The Stel Salaried
Pensioners Organization wishes to thank The Hamilton Spectator for permission
to post the following article by Reporter Luann Lasalle, published in the
November 10, 2005 edition
Pension plan regulations need overhaul: Dodge
By Luann Lasalle Regulations for private pension plans
must be overhauled to sustain retirees and to contribute to the economy and
efficiency of financial markets, Bank of Canada governor David Dodge said
yesterday. Dodge spoke specifically about
defined-benefit pension plans -- like the one currently in deep deficit at
Stelco -- which give retirees a specific monthly payment and make up the bulk
of private employer sponsored pensions. They've been in decline in recent
years as they face bigger and bigger deficits, Dodge told the Quebec MBA
Association in a speech. "The general impact on the
Canadian economy is that capital is just not allocated as efficiently as it
might otherwise be," he said at a news conference after his speech. "Individuals, in the end, either
have to contribute more or take lower pensions as a consequence." Dodge said there are a number of
defined-benefit plans that are currently in deficit. "Whether they will
be in deficit going forward depends on how the economy evolves," he
said, adding that such pension plans provide a source of funding for riskier,
long-term assets. Longevity also has to be factored
into pension plans. "The average lifespan at the age
of retirement has been increasing and not all plans have taken that into
account." Pension plans have been a major issue
in the steel industry with Stelco's defined-benefit plan having a
$1.3-billion pension shortfall. A restructuring plan to be voted on next week
calls for a $400-million down payment on the steelmaker's pension deficit,
$300 million from Stelco and $100 million from a provincial loan. The central banker called on Canada's
policy-makers in his speech to take steps to help remedy the situation. "For the sake of efficiency and
for the future health of our economy, we must get the analysis right, and
then we must act." The speech in Montreal came a day
after a national accountants' group reported that Canada's pension funding
deficit widened by 19 per cent to $190 billion last year and said it's a
wake-up call for the business community. But Dodge said there's "no
silver bullet" to solve the problem. He suggested provincial and federal
governments reform their pension laws so that sponsors of the defined-benefit
plans are responsible for outcomes that lead to deficits and surpluses. He cited pension funds such as the
Ontario Teachers' Pension Plan which have both the employer and employees as
joint sponsors sharing ownership of any surpluses as well as responsibility
for any deficits. Dodge also suggested changes to rebalance the tax treatment
of employer contributions when plans have surpluses, as well as changes to
Canadian accounting standards on pension valuations. |
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