Veterans Affairs Committee on Nov. 3rd, 2009

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

A maximum of 15 minutes, sir.

[The Chair, Conservative, David Sweet]

I think you know how the committee functions quite well. Go ahead.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Chairman and members of the committee, as everyone else says, it's an honour and a pleasure to be here. I am representing a point of view that was brought to my attention over four and a half years ago by three former service personnel in my riding—Mr. John Labelle, Mr. Roger Boutin, and Mr. Mel Pittman.

Prior to their bringing this to my attention, I had no idea what a benefit reduction was, because no one had ever brought it to my attention. No military or RCMP person or any federal or provincial public servant ever previously brought it to my attention.

What is the issue? It is the reduction of benefits under the Canadian Forces Superannuation Act, CFSA, and the Royal Canadian Mounted Police Superannuation Act, RCMPSA. This takes effect when a plan member retires and reaches age 65, the normal age of eligibility for CPP and QPP, or when a plan member becomes entitled to draw CPP or QPP disability benefits at any age.

Why does this happen? The reduction formula that applies to these pensioners was created in 1966 when the Canada Pension Plan was introduced and integrated with the Canadian Forces Superannuation Act, the RCMP Superannuation Act, and the public service pension plan. All three groups experience benefit reduction as a result of the integration of their plans with the CPP.

I may remind you that the only group of public servants in the country who do not receive a benefit reduction are senators, judges, and your friendly members of Parliament.

When these pension plans were integrated with the CPP, the contribution rates of employees towards their pension plan remained the same. However, the amount of employee contribution was divided between the employees' existing superannuation pension plan and the CPP, with a portion going to CPP and the remaining amount going to the members’ pension plan. I should remind this group that when military or RCMP people do their T4 at the end of the year, they are maxed out on their CPP contributions every year.

Since the contribution rates to the superannuation plans were reduced by these divided contributions, reductions were made to the benefits payable from the employees' pension annuity when members receive CPP benefits, either at age 65 or when they become eligible for CPP disability.

At the time these plans were integrated, members were not given options or choices about how they wished to fund contribution obligations. Basically, this decision was made on their behalf without consultation. I say “consultation” in the context of the military and the RCMP, not necessarily the general public service.

A unilateral decision was made to integrate their annuity plans with CPP contributions, rather than stacking the plan or increasing their annuity contributions, with members unaware of the reductions to their pension plans in their retirement years. There is no question that the binders they received when they joined up contained some of this information. But when you're 18 to 21 years old and you join the RCMP or the military, the last thing you think about is your pension plans and deductions. In fact, on Thursday you're going to hear from Mr. John Labelle, who was a financial administrative officer in military service at that time. He was unaware of this, and he was giving financial advice to members when they were leaving.

How is the benefit reduction formula determined? The amount of the reduction is determined by a formula in subsection 15(2) and subsection 15(3) of the CFSA. For the RCMP, the pension is reduced by a formula in subsection 10(2) and subsection 10(3) of the RCMPSA.

In 2008, the standard formula for pension reduction in the three plans—the public service, the CF, and the RCMP—was amended. Minor and gradual decreases in the benefit reduction formula were implemented in 2008—0.685%, with plans to reduce the formula to 0.625% by 2012.

Bill C-201, an act to amend the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act, would eliminate the deduction of annuity for retired and disabled members participating in these pension plans. This bill was introduced in 2005 and reintroduced several times.

I would remind my colleagues in the committee that the bill does not apply to any other federal or provincial public servants.

So why eliminate it? Eliminating the benefit reduction for members of the CF and RCMP would assist in recognizing their special contributions to our country. This is actually the crux of my argument. I'm not arguing that they're not receiving everything they've paid for. No one has ever argued that they didn't. But the reality is that the men and women of our services and the RCMP play a different public service role from anybody else in this country.

I have met a great many individuals who have travelled across this country, and I met one guy who did that 22 times in following his military career across the country and around the world. His spouse, unfortunately, was not able to work; when the employer of that spouse found out that this man was in the military, they didn't hire her, because they knew they were going to be gone very shortly. She, as the spouse of a military person, the backbone of our support services--as we call them, the “invisible force” from the military family resource centres--was unable to contribute to her own pension plan because her husband was serving her country and thus had to move across very many times without any consideration or concern regarding her financial well-being. Plus there are the extended family separations. We all know what our men and women in the service go through in terms of that. The reality is, they work a great many hours of overtime, which of course was part of the service, but there was no time clock. They don't get extra hours for what they've done. It's hazardous, there are health and safety concerns, and there are long stretches of everything else.

