Madam Speaker, last week the government tabled legislation that set out the first major improvements to the public service pension plans in more than 30 years. The legislation aims to ensure the long term sustainability of Canadian public service pension plans, improve the financial management of the pension funds, and upgrade the benefits currently offered to government employees.
I rise today to express my support for Bill C-78 and to underline more particularly its beneficial provisions on the management of public pension plan surpluses and deficits.
Under existing legislation the government assumes responsibility for deficits in the pension accounts but is not entitled to manage existing surpluses. Obviously this is an anomaly that must be corrected.
Also under the present system when projections show an account to be holding more than necessary to meet the future obligations, both the employer and the employees must nevertheless continue to contribute to the accounts as legislated. This provision means that surpluses can thus continue to exist and even grow indefinitely.
For private pension plans, however, the Income Tax Act sets a limit at which a growing surplus must be managed according to specified terms; but this is not the case for public service pension plans. This has become an issue of very real importance since 1991. In 1991 surpluses started to accumulate in the three federal government superannuation plans. They now total some $30 billion.
These surpluses show the difference between the balances of the accounts and the amounts estimated by the actuaries needed to actually pay for all future benefits earned to date by plan members. It makes no sense to keep forcing the Canadian taxpayer to credit ever growing employer contributions to pension plans that continue to generate a surplus far in excess of the needs of plan members and what the Income Tax Act allows for other plans.
As the President of the Treasury Board said earlier the government wants to be fair to government employees, but we would not be acting fairly toward other Canadians if we were to give federal public servants financial advantages that were not available to all. Bill C-78 will provide the government with the authority and mechanism for managing pension surpluses in a manner consistent with the rules for registered pension plans as set out by the Income Tax Act.
The management of the surpluses raises another issue. Who has the ownership of the $30 billion surplus? Canadian taxpayers have always assumed the risk of the public service pension plans since their creation in 1964, and these are not empty words. Since 1964 Canadian taxpayers have poured into the government employee pension plans $13 billion to cover for deficits. Since the government has carried the full load of the risks in all those years, it is only fair that we would also be responsible for any surplus.
The present surpluses would gradually be reduced to the allowable level over a period of up to 15 years. The amounts will be debited over the chosen period so that at the end of the period the remaining surplus or excesses is at most no greater than 10% of the estimated liabilities. This 10% cushion is in line with Income Tax Act maximums that apply to all pension plans in Canada.
Bill C-78 will also permit Treasury Board ministers to determine the use of any future surpluses. They could decide to institute a contribution holiday for plan members, the employer or both, or to withdraw all or part of the surplus. Surpluses could also be used to improve benefits though this would require special legislation.
It should be noted that the government would continue to assume all financial risks for the public service pension plans and to be solely responsible for making extra contributions to cover any future account deficit. This is a further argument in favour of giving the government responsibility for managing an eventual surplus.
Under the legislation now before us, before deciding what to do with an eventual surplus the Treasury Board would consult with the ministers responsible for the three pension plans and with those responsible for the financial management of the plans. As the President of the Treasury Board noted, the same principle will be applied in the case of the new Canada Post pension plan structure which will also take effect on October 1, 2000.
Any future surplus in the CPC pension plan will be managed by Canada Post which has responsibility for all the risks and management of the fund.
This surplus could be used to reduce contributions or to further enhance benefits, or a combination of the two. As previously announced, Canada Post will be meeting and discussing the pension plan with all bargaining agents over the coming weeks and months.
Since the government first announced its intention to take responsibility for future pension plan surpluses it has been accused in some quarters of acting unilaterally without due regard for the opinion and interests of pension plan holders. In fact the government did not move earlier on this issue precisely because it was hoping to reach agreement with plan members on a new joint management framework for the future of pensions.
Thorough consultations have been held in the seven years since 1992 on this subject between the Treasury Board and employee representatives.
In November 1992 the President of the Treasury Board asked his advisory committee for the public service pension plan to conduct a review of the fundamental elements of the plan, including its management and financing. The committee reported to the president in December 1996.
After studying the report in February 1998, the President of the Treasury Board announced the start of a consultative process with employees and pensioners aimed at developing a package to reform the public service plan. Among other things this consultative committee was offered to negotiate an agreement on sharing the risks of the pension plans that would allow our employees to share surpluses in the future.
The committee met from February to December 1998 and, though significant progress was made on the issue of future deficit and surplus sharing, discussions broke down last December. Despite the fact that employees have not shared the cost of past deficits, their representatives insisted on receiving a significant share of the accumulated surplus.
As I explained previously, since the government has carried the full load of the risks in the past, it is our view that we would also be responsible for any surplus. Even though the employer offered joint management and significant improvements to our employee pension plans, the offer was deemed insufficient by employee representatives.
Faced with this impasse, after having consulted for several years with employee and pensioner representatives, the government decided to move ahead simply because it could not afford to wait any longer. By delaying indefinitely the necessary changes that are being proposed today the government would have in fact created an even more intractable position for all concerned.
I believe it would have also shirked its responsibility to all Canadian taxpayers if it did not act to put public service pension plans on a better financial footing, as well as modernizing and improving their administration.
Hon. members should recall, however, that the President of the Treasury Board, on behalf of the government, stated on more than one occasion that the door remained open for future negotiations on the management of pension plan deficits and surpluses. So far, far from being insensitive to the preoccupation of public service pension holders, I think the minister has shown himself to be very open-minded in his approach to this question. We should applaud his willingness to reopen discussions at the opportune time in the best interests of all parties.
I too hope very much that employee representatives will soon resume discussions on a joint management plan for our public pension plans.
I urge all hon. members of the House to support the proposed amendments to the public service superannuation acts. I believe they are fair to our employees and fair to the Canadian taxpayer and that they will bring about much needed and overdue changes to government pension plans.