Proceedings of the Subcommittee on Veterans Affairs
Issue 5 - Evidence - April 30, 2008
OTTAWA, Wednesday, April 30, 2008
The Subcommittee on Veterans Affairs of the Standing Senate Committee on National Security and Defence met this day at 12:11 p.m. to study the services and benefits provided to members of the Canadian Forces, veterans of war and peacekeeping missions and members of their families in recognition of their services to Canada. Topic is Deductions from SISIP Payments
Senator Michael A. Meighen (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Subcommittee on Veterans Affairs. We have an interesting and not uncomplex — if I can use a double negative — subject before us. I hope all senators will keep their questions crisp because I know the witnesses will keep their answers as crisp as possible.
Let me begin by introducing the senators who are present. On my left is Senator Percy E. Downe from Prince Edward Island, officially a member of our of committee today, replacing Senator Kenny, and a frequent attendee at our committee hearings. Senator Roméo Dallaire is to his left, from Quebec. Next to Senator Dallaire is Senator Joseph Day from New Brunswick. To my immediate right is Senator Nancy Ruth from Ontario. To her right is Senator Tommy Banks from Alberta.
All these distinguished senators have long and fulsome descriptions of their successes in other careers, but given that fact and given our time constraints, I will limit myself to introducing them today. If you want more details, I invite you to ask the individual senators after the meeting.
An acronym will come up often today during our discussions. For those who are not familiar with it, I think I had better spell it out right away. You will be hearing a lot about SISIP. If you do not already know, SISIP stands for Service Income Security Insurance Plan. It is a group insurance plan that makes insurance available to members of the Canadian regular and reserve forces. This week and next we hope to address the issue that some have called unfair reductions or clawbacks to SISIP long-term disability, LTD, benefits awarded to disabled veterans. Next week, the committee will hear the views of some of the beneficiaries of SISIP when we hear from representatives of the Royal Canadian Legion and other stakeholders.
Our aim today and in our subsequent hearings is to gain an understanding in order to make a recommendation to government of the issues surrounding the reduction in long-term disability benefits paid through SISIP. If I may set the scene, there are two separate and distinctly different ``clawback'' issues, which are of concern to the veterans community of Canada.
The first deals with a reduction in the Canada Pension Plan payments and the other is focused on the allegedly unfair reductions to SISIP long-term disability benefits awarded to disabled veterans.
In this meeting today, we discuss the latter question, which is the reduction in SISIP long-term disability benefits. To assist us in that discussion, we have before us André Bouchard, President of SISIP Financial Services; and from the Department of National Defence, Brigadier-General David Martin, Chief Executive Officer of the Canadian Forces Personnel Support Agency.
Without further ado, gentlemen, I believe you have a short statement to help us gain an understanding.
Brigadier-General David Martin, Chief Executive Officer, Canadian Forces Personnel Support Agency, Department of National Defence: Thank you, chair and senators. Thank you for inviting us to attend this session today with the subcommittee. I am currently the director general, personnel and family support services, as of April 1. This primarily new organization is made up of the old Canadian Forces Personnel Support Agency, with other elements now merged into it, or about to be.
I will take a few minutes to give a little background on the organizational pieces and where SISIP Financial Services fits into the Canadian Forces. It is one of my responsibilities; they are a division within my organization.
I will provide a brief synopsis of the evolution of SISIP, where it fits into the organization, and the roles and responsibilities of the various stakeholders in long-term disability. I will then ask Mr. Bouchard, who is the president of SISIP Financial Services, to carry on with the presentation and specifically address some of the detailed issues concerning Pension Act offset.
SISIP Financial Services stood up in 1969 after a 1960s study concluded that income protection for members whose injuries, illness or death, not related to military service, the benefits they received were virtually non-existent. Depending on the length of service, a member may have had no entitlement to benefits under the Canadian Forces Superannuation Act or minimal entitlement to other benefits such as Canadian Pension Plan or Quebec Pension Plan.
For injuries and death attributable to military service, this area was under the umbrella of Veterans Affairs Canada. Some benefits were provided, including a Pension Act monthly disability income protection and an income payable to eligible survivors, if it was attributable to military service. SISIP's mandate originally was to provide Canadian Forces members and their families with a reasonable level of income protection in combination with other sources of income.
With that brief understanding I will give the committee some background on where SISIP fits into the Department of National Defence, because I think it is important to understand that relationship. SISIP Financial Services is a division of the director general, personnel and family support services. It is a new organization largely comprised of the former Canadian Forces Personnel Support Agency.
SISIP's financial services personnel are non-public Crown employees and they form the Canadian Forces delivery arm for financial products and services to serving and former Canadian Forces members and their families. It is a division, as I mentioned, under Director General Personnel and Family Support Services. I think you have before you an organizational diagram. Please reference figure 1 which shows SISIP in relation to some of the other divisions that are also under my responsibility. The PSP acronym stands for personal support programs. That is where we include things like the military family services program, our support to deployed operations, our fitness programs, sport and recreation, messes and things like that.
