Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 56 - Twenty-eighth Report of the Committee
TUESDAY, September 7, 1999
The Standing Senate Committee on Banking, Trade and Commerce has the honour to present its
TWENTY-EIGHTH REPORT
Your Committee, to which was referred Bill C-78, An Act to establish the Public Sector Pension Investment Board, to amend the Public Service Superannuation Act, the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act, the Defence Services Pension Continuatinuation Act, the Royal Canadian Mounted Police Pension Continuation Act, the Members of Parliament Retiring Allowances Act and the Canada Post Corporation Act and to make a consequential amendment to another Act, has examined the said Bill in obedience to its Order of Reference dated Thursday, June 17, 1999, and now reports the same without amendment, but with observations which are appended to this report.
Respectfully submitted,
MICHAEL KIRBY
Chairman
(28th Report) - APPENDIX
BILL C-78, THE PUBLIC SECTOR PENSION INVESTMENT BOARD ACT:
ONGOING CONCERNS OF THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE
On 15 June 1999, the Standing Senate Committee on Banking, Trade and Commerce tabled its Twenty-Seventh Report, on Bill C-78, An Act to establish the Public Sector Pension Investment Board. Although no amendments were suggested, the report highlighted concerns of Committee members with respect to various aspects of the bill. The Committee commented on a joint pension management board, ownership of the pension surplus, access to information, the Canada Post Corporation, a statutory review and survivor benefits for conjugal partners of the same sex.
The following observations, based on the Committee's hearings of 23 and 24 August 1999, are supplementary to those made by the Committee in its 27th Report, dated June 15, 1999. The Committee wishes to stress that the issues identified in the earlier report remain the concern of Committee members.
A JOINT PENSION MANAGEMENT BOARD AND RISK-SHARING AGREEMENT
In the Committee's June 1999 report it was recommended that:
the Treasury Board immediately resume discussions with representatives of federal public service employees and retirees with a view to concluding a mutually-acceptable joint management and risk-sharing agreement respecting the public service pension plans. This agreement should resemble the understanding reached between the parties before discussions broke down in December 1998, and should make clear the relationship between the joint pension management board and the proposed Public Sector Pension Investment Board.
The Committee also recommended that:
the disposition of any future pension surplus in the federal public service pension plans be decided by the joint pension management board, notwithstanding any provisions in Bill C-78.
A joint pension management board is an important component of both recommendations noted above. The former recommendation arose in part from a written undertaking received by the Committee from the previous President of the Treasury Board on behalf of the government. The undertaking committed the government to resuming discussions with federal public service unions with a view to establishing a joint pension management board and risk-sharing agreement. While all relevant parties expressed interest in engaging in these discussions, the Committee is aware that not only has no agreement been reached, but no discussions have been held since the tabling of the Committee's report in June.
In the course of our hearings on Bill C-78, the Committee was told of the general nature of the discussions between the Treasury Board and federal public service unions about proposed changes to the Public Service Superannuation Act. We were informed that, while both parties had agreed on a joint pension management board, discussions broke down in December 1998 over the ownership of the current pension surplus. It is alleged by union witnesses and others that the Treasury Board agreed to the joint pension management board on condition that the government would have control of the current pension surplus in the federal public service pension plans.
The Committee is deeply disturbed by the continued lack of agreement on a joint pension management board and risk-sharing arrangement, particularly since our June 1999 report had indicated that many of our concerns about Bill C-78 would be allayed if agreement were reached on this issue. Before the Senate recessed in June, it passed a motion to send Bill C-78 back to the Banking, Trade and Commerce Committee so that the Committee could monitor the discussions referred to in the letter of the previous President of the Treasury Board which was appended to the Committee's June 1999 Report. At that time, many Senators were hopeful that the Treasury Board and federal public service unions would report success in reaching agreement on this issue. These hopes have not been realized, and the Committee is both disappointed and frustrated. In June 1999, we felt that both sides -- the government and representatives of plan members -- had a sincere desire to engage in meaningful discussions designed to conclude such an agreement, yet no such discussions have been held.