The reality is, colleagues, that we always say we support the troops. In my belief, we have to support them long after the uniform comes off, all the way to and including their headstone. The reality is that they play a different public service role in our entire country. These men and women allow us to have a good night's sleep, so I think it's time for us to allow them to have a comfortable sleep in their golden years.

As well, members of the CF and RCMP have noted that their reduction of benefits does not apply to anyone else. Again, it doesn't apply to MPs, senators, or Federal Court judges. The decision to integrate the plans was made, again, unilaterally. It was done without their consultation, and this is something that I believe can and should be shared.

The reality is, now you're going to ask, how is it going to be paid for? There's also something that members of Parliament, senators, and judges don't do, which our military and RCMP do; we don't pay into an unemployment insurance plan, but they do. Once an RCMP or CF member collects an annuity, they're ineligible to collect unemployment insurance. Thus we have literally thousands of members who have paid into a plan from which they have absolutely no opportunity to collect. What the government can do, and this is one idea--it's not in the bill, but it is one idea in order to simplify the system and overstep the initial cost of implementing Bill C-201--is simply cancel that EI deduction and transfer that amount over into superannuation and you would cover the loss.

Right now in this country we have--depending on the current figures--a CF vet population of 593,000, a war service vet population of 156,000, and an RCMP vet population of around 30,000. This bill only applies to 96,000 retired military and RCMP personnel. It doesn't apply to every single veteran who's out there, because you would have to have served over 20 years in order to collect the annuity. Now, of course, with the changes to the pension plans, the new entrants into the military have to serve 25 years before being eligible for a pension. This is something that also gets lost. Without consultation with the military, they tacked on an additional five years prior to eligibility for a pension.

If I may just say, as a sidebar, the military and the RCMP do not have unions or associations that can argue or bargain these things for them. Once they sign up, they're “voluntold” for the rest of their natural career. The reality is, just recently, the RCMP negotiated through their pay councils with the federal government, in a signed deal, a 3.5% increase, which was arbitrarily taken away from them without consultation on December 23 and reduced to 1.5%. This is how we treat our men and women who wear the red serge. This is basically, financially, how we treat our men and women of the armed forces. We give them the verbal platitudes, we offer them some veterans' benefits, but at the end of the day, one of the most nagging things they find is what they call a clawback of their pension, but in truth it's a benefit reduction.

Support for Bill C-201 comes from over 110,000 individuals and very many high-ranking colonels and generals. The Royal Canadian Legion, the Army, Navy & Air Force Veterans in Canada Association, the Air Force Association of Canada, as well as the Canadian Association for the Fifty-Plus, and the national chair of the Armed Forces Pensioners'/Annuitants' Association have all supported the initiative in this regard. In fact, former Royal Canadian Legion Dominion Command President Jack Frost wrote the Minister of National Defence in 2008 asking him to cancel the benefit reduction to reflect the years of commitment and loyal service of veterans. The legion says the clawback occurs at a time in life when the member needs the income the most because of declining health and other financial realities.

The reality is, Mr. Chairman, let me say in conclusion, that by being offered an end to the benefit reduction, those members of the armed forces would on average, according to our calculations, receive anywhere from $200 to $300 additional per month. By receiving that additional amount, they would also receive less old age security, because OAS is based on your income. The government would save there, and additionally, these people would be entered into a slightly higher tax bracket. Further, what do you think the average 65-year-old or disabled person would do with their pension once they receive an additional amount at age 65? They would pump it immediately back into the economy, thereby offering more tax savings to the government.

In conclusion, I want to offer two scenarios for what happens with the CPP disability clawback. I'll call it a clawback because that's what it was referred to me as by the two men, both of them RCMP officers, both medically released from the military. You'll be meeting one, a Mr. Roddie Ohandley, if I'm not mistaken, very shortly after Remembrance Week. His is a classic example of what happens when a military or RCMP person is medically removed from the military and applies for Canada Pension Plan disability. Jim Hill was a classic example, and so was Mr. Ohandley.

At age 55, Mr. Ohandley was medically released from the RCMP after serving close to 30 years of service. He received his RCMP annuity; he also received from Great-West Life an insurance top-up for his disability. He was then told that Great-West Life would only cover him for two years, and that he should then apply for Canada Pension Plan disability. He did and he received it. He received a lump sum, dating back to his time of release, of over $16,000.