The Director General Personnel and Family Support Services group is part of Military Personal Command. It is under Chief Military Personnel. We are a unique organization that uses both public and non-public resources to fulfil its mandate. As you may be aware, non-public property is a special class of Crown property controlled by the Chief of the Defence Staff, primarily for morale and welfare purposes. The majority of non-public funds or non-public property is derived from the contributions made by Canadian Forces members in respect to morale and welfare activities for the Canadian Forces and their families.
Assisted Financial Services is divided into main components in terms of the plans that it manages. There is a public and non-public side to that group. They are listed in figure 2. There are things like optional group term insurance on one side and long-term disability on the other.
Now I want to discuss specifics with respect to SISIP long-term disability. When the program was first created back in 1969, it was solely a non-public operation. All premiums were paid by participants. The program was aimed at those conditions that were not attributed to service. Through the years, the long-term disability portion became a publicly- supported program as Treasury Board of Canada implemented government-sponsored long-term disability insurance benefits for the public service, the Royal Canadian Mounted Police and also the Canadian Forces.
Treasury Board has governance over these programs, and that governance includes the SISIP-managed LTD. Any contractual changes or rate adjustments recommended by DND must be agreed to by Treasury Board Secretariat and approved by Treasury Board ministers. Treasury Board Secretariat also engages the services of the Office of the Chief Actuary within the Office of the Superintendent of Financial Institutions Canada to evaluate the financial experience of the plans and to make recommendations regarding funding levels and the rate action requirements.
The Chief of the Defence Staff is the policy owner for all SISIP plans, both publicly and non-publicly supported. As such, the CDS is ultimately responsible through delegated authority for entering into or terminating any contractual relationship on behalf of the Canadian Forces with the insurer. The CDS is also responsible for monitoring the management of the long-term disability plans.
SISIP Financial Services is responsible for managing the program and working with the various stakeholders to ensure excellence in customer service to the various CF clients. Along with some administration functions, SISIP Financial Services is responsible for ensuring the plans are administered in accordance with contractual provisions and that they are on a sound financial footing. The President of SISIP Financial Services reports to me and, as Director General Personnel and Family Support Services, I report to Chief Military Personnel.
Manulife Financial is the contracted insurer for all SISIP-managed programs. It provides administration services such as long-term disability claims and adjudication, including the payment of monthly benefits and vocational rehabilitation.
I will ask Mr. Bouchard to carry on and provide the facts specific to the pension offset issue.
André Bouchard, President, SISIP Financial Services: Thank you once again to the committee members for the opportunity to speak to you today. My aim will be to provide you with a synopsis of the facts surrounding the deduction from the SISIP LTD payments and, more specifically, the monthly Pension Act benefits.
[Translation]
As mentioned by BGen. Martin, the SISIP long term disability insurance policy was created in 1969 to provide Canadian Forces members with income protection for total disability that was not attributable to military service.
[English]
The amount paid by SISIP was the guaranteed amount of 75 per cent of pay at release from the CF, less applicable specific reductions, including the monthly benefits under the Canadian Forces Superannuation Act, disability paid under the Canada Pension Plan and Quebec Pension Plan, and employment income.
In 1976, SISIP LTD coverage was expanded to include service for attributable injuries because, in certain circumstances, Pension Act benefits alone were inadequate to maintain a reasonable standard of living. As a result, totally disabled members who were awarded a tax-free pension benefit were also assured of 75 per cent of pre-release salary from all sources under the LTD provisions.
The Pension Act was added to the list of applicable reductions, in part because of the stacking of disability payments from two federally funded sources was not consistent with the Treasury Board design for such plans. Reducing long- term disability benefits ensures that the amount of disability insurance benefits does not exceed employment salary and that the net value of benefits awarded is comparable, whether the disability was attributable to military situation or not.
[Translation]
This practice has also allowed the insurer to keep both the cost of the long-term disability program and the cost of premiums, which are co-funded by the Treasury Board (85 per cent) and Canadian Forces members (15 per cent), as low as possible. Therefore, the premiums paid by the members were in keeping with the level of benefits received.
[English]
Initially, pensions under the Pension Act were payable only upon a member's release from the CF. In 1971, the Pension Act was amended so that CF members injured in a special duty area can receive a disability pension while still serving. In October, 2000, Veterans Affairs Canada, through Bill C-41, amended the Pension Act to entitle any CF member to a pension while serving. While this amendment was intended to restore parity among serving members, the result was that the fairness of reducing SISIP LTD benefits became an issue. That issue resulted in the 2003 Ombudsman Report.
In the report, the ombudsman contends that the Pension Act benefits are awarded to compensate members for the disability suffered, not to replace lost income. As such, it should not be offset from LTD benefits. The ombudsman maintains that, because Pension Act benefits are in addition to salary for serving members, they should also be in addition to SISIP LTD benefits for released disabled veterans.
[Translation]
In his report, he has recommended that reimbursement be retroactive to October 27, 2000, the date on which all Canadian Forces members became eligible to receive a pension while serving.