The Committee believes that discussions did not proceed over the summer because of a perceived precondition imposed by both the government and plan members about whether the current pension surplus would form part of the discussions. Captain M. R. Sjoquist, Co-Chair of the National Joint Council, stated in a 28 June 1999 letter to then President of the Treasury Board Marcel Massé that «further talks cannot proceed without ... agreement to negotiate the existing plan surplus.» From the perspective of the government, in a 25 June 1999 letter to Mr. Daryl Bean, National President of the Public Service Alliance of Canada, then President of the Treasury Board Marcel Massé said that «the government's position on the disposition of the existing surplus remains unchanged. ... (S)ince the government ... has assumed all financial risks associated with being the sole sponsor of the pension plan, any `rewards' that accrue as a result of those risks must fall to the taxpayers of Canada.» A minority of Committee members now feel strongly that no sincere attempts were made by the government to resume discussions following the Senate's June 1999 motion, and hence are not optimistic that any sincere efforts will be made in the future, particularly in light of the letters of Mr. Bean and Captain Sjoquist of August 3 and 4, 1999, respectively, which are appended to this report.
Moreover, the Committee was informed that, when negotiations broke down in December 1998, while agreement in principle had been reached, all of the details of the joint pension management board had not been finalized. As well, representatives of the Canadian Forces and the Royal Canadian Mounted Police were not part of those discussions. These details must be finalized, and discussions with the Canadian Forces and the RCMP must occur, before any amendments are made to Bill C-78.
In the Committee's most recent hearings, the President of the Treasury Board testified that "... as soon as a final agreement is reached on a joint management arrangement ... that is satisfactory to all parties, I will seek an early opportunity to introduce the necessary legislation to implement it." Moreover, in a 20 August 1999 letter received by Senators Kirby and Tkachuk, the President of the Treasury Board indicated that " ... Bill C-78 is the first step and not the last step in the reform process. ... (A) joint management framework for the public pension plan is the only option that will ultimately put this plan on a firm foundation for the future." The Committee intends to monitor these discussions closely.
In the interim, a majority of the Committee favours proceeding with Bill C-78 in its current form. All members of the Committee strongly favour a negotiated joint pension management board and risk-sharing agreement, and wish that Bill C-78 could have incorporated the essential features of such a board as agreed to by the parties in December 1998. From this perspective, we look forward to the promised legislative changes once the negotiations have been completed.
Although a majority of Committee members continue to believe that the government should control the current pension surplus, all Committee members believe that the disposition of any future surplus should be decided by the joint pension management board.
THE OWNERSHIP OF THE PENSION SURPLUS
Regarding the ownership of the pension surplus, the Committee re-iterates the comments made in our June 1999 report. A majority of Committee members continue to believe that because the employer, in this case the government, has been liable for any pension fund shortfalls, it is logical for it also to receive any surpluses in those funds. The entire Committee continues to believe that any future surplus should be shared only if any future shortage is likewise shared.
Several Committee members, however, continue to hold the view that the employer should not have unilateral access to the present surplus, and that the disposition of this surplus should be negotiated between the parties. A suggestion made in the Committee's June 1999 report was a division reflecting the relative percentage contributions to the pension plans made by the employer and the employees. In addition, many members of the Committee believe that the provisions of the Pension Benefits Standard Act, 1985 should apply to the federal government itself.
A minority of Committee members do not agree that the government has assumed all past risks and is therefore entitled to the current surplus, and instead believe that the government has never assumed 100 percent of any plan risk. In support of this position, these Committee members recall the testimony of some witnesses regarding legislated contribution rate increases that have occurred in the past. Assets resulting from these increases could have offset plan deficits or financed such enhanced plan provisions as indexing. Although there are limitations within Bill C-78 regarding future contribution rate increases, a minority of Committee members fear that the government's ability to change contribution rates could be used to deliberately create a surplus that could later be accessed.
