Public Accounts Committee on May 28th, 2014

[The Chair, NDP, David Christopherson]

No. I was saying that the business will be what do we do with this, that we either decide now or decide at a business meeting, but your suggestion is that we do it now, so I'm good with that. At 5:18, then, if everybody agrees, I'll bring us to the issue of whether we consider ourselves to have heard enough so that we can write a report, or if there is a need for a further hearing, recognizing how many people we're bringing on deck every time we have one of these. Why don't we do that? Is everybody in agreement? Do I have unanimous consent?

[Some hon. members]

Agreed.

[The Chair, NDP, David Christopherson]

I seem to have. Very good. We will continue.

We concluded with Mr. Carmichael. Now we'll go over to Monsieur Giguère.

You have the floor, sir.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here today.

Ms. Cheng, my first question concerns the dates of your audit. They are relatively important given that there was a considerable improvement in the performance of the pension funds in the final months of the year 2013.

Does this major performance improvement in 2013 appear in your audit report?

[Nancy Cheng]

Thank you, Mr. Chair.

The audit relates to and describes the period under examination. The period that we did examine has to do with April 1, 2011 up to March 2013. That is the period under examination.

It wasn't so much that it was an actual problem in terms of the current-day issue. Of course, these economic conditions do change from time to time. If you roll back the clock a little further to the days of the economic crisis, with respect to 2008 onward, the dynamics were a little different. Economic conditions do change from time to time, and that further supports the point we wanted to make, which is that there is a need for a regular assessment of the plan's sustainability.

The audit did not conclude that at a particular point in time the plan was sustainable or not, but rather begs for the case to make sure there's regular assessment.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

You might be able to provide me with some guidance on a point that I did not see in your documents.

I have seen a decision of the Supreme Court of Canada on an actuarial surplus of $19 billion. That was attributed to the federal government. This figure of $19 billion is purely a book-keeping exercise.

When I see a government accumulating budgetary surpluses during a time of deficit, it reminds me a little bit of the grasshopper who spent the summer singing while the ant was working.

When the government operates this way, what are the long-term impacts? Was this evaluated by the government before the $19 billion were attributed?

[Nancy Cheng]

Thank you, Mr. Chair.

The issue about the Supreme Court decision really has to do with an account that is called the “public sector superannuation account”. That account indeed is just a tracking account. It is not funded by assets, and the decision was made by the Supreme Court justices. In terms of further comments on that, I don't know if our colleagues from Treasury Board would want to add any specific comments.

[Daniel Watson]

In this respect, the government is the plan's proponent and remains responsible for the deficit. Given the imminent Supreme Court decision, we are very aware that we are responsible for surpluses and deficit issues.

We currently have an actuarial deficit. The financial and actuarial valuation that was done dates from March 31, 2011. That was not long after the second biggest crisis in the financial markets in two generations. It is not more recent than that. The new valuation will be done soon and will be led by the Chief Actuary, starting from the current year.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you.

In subsection 1.42 of the Auditor General's report, it says that you did not have access to all of the secretariat's documentation for the preparation of different working assumptions. One of these assumptions was a move from a defined-benefit plan to a defined-contribution plan. Could the representatives of the government, National Defence, and the Royal Canadian Mounted Police please tell us how this change will affect their staff management probabilities? Will it be possible to incite staff to continue working for these organizations if they lose the guarantee of receiving a set pension, which would be replaced by a requirement to pay into a pension fund without a guaranteed return?

[The Chair, NDP, David Christopherson]

Were you directing that specifically to someone, monsieur?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Could the representatives of the Department of National Defence and the Royal Canadian Mounted Police please tell us how they will move from a defined-benefit plan to a defined-contribution plan?

[The Chair, NDP, David Christopherson]

Okay.

Go ahead, Major-General. You can go first, sir.

[MGen David Millar]

Thank you, Mr. Chair.

As far as the Canadian Forces are concerned, we are not assessing defined contributions at all. We are very pleased that it is a defined-benefits package, and as far as we are concerned, that is the way our pension plan is going to continue. Therefore, we will not make and have not made such an assessment, because as far as we're concerned, it is not on the horizon.

[A/Commr Gilles Moreau]

I tend to agree. This is not a change that the RCMP has looked at so far.

[The Chair, NDP, David Christopherson]

Mr. Watson wants a chance if you want to hear from him.

Go ahead, Mr. Watson.