[English]
The purpose of Pension Act pensions is not explicit in the legislation. While some provisions, such as the one cited by the ombudsman, suggest that benefits are for pain and suffering, other provisions are more in the nature of income replacement. For example, if a pensioner dies, the Pension Act provides that the survivor receive a portion of the pension for life, even if the union occurred after the member was disabled. This provision suggests that the pension is a form of income. In reality, the Pension Act served two purposes, not one as the ombudsman suggested. This lack of clarity has created the existing confusion.
[Translation]
Applying reductions to long term disability benefits is a common and accepted insurance industry practice.
[English]
All the public service Disability Insurance Plans have reductions. The RCMP LTD plan also reduces for the monthly Pension Act benefits. The RCMP plan is a mirror copy of the SISIP LTD.
The insurer, Manulife Financial, submitted in 2007 that the cost to implement the ombudsman's recommendation was at between $270.8 million to $295.8 million. This amount was validated by an actuary of the Office of the Superintendent of Financial Institutions Canada.
Of that amount, between $270 million and $295 million is the cost of retroactive payments for an estimated 4,286 eligible claimants, plus the cost of additional reserves to accommodate the increase in future payments to the claimants. The balance — $0.8 million — is for administration.
DND will be responsible to provide all requests for the required funds. Implementation will take approximately two and a half years. This plan could also impact on other government plans. However, the financial impact on these other plans has not been calculated.
You may be aware that a certification hearing for a proposed class action lawsuit surrounding the Pension Act offset from LTD benefits took place in Halifax on February 12-13, 2008. We are awaiting the court's decision on this matter. As this matter is pending before the Federal Court, we will not make any comments on this litigation.
[Translation]
That concludes my remarks and I trust that we have provided the committee with sufficiently clear background on this matter. BGen. Martin and I would be pleased to answer any questions you may have.
[English]
The Chair: Thank you for your excellent presentations. We now have less than an hour for questions. I am sure an hour will not be enough, but we will do our best to gain a full understanding and we thank you for your assistance in that regard.
Senator Downe: I want to follow through on the delegation of authority that Brigadier-General Martin referred to for the Chief of the Defence Staff. The DND ombudsman says this is unfair and should be rectified. We have a motion that has gone through the House of Commons in November 2006, indicating that this unfair deduction should be stopped.
The recommendation from the DND ombudsman was that the Minister of National Defence would present the necessary submissions to Treasury Board to have this situation rectified. I want to be clear: Who must initiate this procedure in the department, the minister or the Chief of the Defence Staff?
Brig.-Gen. Martin: In this case, the minister; this program is a Treasury Board-governed program. The minister initiates that procedure with the minister's Treasury Board colleagues for approval. The CDS is the policyholder; but in terms of changing the benefits, the decision must be taken by government through Treasury Board and approved by Treasury Board ministers.
Senator Downe: Can you elaborate further on the responsibility of the policyholder? Does the minister wait for a recommendation from the Chief of the Defence Staff before acting, or can the minister act on their own?
Brig.-Gen. Martin: The minister can always go to Treasury Board. The minister has the oversight of the programs delivered by the department and, in this case, governed by Treasury Board.
The ombudsman's recommendations came in; two of them remain to be acted upon and reside, in terms of a decision to be taken, with the minister.
Senator Downe: Can you give us a brief explanation of the responsibilities of the Chief of the Defence Staff as policyholder?
Mr. Bouchard: The Chief of the Defence Staff must ensure that SISIP will deliver programs — not only the long- term disability program, but any program for which the CDS is responsible — in accordance with the policy. This is not to say that the Chief of the Defence Staff cannot make a recommendation to change some part of the policy.
The CDS has the prerogative to suggest that part of the policy can be changed. I suspect, especially if we look at the ombudsman's report — the two recommendations therein — the decision to come down, if it comes down, to SISIP must come from the government. It is not something we can implement on our own.
Senator Downe: It is my understanding — correct me if I am wrong — that the senior management and executives in the public service have a disability plan that has no restrictions for disability insurance benefits. It is only the plans of the Canadian Forces and the RCMP that reduce disability insurance benefits by the amount of disability pension received for any disability. Is that correct?
Mr. Bouchard: Yes.
Senator Downe: You indicated the cost is $270 million to $295 million. That cost does not bother me. If we have the responsibility, we pay the bill.
It can be argued, on the other hand, that if we reduce the benefits available for the senior public service and managers to bring them in line with the current service income security insurance plan, we can save a lot of money. However, we do not do that because we do not think it is the right thing to do. This situation should be corrected as soon as possible, and I hope this committee comes to that conclusion.
Senator Day: I did not write down all the figures, Mr. Bouchard. Was the $270 million to $295 million the retroactive payment that was recommended?
Mr. Bouchard: Yes, if we look at this range of between $270 million to $295 million, this amount of money is required, first, to retroactively reimburse all members from whom we have deducted Pension Act monthly benefits from the date that Bill C-49 was introduced, which was from October 27, 2000 until April 1, 2006, the date of implementation of the New Veterans Charter.
That figure covers retroactive reimbursement for that period. The amount of money required for that piece alone is approximately $102 million. The rest of the money, close to $200 million, is to set up the statutory reserves so we can make the ongoing payments to all the LTD claimants we have on the books.