The first letter he got was from the RCMP annuity individuals, who said he owed them $11,000. So the $16,000 was immediately taken down to $5,000. He's very afraid of what Great-West Life is going to do, because Great-West Life is going to come back and ask him for that two-year gap that they paid. At the end of the day, he's going to end up owing the government money, or he's going to end up owing someone money. This is a man who served his country and who now owes the government money, if he gives back Great-West Life the money they're soon going to ask for. The CPP disability clawback is simply wrong.

Jim Hill had a stroke at work. They found he had cancer. They gave him the good news and the bad news that he'll survive the stroke but that they were not sure about the cancer. He was medically released as disabled from the RCMP. It was the same thing: he received his annuity—I forget the exact amount—and was told to apply for Canada Pension Plan disability. He said to himself that if he got that more than $800 of disability along with his annuity, his family and he should be okay, if he survived the cancer.

Sorry, Jim, that's not how the game is played. You'll get your CPP disability, but it's deducted dollar for dollar from your annuity. This is a man who served his country for 32 years. He's disabled, out of the RCMP, and the first thing we do is say to him, “Sorry, Jim, you're entitled to your CPP disability, but because of the plan that happened in 1966, we're deducting that, dollar for dollar, from your annuity.”

You tell me whether this is fair. What the 110,000 people who have been writing me on a continuous basis have been asking for is fairness. They have a completely different public service role. They're not saying they didn't get all the benefits they paid for; what they're saying is that fairness is fairness. If it was such a great deal for the RCMP and the military, then why didn't members of the Senate, the members of Parliament, and the federal judges fall into this bailiwick as well?

Ladies and gentlemen, I'll stop right there. I thank you so much for the opportunity to finally bring Bill C-201 to the committee stage. I look forward to your questions.

Merci. Thank you.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Stoffer.

I've done a little math for the members. In order to have some fairness in this short hour, we'll go with four-minute rounds. That should, hopefully, let everybody have a chance to ask some questions--if we keep the answers tight as well.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Yes, sir.

[The Chair, Conservative, David Sweet]

We'll go over to the Liberal Party first.

[Rob Oliphant, Liberal, Don Valley West, ON]

I'd just like to serve notice that I'd like to have that reviewed at another meeting, because normally questions are not done based on how many members are around the table, but on party standings. I know this committee seems to operate differently from other committees, but I want to serve notice that I think this needs to be addressed, because it's not the goal of other committees. I'd just like to raise that.

[The Chair, Conservative, David Sweet]

Mr. Oliphant, the numbers of members around the table are representative of the standings in the House of Commons.

[Rob Oliphant, Liberal, Don Valley West, ON]

But the formula to separate the time that is used in other committees I sit on is different.

[The Chair, Conservative, David Sweet]

This was voted on initially when we did our routine motions.

[Rob Oliphant, Liberal, Don Valley West, ON]

I think it was not, though, since the reconstitution of the committee. I think that was done in its last constitution. When we had the new election of vice-chairs and those things, I don't think we revisited that issue.

[The Chair, Conservative, David Sweet]

No, for the 40th Parliament, this was what we did. We only review the routine motions when there's a new session.

[Rob Oliphant, Liberal, Don Valley West, ON]

Okay. Is that the only possibility of reviewing it?

[The Chair, Conservative, David Sweet]

No. If you want to bring it up in another business meeting, you can certainly do that.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you. It's just that it affects this meeting, when you say it's now four minutes; that's all.

[The Chair, Conservative, David Sweet]

Yes, absolutely.

[Rob Oliphant, Liberal, Don Valley West, ON]

Thank you, Mr. Stoffer, for your commitment to the issue and your commitment to both veterans and members of the RCMP who are retired.

I have a couple of questions.

My concern on the issue is mixing up fair compensation for work that members of the Canadian Forces and the RCMP officers do with a pension plan that is actuarially based. I don't want any question of mine to be considered unsupportive of our military forces or for RCMP officers; it's the understanding that you can look at this issue in two ways. You can look at it as a benefit reduction when people reach a retirement age of 65 or you can look at it as a benefit top-up to allow them a standard of living until they reach that perspective.

Of course, it's always easier to look at it from the standpoint of a benefit that you receive. So if I receive a pension benefit and then lose something, or perceive myself to have lost something at a certain age, I see it as a clawback or a benefit reduction. If I am the actuary trying to sort out how to fairly compensate people in their retirement, I would look at it as a benefit increase to allow them to bridge until they get another benefit. It's not different from other pensions in the way it's looked at in a fiduciary or a fiscal way.

I'm wondering whether this is the appropriate way to compensate members of the Canadian Forces for their service to the country or whether we're mixing apples and oranges here. I'm wondering whether this is one question—fair compensation and veterans' benefits—or whether we should be doing this through the pension system.

