moved that Bill C-421, An Act respecting the establishment of the Office of the Chief Actuary of Canada and to amend other Acts in consequence thereof, be read the second time and referred to a committee.
Madam Speaker, I am pleased to introduce to the House this private member's bill called the chief actuary act.
I would like to tell the House what I will cover today. First, I will go over the purpose of the bill. Second, I will talk about what an actuary is because I did not really know what an actuary was before I became involved in this and maybe others have the same question. Third, what does the chief actuary of Canada do? Fourth, why do we need an independent chief actuary? The fifth item I will address is how an independent chief actuary will benefit Canadians. I have 15 minutes to cover those five points and I am sure you will hold me to my time, Madam Speaker, so I will get on with it.
The purpose of the bill is quite simple. It is set out in clause 3 of the bill, which reads as follows:
The purpose of this Act is to provide for an independent Chief Actuary of Canada who will report directly to the House of Commons on the activities of his or her office.
The purpose is to have an independent chief actuary. What is an actuary? An actuary is a professional who evaluates the financial implications of uncertain future events. An actuary is part scientist and part crystal ball gazer, I guess. A chief actuary's principal work is the design, the pricing and the financing of insurance plans and pension plans.
The qualifications of an actuary are: an innate analytical ability; an expertise in demographics; a focus on insurance systems and their actuarial soundness; and a unique training in quantifying and projecting the costs of multiple complex factors and contingent events. An actuary must have a proven professional objectivity in making quantitative assessments. An actuary is a professional business person skilled in the application of mathematics to financial problems.
The principal role of an actuary is the application of probability analysis, risk theory and statistics to the financial environment. Actuaries are a cornerstone of the risk management mechanisms of insurance companies and pension plans in Canada. So all who would like to be an actuary should please raise their hands; it sounds like there is a great deal of ability and expertise that would be required of an actuary.
The third question I would like to answer is, what does a chief actuary of Canada do? I will read from the web page of the chief actuary of Canada as to the mandate of the chief actuary:
The Office of the Chief Actuary (OAC) estimates long-term expenditures and revenues and current liabilities of the Canada Pension Plan and of federal public sector workplace pension and insurance plans. It also estimates long-term future expenditures for Old Age Security programs. It prepares actuarial reports on the financial status of these programs as required by legislation, including reports on proposed changes to the Canada Pension Plan introduced in Parliament and submits them to the responsible Ministers. The Office of the Chief Actuary also provides actuarial information to responsible government departments to assist these departments in the design, funding and administration of these programs.
Also, the chief actuary of Canada has the responsibility to give actuarial information concerning the performance of the public service pension fund and the RCMP and Canadian Forces pension funds. Public servants and those who have participated in defending our country, as well as members of Parliament and judges, all of us, have an important interest in ensuring good oversight of these social programs.
The fourth question that I want to answer is why we need an independent chief actuary. We have talked about the purpose of the bill, which is to install an independent chief actuary. We have talked about what an actuary is and what an actuary does. We have talked about what the chief actuary of Canada does and now we need to talk about why we need to make that individual independent.
The bottom line is there is a need for Canadians to be absolutely sure that the true state of their public pensions is not being hidden because the pension watchdog is not independent. I want to make four quick points on this issue.
First, the lack of independence of the current office of the chief actuary has resulted in events which have led to questions about the level of confidence Canadians can place on the oversight of their pensions. I speak specifically about the fact that the former chief actuary of the Canada pension plan and of other public pension plans and other important social plans was fired by the finance department. This individual had been in office for seven years. This individual was just about to bring out a report on the state of the Canada pension plan. This individual was fired after seven years in office and came forward and publicly said that he was fired because he would not validate the figures that were being put forward by the finance department about Canada pension plan projections.
I do not know what the right and wrong of this is, but the fact is that this individual, who had held the post for many years and who was very highly qualified and respected, took the matter to court, sued for wrongful dismissal and won a settlement of over $300,000. This raises legitimate questions as to whether the fact that he insisted on a measure of independence, which the finance department was not prepared to give him, was a factor in this whole very unsettling series of events.
This is one example of the kind of questions that can arise when an important post like the chief actuary is not independent.
The second point I would like to make is with respect to a controversy that arose a few years ago with respect to the public service pension plan. What occurred was there was a controversy over the government's management of the public service pensions during the period 1997 to 1999. The government introduced a bill and there was a real uproar about this. The Auditor General's office said this about the management of the public service pension plans at that time. It stated:
Indeed, the government employees--public service, armed forces and RCMP--pension fund is a 'phantom fund' in that it exists as a set of bookkeeping entries rather than in the form of an investment portfolio of various stocks, bonds and other financial assets.
The bill the government introduced affected all these pension plans, including the members of Parliament retirement allowances. It basically took money out of those plans to help pay down the deficit. Our Senate Committee on Banking, Trade and Commerce reported in September, 1999 the following opinions. It stated:
The committee re-iterates our view that a joint pension management board and risk-sharing agreement is the preferred option for the future. Nevertheless we also note the point made in our June 1999 report that, if no agreement is reached, some Committee members feel that additional safeguards should be introduced to protect the interests of both taxpayers and plan members, including appointing the Auditor General as the primary auditor of the funds, ensuring that a majority of the members of the proposed Pension Investment Board have significant pension fund expertise, requiring the proposed Board to liaise with the actuary so as to understand the nature and timing of plan liabilities, and increasing the amount of information that may be requested of the proposed Board and the anticipated joint pension management board by plan members.
The Senate at that time saw an expanded actuarial oversight role for public service pensions, including your pension and my pension, Madam Speaker.
The third point I would like to make, under the need for an independent chief actuary, is the growing calls for an independent oversight of critical social programs on which Canadians depend. For example, the Canadian Institute of Actuaries recently called for an independent medicare actuary for Canada. It believes we need to use the actuarial discipline to help ensure a sustainable health care system. It states that an independent medical actuary is needed to provide professional, unbiased, non-political advice to policy makers and legislators at provincial and federal levels on design, funding, impact of possible changes, et cetera.
Therefore this is a time when professional expert people in our country are calling for more independent actuarial input into the way our social programs are managed and designed.
The fourth point I want to make is that this call for an independent chief actuary is very consistent with the direction government is taking. Government is recognizing in a variety of ways that it needs to have measures to respond to a growing demand for greater openness and accountability in the operations of government. The new political financing bill is an example of this and there are other examples.
Therefore this is a time when the growth in demand by the public for more independent oversight is starting to generate a response from government and from members of the House. I believe this bill, a simple measure, would be another step in the direction of greater openness and accountability.
The next question is how to go about installing an independent chief actuary. It is not very difficult. The independent chief actuary would be chosen by a resolution of the Senate and the House of Commons. That individual's office, which is already operating, would simply report not to the finance department but directly to the House of Commons. That would allow much greater independence and a much greater level of confidence in the information and the oversight that is being exerted on these very important plans.
Therefore I would like to end by saying there is a real benefit to Canadians, in the House passing this very simple measure of making the chief actuary of Canada independent of government and reporting directly to the people's representatives in the House of Commons. It would generate much greater confidence in important programs. It would allow a better set of checks and balances on these operations of government and increase the confidence in how the checks and balances operate.
Of course the real winner would be our democracy because Canadians who are concerned, who perhaps feel alienated, or uneasy or uncomfortable with just how open and transparent our system is would be further reassured by making this very important critical post entirely independent, reporting directly to us in the House of Commons.
I hope members of Parliament will support this very simple measure and I look forward to the debate on the bill.