Senator Day: The $270 million to $295 million is the total — it is the retroactive reimbursement plus setting up the reserve. Is that right?
Mr. Bouchard: Plus the ongoing forward basis cost, yes.
Senator Day: Can you briefly refresh my memory on the impact of the New Veterans Charter? You indicated that the reimbursement period will continue until that time. What happened with the New Veterans Charter that at least partially solved this problem?
Mr. Bouchard: On a going forward basis from April 1, 2006, the date the charter was implemented, the charter essentially replaces the monthly Pension Act benefit with a disability award, which is a lump sum amount. Of course, this lump sum amount is not a deduction from SISIP LTD.
Senator Day: Is the lump sum amount non-taxable?
Mr. Bouchard: Yes, as I mentioned in my notes, the monthly benefit is also a non-taxable benefit.
Senator Day: Looking at the document you provided — an organizational chart — you indicated that the PSP is personnel support programs. We visited the family resources centres at various bases as a committee, or part of our larger Standing Senate Committee on National Security and Defence visited various bases. Does that service fit under that heading?
Brig.-Gen. Martin: Yes, we manage the military family services program, which provides the essential funding and oversight for the centres. The programs are delivered by the military family resource centres, which are third party, incorporated organizations. However, they must meet certain expectations that we spell out for them; and we measure those results so we have a large degree of oversight and control of the program.
Senator Day: When I am in Kingston and I drive by the Royal Military College, I see the letters on the side of the building. Is that under Chief of Personnel Support Programs as well?
Brig.-Gen. Martin: Yes, that building is part of the fitness structure within the Canadian Forces. There are personnel support programs on every base and wing. All the gym facilities and arenas are under that umbrella.
Senator Day: Was the decision to have Manulife Financial as the carrier of the plan based on a recommendation from the CDS following the guidelines of Treasury Board?
Mr. Bouchard: No, when SISIP was implemented in 1969, administrators went through a bidding process to find an insurance company interested in the business. Maritime Life received the contract, which was subsequently taken over by Manulife. The company administers SISIP and can deliver our insurance products because SISIP Financial Services is not an insurance company. Manulife acts as the arm of SISIP that allows SISIP to deliver the disability and life insurance to members of the Canadian Forces and their families.
Senator Day: Does the company have a long-term contract?
Mr. Bouchard: Yes, Maritime Life has provided the service since 1969, including the changeover to Manulife, who carried it forward.
Manulife adjudicates all claims and recommends payment or non-payment of all claims. They carry out all their functions on our behalf.
Senator Day: Do they provide any advice on costing under the rules to the CDS or to SISIP if they were to drop a certain clawback or deduction?
Mr. Bouchard: Yes, in a sense, they provide this information. Each time we are asked to make a change to an element of the policy, we consult the insurer to know the consequences of the change. Actuaries at Manulife are able to determine the cost of the change. They provide that information. If there is a need for a Treasury Board submission, depending on the nature of the change, that costing information forms part of the submission for Treasury Board's approval.
Senator Day: In the schedule you provided to the committee, we see financial planning at the fourth bullet in the category, Non-Publically Supported. How do I compare that to financial counselling and education in the other category, Publically Supported? One is paid from the public purse and one is paid by Canadian Forces personnel. It seems to be the same activity.
Brig.-Gen. Martin: If I may, I will provide an overview. The difference between financial planning and financial counselling is that financial counselling is put in place to assist members when they have difficulties. For example, they might be challenged with the management of their resources. This counselling is done to the benefit of the organization to provide assistance in finding a resolution to their particular situation.
Financial planning is a voluntary program. It helps members to look ahead, and it encourages them to make wise decisions with their money for long-term planning of financial matters.
The two are handled accordingly, with one being a more public responsibility and the other being non-public.
Senator Day: Thank you for the clarification. Can you explain the publicly supported Treasury Board General Officers' Insurance Plan? Is this plan for general officers only? How does it differ from the long-term disability plan that we have been discussing?
Mr. Bouchard: With long-term disability, we are looking at a program for members who are injured and, as a result, released from the Canadian Forces. The long-term disability will provide them with a guaranteed form of income for a specific period of time or up to the age of 65.
The General Officers Insurance Plan, GOIP, is a benefit that essentially mirrors what is available to the executive cadre of the public service. The program was put in place in 1972 by Treasury Board. The elements of the GOIP for senior officers are identical to those available to public service executives: life insurance, and long-term disability, dismemberment and accidental death coverage.
Senator Day: Is life insurance available for serving men and women as it is for general officers?
Mr. Bouchard: Yes, it is available. As soon as someone is promoted to colonel or general officer, they have an automatic eligibility for GOIP. They can also enrol in the optional term life plan under SISIP for amounts of $10,000 up to $400,000. This plan is also available to all Canadian Forces members and their spouses, with their dependents covered as well under the optional term life.
Senator Day: I see optional term life on the left side of the material that you provided. Is that what you are talking about?
Mr. Bouchard: Yes.
Senator Day: Can you explain the difference between the long-term disability benefits available to the serving men and women and the benefits available to general officers?
