The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Naomi Powell, published in the November 15, 2007 edition
Local pensioners give commission an earful
The Hamilton Spectator
(Nov 15, 2007)
In 2004, Glen Bradley's monthly pension
payments were slashed by a third, his medical benefits eliminated.
His former employer, Welland's Atlas Steel,
had slid into bankruptcy protection with an underfunded pension plan.
The next year Bradley, 59, had a stroke that
left him with a $7,000 annual bill for his medications.
No surprise then, that Bradley had a few
things to say when the commission reviewing Ontario's pension law held a
hearing in Hamilton this week.
"We didn't expect this," said
Bradley, one of 900 employees and survivors hurt by Atlas's eventual
liquidation. "We didn't cause it. A company goes into CCAA (Companies'
Creditors Arrangement Act), the judge puts the gavel down, and you lose your
benefits. The judge puts the gavel down again and you lose your pensions."
Such stories are the simple human imperative
behind a decidedly complicated task: how to improve pension legislation that
hasn't been touched in 20 years. That task is being tackled by former York
University president Harry Arthurs, head of the Expert Commission on Pensions.
"The big issue that we're hearing is,
'Is my pension secure?'" said Arthurs, an expert in labour and
administrative law.
It's a key question in the Hamilton and
Niagara regions, where Atlas, Stelco, Amcan Castings and Hamilton Specialty Bar
have all emerged with inadequately funded pension plans.
The central issue is how to manage funds in
a way that prevents deficits from developing in the first place. Employee and
retiree groups have argued for greater powers for regulators to intervene when
a company fails to make payments into the plan. As it stands, the regulators do
have the power to take a company to court and force payments, but, as Arthurs
notes, that process is "long and cumbersome."
Greater regulatory power could improve the
process but it wouldn't address the root problem of how to determine when a
fund isn't solvent. Currently it's up to the work of actuaries to diagnose when
a fund is headed for trouble.
The problem is, actuarial forecasting is
done just once every three years, so a plan that is fully funded in 2007 could
have plunged into a deficit by the time it is re-examined in 2010.
Even if the forecasts were made annually,
they rest on assumptions about interest rates and market behaviour that may
fail to match up with reality.
"Even if its done in good faith, it's
fundamentally fortune telling," said Sherman Cheung, a McMaster University
professor specializing in pensions.
Then there's the question of surpluses.
Currently, if a fund has more money than required, employers aren't allowed to
remove that money. This, Cheung argues, acts as a disincentive for employers to
make regular contributions.
"If they were able to pull the money
out when it turned out the plan had a surplus, maybe they wouldn't be so
reluctant to put a little extra in," he said.
The Canadian Federation of Pensioners and
other retiree groups have argued for reserve funds, where surplus returns act
as a cushion during times of low interest rates and returns. Should the fund
exceed the maximum, the extra cash would belong to contributors.
Such a fund would encourage full funding of
pensions, the CFP says, and eventually eliminate the need for the Pension
Benefits Guarantee Fund, which the government uses to top up pension payments
when an insolvent company's plan is underfunded. In the meantime, the CFP, like
many groups, wants the PBGF maximum adjusted --set in the 1980s, it tops up
monthly pension payments to $1,000. That should be $2,500, said CFP chair John
Hanson.
The commission is to report to Ontario's
finance ministry in the summer.
"It's very complex stuff and very
important stuff," Cheung said. "I do not envy the commission."
npowell@thespec.com 905-526-4620