[Daniel Watson]

I would add briefly that, recently, the President of the Treasury Board was very clear when he told the media that he was not considering such a plan for the time being. In his 21^st report on the public service, the Clerk of the Privy Council indicated that we had already established the necessary changes. I will repeat what my colleagues have said. We are not talking about moving into a defined-contribution plan, as you have described. We are not even thinking about it.

[The Chair, NDP, David Christopherson]

That's it.

Sorry, but the time's up. It goes quickly.

Mr. Woodworth, you have the floor, sir.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you, Mr. Chair.

Thank you to all of you for being here with us today, and apologies for the fact that our time has been a bit shortened because of votes.

I'm going to direct my questions primarily to you, Mr. Watson, although I may get to some of the others. I'm going to focus on the question of assessing the sustainability of the plans. I'm going to start by referring you, Mr. Watson, to a statement on page 27 of the Auditor General's report in paragraph 1.83, which says, “First, the plan sponsor does not address the sustainability of the plans.” I will also refer you to the recommendation at paragraph 1.46, which says:

To support the plan sponsor—represented by the President of the Treasury Board—the Treasury Board of Canada Secretariat, with the collaboration of the RCMP and National Defence, should assess periodically the pension plans’ sustainability. If deemed appropriate, the entities should recommend changes to plan designs so that they are up to date, affordable, and fair to current and future generations.

So when I see the Auditor General saying, “First, the plan sponsor does not address the sustainability of the plans”, I then look to your evidence today, which says that you have recently reviewed the plans and taken steps to help ensure their long-term sustainability. You mentioned a few things about ratios and retirement age, and I wonder if your steps to do that were taken in response to the Auditor General's recommendation or they were taken before the Auditor General's recommendation.

[Daniel Watson]

Thank you very much for the question.

The changes were brought into force for January 1, 2013, so the work was ongoing well before this audit began.

In terms of the sustainability, we have looked at the contribution ratios. This involves serious thinking, as any prudent person would do, about what the models might be. We have reached conclusions based on the model we have, which is defined benefits. We work very closely with the Office of the Chief Actuary. We work closely with all the colleagues who are here today, which is why there are so many of us. We work closely with the pension advisory boards, including bargaining agent representatives, for example, who are very interested in the question of the long-term sustainability of the programs.

Without wanting to embarrass my colleague the chief actuary, I suspect that there will be very few people in this country understand the possible fluctuations and their impacts on plans' longevity and other related issues as my colleague here does.

So we work very closely on these issues. We accept the point the Auditor General has made that we can do better on that front, and we can be more systematic about it. We'll do so through the creation of a committee that will be involving Finance, RCMP, the Canadian Forces, and ourselves to make sure that these issues at no time drop out of sight.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

When the Auditor General said that the plan sponsor does not address the sustainability of the plans, and your evidence today said you had recently reviewed the plans and taken steps to help ensure their long-term sustainability, I wondered if that meant you were just doing that for your little corner of the world and not doing it for all the other plans.

Is that the case?

[Daniel Watson]

We work very closely with all plans together, and as Mr. Valentini pointed out in his remarks, they invest all the funds for these three plans: RCMP, Canadian Forces, and ourselves.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Then your work did address the issue of sustainability of all the plans we're speaking about today?

[Daniel Watson]

Yes, it did, and in fairness to the Auditor General's comments, we shared over 400 documents and three Treasury Board submissions. We held 13 meetings lasting 19 hours; 32 of our staff engaged with them over time. There would have been hundreds if not thousands of phone calls and e-mails on this front, but there are some things under the orders in council from 1985 and 2006 that we are not able to share because they are cabinet confidences.

Another number I think is important is the number zero, which is the number of disputes we had over whether or not relevant documents were inappropriately withheld.

[The Chair, NDP, David Christopherson]

I'm sorry, your time has expired, and Ms. Cheng wants in.

If it's very brief, given that you're Acting Auditor General, please go ahead.

[Nancy Cheng]

I'll be very brief, just to address and clarify the observation we're raising.

The reason we raised the issues of sustainability and there being no systematic regular assessment is that they weren't legislated in any way. In our conversations with the various stakeholders around the table, they felt that their duties are particularly restricted to what is laid out in legislation.

It was important to get to the ownership of the issue, and that's why we raised it because it was said that it's not a stated responsibility by statute, and therefore that they don't have a role in conducting that sustainability.

I thought I'd clarify that, Mr. Chair.