Mr. Bouchard: Every member of the Canadian Forces is entitled to SISIP Long Term Disability. In addition, there is accidental dismemberment coverage, which was put in place in February 2003. The committee might have read the report that was implemented after a long process. Anyone who is injured or suffers dismemberment for a reason attributable to military service can access up to $150,000 in benefits based on the schedule of benefits.
For people who are injured or dismembered for conditions not attributable to military service, there is a dismemberment provision under the optional term life in SISIP. That provision mirrors what is in the accidental dismemberment plan of the Canadian Forces and the GOIP.
Members are fully covered. If they are injured, they can access up to $250,000 for dismemberment. If they die in an operational theatre, they can access up to $250,000 under Veterans Affairs Canada. Members injured in military service can receive up to $150,000 from SISIP and up to $250,000 from VAC for the same condition. They can collect from both SISIP and VAC.
Members are fully covered, and SISIP is in place to complement term life.
Senator Day: You said that members are fully covered. The coverage depends on the options selected under the non- publicly funded category, and it is the same for general officers as it is for serving men and women.
Mr. Bouchard: Yes, that is correct under the optional term. General officers or any Canadian Forces member can apply for exactly the same coverage.
Senator Day: Is it the same in terms of the net result to the individual under the publicly funded category, although it has a different name?
Mr. Bouchard: The General Officers' Insurance Plan under the publicly-funded category is strictly for senior officers. Members of the forces cannot access that program.
Senator Day: Do they access a program of equal benefit?
Mr. Bouchard: A program of equal benefit exists including accidental death and dismemberment. Essentially, as general officers, they have similar benefits at different levels.
Senator Day: I ask these questions because this committee completed a lot of work with respect to Major Bruce Henwood. At that time, the major was not a general officer and was not able to access the same benefits for dismemberment that general officers were able to access. We want to ensure an equal level of compensation irrespective of the rank.
Mr. Bouchard: I can assure you there is. We have achieved that goal with the accidental dismemberment.
Brig.-Gen. Martin: I will add that a Treasury Board submission is in progress. We have implemented the plan so there is no difference and the Treasury Board submission will make that plan the permanent condition.
Senator Day: It has not yet been made permanent?
Brig.-Gen. Martin: Not yet; currently, we are implementing it and all members will receive it.
Senator Day: Maybe a push to the Treasury Board from this committee may help bring that process to a good conclusion.
[Translation]
Mr. Bouchard, you mentioned the ombudsman's two recommendations. You also mentioned the case before the Federal Court in Halifax. Thank you for mentioning that because I was not aware of it. Now, prior to the case before the courts, did the Department of National Defence make a decision about the ombudsman's recommendation? Did it express an opinion before the matter went to court?
Mr. Bouchard: For my part, I gave the information to the minister with no recommendation, as I have done here at the committee. Of course, no recommendation came from the minister's office.
Senator Day: Saying that such and such a thing had to be done.
Mr. Bouchard: Yes, exactly.
[English]
Senator Banks: On the last point, if I painted two recommendations of the ombudsman pink and followed them through the process, where will I find them today? Are they on the minister's desk and nothing more?
Brig.-Gen. Martin: The recommendations went to the minister. There has been one response to the ombudsman that I am aware of from a former minister who indicated that, as I understand, no decision has been taken nor is one intended while the legal action is underway.
Subsequent to that response, I believe the ombudsman wrote back to the minister seeking a resolution independent of the legal action. To my knowledge, no decision has been taken by the minister.
Senator Banks: Was that second letter from the ombudsman to which you refer sent to the present minister?
Brig.-Gen. Martin: I would need to confirm the date when that letter was sent.
Mr. Bouchard: It was in 2007. It would have been sent to Minister Gordon O'Connor.
Senator Banks: The previous minister?
Mr. Bouchard: Yes; I am not aware of a letter that has gone to Minister Peter MacKay at this point.
Senator Banks: Do you believe that the present minister personally knows about those recommendations?
Mr. Bouchard: Yes, I briefed the previous ministers and I also briefed Minister MacKay not long ago. Essentially, I gave the same type of briefings as I made to this committee without making any recommendations. The decisions are labelled and we have not seen anything come back from his office.
Senator Banks: I have a hard time following anything with dollar signs in front of it, so correct me if I am wrong. As I understand it, essentially SISIP was originally intended to be a guarantee that income, however it is defined, would not fall below a certain point. It is not a straight bet like insurance.
Brig.-Gen. Martin: It was intended as a top-up.
It was clear that, especially for those cases unrelated to service, there were no benefits. Therefore, it was intended to ensure a safety net providing a total income of at least 75 per cent. When they are not paying for pension and income tax, that amount was deemed to be a reasonable threshold.
That is how SISIP began. It was for non-attributable releases and service. Later, it was expanded to include medical release due to service.
Senator Banks: I understand that SISIP, in the sense we are talking about it, no longer exists in terms of long term disability. As of April and the implementation of the charter, it has been replaced by a lump sum. Is that correct?
Brig.-Gen. Martin: In April 2006, with the changes in the New Veterans Charter, veteran's monthly pension awards are no longer given. The awards are given as a lump sum.