Obviously, you think we should be doing it through the pension system, and I just need some help with understanding why it is you've come to that conclusion.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

I came to that conclusion because it was brought to my particular attention. After doing fairly lengthy research and asking a million questions of our researchers at the parliamentary library and of pension experts across the country—the public service pension experts and everyone else—I looked at it this way: the simplification of allowing them to have both at age 65, without the reduction, would not only save money in the long run, in terms of administering it, but it would also show them that indeed, through the pension benefits, we can allow them a minor increase at age 65. A few hundred dollars, which is not all that much, is what we're talking about, but it means an awful lot to the men and women who serve.

I will give you just a couple of examples here.

At age 60, every person in the country who's retired can elect to take their CPP early, which means losing one-third of it right away. If you're a military or RCMP individual and your annuity is, say, $2,500, you can collect your CPP early. For example, just for argument's sake, say that two-thirds of a CPP benefit was $500. You get your $2,500 and your $500; there's no reduction from your annuity, no deduction at all. The deduction takes place at age 65--what you would have collected if you had started collecting at age 65.

So you get the $500 for the rest of your natural life, with whatever increases may happen with inflation, but the amount you lose is that what you would have received at age 65 is deducted from whatever your annuity is at the time. But you also get an increase, from old age security, which is to offset any kind of loss in this regard. My argument has always been that OAS should have nothing to do with your annuity and your defined Canada Pension Plan in this particular regard.

Also, the term “bridge benefits” has come up a lot. Just to let you know, Mr. Laval will be here on Thursday and will explain that in Manual AFN109001/ID001, according to him, the term “bridge benefits” was not even listed, and apparently the manual was never made available to service personnel. Mind you, I haven't seen this manual, but he will testify to this on Thursday.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Stoffer. That was almost a full five minutes.

Now, on to the Bloc Québécois. Monsieur André or Monsieur Gaudet.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Good morning, Mr. Stoffer. It is a pleasure to see you this morning.

I know that you are very committed to this matter on behalf of veterans. I certainly feel that there is an anomaly. These people fought for our freedom and we need to be very attentive to their retirement situation.

Have you costed this out? Of course, members of the RCMP and the Canadian Forces are affected by your bill, because they have paid into employment insurance for their entire careers. Some have said, the parliamentary secretary for one, that your proposal will cost $5.5 billion in the case of the Canadian Forces. That was the cost estimate.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Actually, it's...[Inaudible--Editor]

[Guy André, Bloc, Berthier—Maskinongé, QC]

The figures I had showed $5.5 billion, but perhaps they have changed since. We also have to add in $1.7 billion for the RCMP.

My question is a simple one. We know the situation that the employment insurance program is in. We still pay into it at the same time as the government has been helping itself willy-nilly for the last few years. By the way, the Bloc Québécois is tackling that issue head on, as is the NDP. Have you compared the amount contributed to employment insurance to the money that this initiative would cost? In other words, have you calculated the difference between the two amounts?

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

First of all, on your question, I believe the figure I read.... Many, many individuals across the country sent me the response they received from their MPs, which was basically a standard response.

In order to implement this plan, the cost would be $7.2 billion.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Are you talking about the total cost? So it would be $5.5 billion and $1.7 billion.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Yes, that's the total.

I've asked the parliamentary library. I've asked pension experts. I've asked everyone where that figure of $7.2 billion came from. I even asked it in the House. I'm still waiting for the answer. Hopefully we can get it today.

I have no idea where $7.2 billion comes from. The bill is not retroactive. I repeat, it is not retroactive. It applies to roughly 96,000 individuals, and it only becomes law the day it happens. How the government finally assesses the additional payments on that is up to the government to determine at the end of the day. I gave them one solution. I'm not sure where that is.

In terms of the surplus, as you know, billions of dollars were taken out of the superannuation plan in 1999, which by the way was contributed to by us. Every single person put into the federal public service plan--the employees who work in this room--and apparently there was a surplus. The federal government at that time took out billions and billions of dollars.

At the same time, from 1997 until 2008, well over $55 billion of EI surplus was diverted into areas of taxation breaks, spending, or whatever. Over $75 billion that belonged to employees/employers was taken for other purposes than initially intended. This is one of the bones of contention of military and RCMP officers out there, and a lot of other people in the public service when they see it.

In fairness to the debate, that has absolutely nothing to do with Bill C-201; it just shows what happens when there are surpluses in funds. Instead of being put back in to assist members or their families with additional benefits, it was taken for other purposes than what it was intended for. That still sticks in their craw a bit, as they say.