans would disappear.

And thank you for indicating that, you know, there haven't been any new ones.

I would put it to you that in fact defined benefit plans really are a thing of the past. What this bill does is protect them going forward, and 20 or 30 years from now this bill will have no relevance. So this is an opportunity to make sure there's protection.

I'd like your comments on that.

[The Chair, Conservative, David Sweet]

As briefly as possible.

[Phil Benson]

I'll be really brief.

A pension plan is a pension plan, and whether or not it's a hybrid plan--Teamsters Canada is partly defined and partly defined contribution--there's still a requirement that the plan will fully fund its promises.

So although defined benefit may be going, I personally do not predict one will appear perhaps in my lifetime. It's for all pension plans. I don't view it for just one. I think this is for all of them.

[The Chair, Conservative, David Sweet]

Madam Clark-Stewart.

[Anne Clark-Stewart]

I would like to make a last point.

There were a number of changes put in place by the government for federally regulated pension plans. Those were good initiatives, but they don't apply to private plans. I think we have to somehow make some arrangements within this country that we don't have two classes of pensioners, because now with what they've done with the federally regulated plans is that the over-funding can get up to 125% without any penalties. That's not the case with the private plans.

I think when our pension plans were creeping up to the 110% level, which is what they are at right now, the companies tended to say they were not going to put any more money into that. That valuation was based on an ongoing concern.

When you get into a situation like we're in right now, they weren't basing it on the solvency ratio or on the windup ratio. You can see that we're looking at 30% and 40% differences between those. We have to do something to make sure that this legislation gets changed as well.

[The Chair, Conservative, David Sweet]

Thank you, Madam Clark-Stewart.

Thank you to both witnesses for appearing today.

[Anne Clark-Stewart]

Thank you very much.

[The Chair, Conservative, David Sweet]

To our committee, we'll meet again on Thursday with another panel of witnesses.

The meeting is adjourned.