In the case of long-term disability, there is no offset because of the lump sum. There is no reduction.
Senator Banks: Therefore, the long-term disability continues?
Brig.-Gen. Martin: Yes, it continues. In new cases beyond April 2006, they will receive a lump sum award, if they are entitled to it, from Veterans Affairs Canada. If they qualify for long-term disability, they will be moved into that program. Again, the program will be a top-up to 75 per cent of their salary, but will not include that lump sum payment.
Senator Banks: Therefore, the lump sum payment has no effect on the long-term disability amount.
Brig.-Gen. Martin: That is correct.
Senator Banks: Am I correct that in the two programs — the publicly supported by Treasury Board and non- publicly supported optional — neither of those have shared payment of premiums? On hundred per cent of the premium is paid by the member for the non-publicly supported optionals?
Mr. Bouchard: That is correct.
Senator Banks: All the premiums on the publicly funded side will be paid by the public without contribution by the member?
Mr. Bouchard: The LTD premium is shared; 85 per cent is paid by Treasury Board and 15 per cent is paid by the member. Under the General Officers' Insurance Plan, this plan is completely premium-free for the officers.
Senator Banks: Members below the general officer level pay 15 per cent for their LTD coverage?
Mr. Bouchard: Yes; accidental dismemberment is also premium-free for all members of the Canadian Forces.
Senator Banks: They make no contribution?
Mr. Bouchard: That is correct.
Senator Banks: The 15 per cent applies only to the LTD plan for members below the general officer level?
Mr. Bouchard: That is correct.
The Chair: Senator Banks, will you permit the chair a supplementary question to the issue you raised?
Senator Banks: Yes.
The Chair: I want to ensure I understand the point Senator Banks elicited.
Since April 2006, there is no Department of Veterans Affairs disability pension. Under the charter, there is a lump sum payment that does not offset the LTD.
Am I correct that if we could write a cheque for $$300 million we would have no further problem?
Brig-Gen. Martin: The piece that has not been addressed is benefits received by members prior to April 2006. Some of those benefits are ongoing, and some, of course, would be in a group that is retroactive, so it is the combination of those two things.
The government would need to consider other implications in terms of other plans that are similar, the RCMP for one, and what to do for them, because it is the same kind of arrangement.
In the public service plan, there is some reduction due to pension. Those not related to the actual LTD are excluded in those cases, but the minimum guarantee level is 70 per cent versus 75 per cent, so there are differences throughout government. I expect those plans would also need to be considered more broadly than the Canadian Forces.
The Chair: I misspoke. I said from April 2006 to the present. I should have said that 2000 to 2006 is the bracketed period. Is that correct?
Mr. Bouchard: Yes, from the date of Bill C-41.
Senator Day: I am confused. I understood you to say that the retroactive period was $102 million, not $300 million.
Mr. Bouchard: The total sum is between $275 million and $295 million. To reimburse members retroactive to October 20, 2000 would cost $102 million. The remaining amount of money is required to set up the reserves so that we can continue making payments prospectively.
Senator Banks: That estimate is a straight actuarial calculation?
Mr. Bouchard: Yes, it is.
Senator Banks: I will make an odious comparison between Person A and Person B, both of whom received identical injuries, one before the change in the charter and one after the change in the charter. Am I correct that the up-to- $250,000 lump sum payment is designed to replace or succeed, and it is instead of what they would have received before by way of an ongoing pension?
Mr. Bouchard: I am not sure if we can compare the monthly and the lump sum amount, because the lump sum amount is up to $250,000 based on a specific injury. Therefore, I am not sure how we can relate the two and say that this $50,000 is worth as much as it was under the monthly pension payment.
Senator Banks: Not worth as much, but do I have it right that as of April 2006 the monthly system stopped and was replaced, although not in equal measure, by the concept of a lump sum payment?
Mr. Bouchard: Yes.
Senator Banks: It seems to me that the fairness question is crystallized by the fact that Person B, to whom the injuries occurred after the change in the charter, receives a consideration, whatever that consideration is, that does not reduce LTD. Person A, who received the identical injury before April 2006, receives a payment that was the precursor to the lump sum payment that affects LTD because LTD is reduced by that amount. Have I got that right?
Mr. Bouchard: Yes, you have.
The Chair: Am I correct in saying that the person receiving a disability payment prior to April 2006 may continue to receive a disability payment?
Mr. Bouchard: That is correct.
The Chair: In other words, the charter does not change anything. If people prefer to receive lump sum payments, can they choose that option?
Mr. Bouchard: If they were in receipt of a monthly pension, that monthly pension will continue and they cannot turn it into a lump sum amount.
The Chair: The monthly payment is unaffected by the arrival of the charter for that individual?
Mr. Bouchard: That is correct.
Senator Banks: However, it has the effect of reducing the LTD payment.
The Chair: I am not arguing one way or another; I only want to make sure I understand. Talking about reductions, the payments under the Pension Act are tax free, are they not?
Mr. Bouchard: That is correct, sir.