THE CANADIAN FORCES AND THE ROYAL CANADIAN MOUNTED POLICE
The Committee is outraged about the lack of consultation with members of the Canadian Forces and the Royal Canadian Mounted Police on the proposed changes to their pension plans, particularly since our June 1999 report stated that some mechanism had to be found to formally include them in discussions on a joint pension management board and risk-sharing agreement. Representatives of members of the RCMP, in particular, made compelling arguments to the Committee about such issues as the treatment of part-time and civilian members and the definition of "pay."
In the view of Committee members, serious consideration must be given to including part-time members of the RCMP in the Royal Canadian Mounted Police Superannuation Plan, bearing in mind that part-time employees within the federal public service are included in the Public Service Superannuation Plan. Moreover, recognizing that civilian members work alongside regular members of the RCMP, any differences between the pension regimes of each group should be examined to ensure that they can be justified, including, for example, early retirement provisions. On the issue of the manner in which the term "pay" is defined, acting pay should be included in the definition, given its importance as a compensation item.
In the Committee's opinion, the pension plans for members of the Canadian Forces and the Royal Canadian Mounted Police must be tailored to reflect their particular circumstances, and the Committee urges the government to immediately initiate thorough and broad-ranging consultation with them. The Committee will be monitoring the nature and extent of these discussions.
More generally, the Committee firmly believes that in any instance where a number of employee groups are affected, and these groups have unique concerns, it is preferable to address them in separate pieces of legislation. It is only through such an approach that the particular circumstances of each group can be adequately highlighted, discussed and addressed. In the context of Bill C-78, for example, we believe that the concerns of members of the Canadian Forces and the RCMP, and of employees of the Canada Post Corporation, would have been more appropriately addressed if their pension arrangements had been amended through separate pieces of legislation rather than within Bill C-78.
THE EXTENSION OF SURVIVOR BENEFITS
Bill C-78 would extend survivor benefits to persons in a same-sex conjugal relationship. Although the Committee recognizes that this measure was included, in part, in order to comply with a recent Supreme Court of Canada ruling, we repeat our June 1999 recommendation that the government consider extending benefits in situations characterized by economic dependence, not only to conjugal relationships. In her appearance before the Committee, the President of the Treasury Board recognised the need for examination of this issue. She also noted that, although the government has yet to decide how and when debate on this issue will occur, means must be found for including Canadians in the debate. The Committee will be closely monitoring progress in this area.
CONCLUSION
Although the Committee is reporting Bill C-78 without amendment, a minority of Committee members believe that Bill C-78, as currently drafted, should not be enacted. Serious concerns in a number of areas still remain. A minority of Committee members are troubled by the fact that the government would prefer to resolve some outstanding issues after Bill C-78 becomes law, by introducing additional amendments at a later date. Despite the desire of a majority of Committee members to pass Bill C-78 unamended at this time, a minority would have preferred it if the current bill had incorporated the essential features of a negotiated joint pension management board and risk-sharing agreement and addressed any particular concerns of members of the Canadian Forces and the Royal Canadian Mounted Police.
The Committee ended its June 1999 hearings on Bill C-78 with an undertaking from the previous President of the Treasury Board to re-establish discussions with employee and pensioner representatives regarding a joint management arrangement, although the parties have not to date engaged in such discussions. We ended our August 1999 hearings on the bill with an undertaking from the current President of the Treasury Board of future legislative change to implement the details of a mutually-agreed joint pension management board and risk-sharing agreement. The Committee will press for the early introduction of this legislation.
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.
Finally, the Committee also re-iterates our June 1999 recommendation that the President of the Treasury Board initiate a Parliamentary review of the operation of the proposed Pension Investment Board no later than three years after the coming into force of Bill C-78. Given the acrimony that appears to exist at this time between the Treasury Board and representatives of plan members, we believe that the proposed Parliamentary review should be broadened to include any issues of concern to Parliamentarians involved in the review, including, for example, the effectiveness of the Pension Advisory Committees proposed by Bill C-78.