The Chair: And that payment is offset against the SISIP payment. Therefore, can I argue that there is some benefit in that I am reducing a taxable amount and receiving a non-taxable amount? I receive $1,000 from SISIP and $200 under the Pension Act. I offset the two and now only receive $800 from SISIP, so I presumably pay less tax, and I have $200 on which I pay no tax.
Mr. Bouchard: That is correct.
Senator Dallaire: You must also remember that a number of people believe that receiving the lump sum of $250,000 after 2006 is a disadvantage compared to those who previously received a monthly pension. There are two sides to the exercise. The figure you put forth with regard to what is taxable and what is non-taxable has never been presented by any of the people who have complained. People use the figures they choose to sell their point.
[Translation]
I have some specific questions about this. Before Bill C-41, before 2000, people saw the amount they received from SISIP reduced depending on the amount they received from the Canada Pension Plan or from Veterans Affairs Canada. Is that correct?
Mr. Bouchard: Yes.
Senator Dallaire: Is it correct that they have no recourse? I do not understand Bill C-41 from that perspective.
Mr. Bouchard: The ombudsman's report was done in 2003. He went back to the introduction of Bill C-41, which essentially said that all members of the Canadian Forces entitled to a monthly pension could now receive the pension even if they were still in the active forces.
That is where the problem arose. The problem has existed since 1972. As I mentioned in my introduction, in 1972, Veterans Affairs brought in a provision whereby those in operational theatres, who were wounded and receiving a pension, could also receive it while still on service and before being discharged. Bill C-41 extended that to all Canadian Forces personnel.
Senator Dallaire: So Bill C-41 did the same as the veterans' pension scheme, where someone can still be serving and receive his pension. Except that, to solve the problem, it is not $300 million. If you want to be really honest, you have to go back to 1972.
Mr. Bouchard: If you want to be honest, you have to go back to 1976. Because we have to recall that, from 1969 to 1976, the program was totally for non-attributable reasons. Between 1972 and 1976, studies found that the number of people receiving pensions under the Pension Act was very small. About 70 per cent of pensions provided between $100 and $1,000. It was realized that this was not enough to maintain a decent standard of living.
So, in 1976, the decision was made to include these people in SISIP for conditions attributable to military service, so the reduction also went into effect.
Senator Dallaire: It is all very well to solve the problem as of 2000, but if you want to be really honest, you have to go back to 1976, because 1976 was when members started paying or getting the reduction. It did not start in 2000. All that 2000 means is that a serving member is able to take the SISIP now, whereas before, if he was still serving, he could only get his pension when he retired. To deal with the ``clawback'', you have to go back to 1976, not 2000. The real cost of that could perhaps be a billion — I do not know what the numbers are.
Mr. Bouchard: You are right. That is where the danger lies; the report just goes back to 2000. If the decision is made to go back to 2000, a number of people are going to say ``Why not me too? I have been in since 1976?''
Senator Dallaire: Exactly. If we want to solve this problem, we have to do it in stages. Let us start with those who have been eligible since 2000 and then we can solve the problem for those between 1976 and 2000. Remember that, when we are taking care of one group, the other group must be taken care of as well. We have to take care of all groups. That is the point I wanted to raise.
The Chair: Does that have implications for the premiums? If the premiums go up, the people there now are going to be paying for the 1976 group, are they not?
Mr. Bouchard: The moment you change an aspect of the program and there are costs associated with doing so, you absolutely have to look at the effect on premiums. It could cause premiums to rise significantly. These things come into play. If the figure is $295 million, what effect does that have on premiums? Are premiums going to go up by 40 per cent, 50 per cent? It is possible. Now, once a change is put into effect, other decisions will need to be made. Is the increase in premiums also paid by the members, or is there another way of doing it? Everything we do has an effect. We always have to look at the whole program when we make decisions.
Senator Dallaire: I would like to go back to the General Officers' Insurance Plan (GOIP). Generals had such a hard time in the 1990s, from politicians, from the media and so on, that I am surprised that the program still exists. As I recall, we wanted to scrap it. We wanted benefits to be equal, for all members of the forces to be treated the same as the generals. I was under the impression that it had been decided that general officers should have no advantages. I know that, in the public service, the EX people kept theirs. It is up to the public service union to fight with the EX group and Treasury Board. What, specifically, is the advantage of keeping the GOIP?
Mr. Bouchard: I was not aware that there was a move to try to scrap it. I have been with the program for 18 years, but perhaps there are things that I have missed, depending on the position I was holding at the time. Because a program on accidental dismemberment during military service was introduced for all Canadian Forces members, we are in the process of changing the GOIP provision on accidental death and dismemberment so that it covers non- military situations. For example, if a general officer had an accident or suffered dismemberment for a reason that was not attributable to military service, the GOIP would pay the benefit. So if the reason for the accident or the dismemberment was attributable to military service, the same officer could not use the GOIP. He would have to use the new Accidental Dismemberment Insurance Plan that is now in place. The good thing is that there is one program or the other, attributable or not attributable, depending on the circumstances.
The other advantage is that general officers automatically have disability insurance as an employment benefit. There are other benefits, like life insurance, that are also part of the program. As long as I have been involved, there has been no change.
Senator Dallaire: Perhaps I was in another army, because the matter was frequently debated at the Armed Forces Council. We heard from our predecessors — the ones here, I mean — that there was no reason for general officers to be treated differently from the troops. Everyone said so. I am flabbergasted that no one has drawn attention to this equality that the armed forces considered appropriate whether in combat or in barracks. So, according to your explanation, this creates many more problems than benefits. Let the public service keep it for its EXs, they have to act according to their own code of ethics. But I always thought that the armed forces were separate from the public service.
Mr. Bouchard: So you are saying that this certainly was discussed at senior levels. Perhaps the political will was never there. Now we want to introduce it.
Senator Dallaire: It never got going.
The Chair: Senator Dallaire, could you wrap up soon?
Senator Dallaire: How much does the 15 per cent cost?
Mr. Bouchard: The total premium for long-term disability insurance is $13.95 per month per $1,000 of salary. For a master corporal, a junior officer, the 15 per cent is less than $10 per month for long-term disability. The Treasury Board pays the rest.
Senator Dallaire: If members absorbed more of the costs of the premiums, would that give the CDS more clout with the politicians, or, because the government pays most of the premiums, does it have the upper hand when it comes to changes in direction?
Mr. Bouchard: If members paid more of the 85/15 share of the premiums? In other words, if the member paid, say, 25 per cent of the premium and the government 75 per cent?
Senator Dallaire: Or 50/50.
Mr. Bouchard: At that point, the Chief of the Defence Staff would perhaps have a little more negotiating power to change things, given that the members were paying a bigger proportion. I am not sure.
Senator Dallaire: In the private sector, what normally would be the percentage paid by the employer and by the employee?
Mr. Bouchard: I really cannot give you an answer, I have not checked premiums.
[English]
Are there overlaps between what SISIP does or was doing and the new charter? For example, with employment assistance to the member or employment assistance to the spouse when the member cannot be re-employed or retrained, is there still the two-year time limit on some of the actions and so on? Has all that detail been clarified, or is there friction or repetition between the two in regard to SISIP and the new charter? I am talking in general.
Mr. Bouchard: SISIP LTD essentially is the vocational rehabilitation piece. Under the new charter, there is a piece. If Veterans Affairs Canada assumes a different role with the economic loss and also the vocational rehabilitation piece, they will pay, but at this time there is no overlap in what we deliver. SISIP has been mandated to deliver this program, and to this point there is no overlap in the piece we deliver with the piece that VAC delivers. Essentially, VAC will complement what we do not do, and with agreements in place, if a member of the Canadian Forces needs psychosocial therapy, for example, those members are referred to VAC.
Senator Dallaire: You are time limited, are you not, in vocational training?
Mr. Bouchard: Typically, the intent of the program is for someone to take not more than 30 months in rehabilitation so they can return to gainful employment. The thrust of the SISIP program is that the program will be completed within 30 months — typically, 6 months prior to release and up to 24 months after their effective date of release.
Senator Dallaire: What if they want university education for four years?
Mr. Bouchard: Typically, we focus on the expertise they have right now, the classification and experience they have. The program will be developed based on those skill sets. If someone with a grade 12 education wants to be a doctor, the likelihood of sending them to medical school is not great, but we have people in university programs to complete a program that was already started.
Senator Dallaire: But they cannot start one?
Mr. Bouchard: They can, depending on whether they have been accepted into a program. If they can do it within the time frame allocated, we will do it.
The Chair: Gentlemen, I am sorry, but we too are time limited. We must end the meeting before 1:30. I apologize for interrupting you, Mr. Bouchard and Senator Dallaire. I will allow one final question from Senator Downe. Then, prior to ending the meeting, I would like a motion that I will explain to you quickly for the record.
Senator Downe: I want to follow up briefly on your tax deduction concern and tax benefits. I assume the government receives little tax from these monthly disability payments because the payments are so low. What is the average yearly payment from monthly disability that you pay out?
Mr. Bouchard: It is a combination. It is based on their salary at time of release. If we take someone who makes, for example, $10,000 a month, which is easy to compute, 75 per cent is $7,500 per month, in combination with other payments, so other payments will reduce this amount, but the person will be guaranteed this 75 per cent. If we take someone who makes $5,000 or makes $4,000, 75 per cent of that amount is much less so the taxable income is commensurate.
Senator Downe: What is your average payout?
Mr. Bouchard: I do not have that number with me.
The Chair: I have a final question, abusing my position as chair. You have given us an estimate of $300 million roughly as the cost, following up the ombudsman's recommendations. Senator Dallaire has put forward that we go back not to 2000 but to 1976. Can you give us an estimate of the figure involved in that event?
Mr. Bouchard: We can provide that. It will require a bit of research.
The Chair: I am not asking for it today or tomorrow, but if you can give us a rough estimate comparable to the $300 million for the other, that information will be helpful.
Honourable senators, can I have a motion that we publish the organization chart that has been provided to us as an appendix to the printed version of the proceedings? Thank you, Senator Banks and Senator Downe. Anyone opposed? All in favour? Carried.
The committee adjourned.