Proceedings of the Standing Senate Committee on
National Finance
Issue 30 - Evidence - November 27, 2012 (Afternoon meeting)
OTTAWA, Tuesday, November 27, 2012
The Standing Senate Committee on National Finance met this day at 2:15 p.m. to examine the subject-matter of all of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures introduced in the House of Commons on October 18, 2012 (topic: Part 4 — Division 23 — public sector pensions).
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Honourable senators, this is the ninth meeting on the subject matter of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures introduced in the House of Commons on October 18, 2012.
[Translation]
During the next two hours, we will be speaking with representatives of the Treasury Board of Canada Secretariat, who will explain the last two divisions of Part 4 of the bill. We will begin with Division 23 regarding public sector pension plans; it starts on page 353 of the bill.
[English]
From the Treasury Board of Canada Secretariat, Pensions and Benefits Sector, we once again welcome Joan Arnold, Senior Director. Thank you for being here. Kim Gowing is also back with us. From the Office of the Superintendent of Financial Institutions, we welcome the Chief Actuary, Jean-Claude Ménard.
Ms. Arnold, I presume you will be taking the lead in taking us through Division 23.
Joan Arnold, Senior Director, Pensions and Benefits Sector, Treasury Board of Canada Secretariat: I think Ms. Gowing was going to do a brief overview first, and then I will start the clause by clause, if that is okay.
The Chair: That is perfect; thank you.
Ms. Gowing, please wait until everyone gets to the page. This is page 353 in the English version of the bill, Division 23, Public Sector Pensions. Give us an overview.
Kim Gowing, Director, Pensions and Benefits Sector, Treasury Board of Canada Secretariat: Thank you very much. These are amendments to the Public Service Superannuation Act, the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act. The Public Service Superannuation Act is amended to provide that contributors pay no more than 50 per cent of the current service costs of the pension plan. In addition, the pensionable age is raised from 60 to 65 in relation to persons who become contributors on or after January 1, 2013. The Canadian Forces Superannuation Act is amended to change the limitations that apply with respect to the contribution rates that contributors are required to pay as a result of the amendments to the Public Service Superannuation Act. The Royal Canadian Mounted Police Superannuation Act is amended to change the limitations that apply with respect of the contribution rates that contributors are required to pay as a result of the amendments to the Public Service Superannuation Act. Ms. Arnold will now address the clause by clause.
The Chair: Will we find a lot of clauses here that are similar to what we saw in Bill C-46?
Ms. Arnold: The ones in the Canadian Forces Superannuation Act and the ones in the RCMP Superannuation Act are quite similar since they have a limited scope and are derivative of the amendments made in the Public Service Superannuation Act.
The Chair: If you could make that link as you are going through, that would be great.
Ms. Arnold: I can probably do that. To start with clause 464, this provision just updates the definition of contributor, which is found in the Canadian Forces Superannuation Act. It updates the references, takes out the word ``retired'' because it was not really defined in the statute and refers to the act and a person who is required to contribute or who was required to contribute under the act. That same amendment would be found in clause 504, which is the RCMP, and in clause 475. All three of those do the same thing.
The Chair: When you get to them, you can refer back because we have already seen that, rather than have us jump way ahead.
Ms. Arnold: Clause 465 proposes to amend the Canadian Forces Superannuation Act, the CFSA, to restructure the contribution rate section, which requires plan members to contribute. The clause proposes to restructure it completely, take out the spent provisions, and set out the new regime. Essentially, it says that Canadian Forces superannuation members contribute the same amount as persons under the Public Service Superannuation Act, who are Group 1 contributors. I will get to what a ``Group 1 contributor'' is when I get to the public service act. Currently, they pay the same as a public servant and in the future will pay the same as a public servant. This will not bring a Canadian Forces individual up to 50-50 on the cost in terms of the current service costs because the Canadian Forces Superannuation Act, like the RCMP act, is a more expensive pension plan. Their cost-sharing ratios are not the same as the PSSA, which is 50-50.
Basically, clauses 466, 467, 468, 469 and 470 are proposed consequential amendments on the restructuring of the contribution rate section, which is in clause 465. They are technical changes to take into account the restructuring of that contribution section.
Clause 471 is a consequential amendment to the change proposed in clause 464 to remove a reference to the Superannuation Account. That is because there is no longer any necessity to talk about the Superannuation Account in terms of people who are contributing now on a current basis. That was the terminology used in the past for the contributions held and credited. We no longer need to use that account because we are going forward from this point. Currently, the contributions are credited to the Canadian Forces superannuation fund. There are two different provisions. The account is for service prior to 2000 and the fund is for service from 2000 forward. It is a consequential amendment based on an updating of the definition of ``contributor.''
Clause 472 is consequential to amendments proposed in clause 465 — changing the cross-references because section 5 was restructured.
Clause 473 proposes to change a cross-reference in the Special Retirement Arrangements Act.
In clause 474, coordinating amendments were necessary to take account of the fact that some amendments were made to the Canadian Forces Superannuation Act in 2003 that are not yet in force. Since they are not in force, you have to allow for the contingency that they would come into force before the proposed amendments in Bill C-45. I am sure that senators are well versed in these things. That is all for the Canadian Forces Superannuation Act.
If I may, I will move to clause 475, which is the first clause that proposes to amend the Public Service Superannuation Act, PSSA. Clause 475 proposes to amend the definition of ``contributor'' to remove outdated references and a reference to the Superannuation Account. It is the same as the amendment proposed to the CFSA.
Clause 476 is key to these amendments because it sets up the new contribution regime for January 1, 2013, going forward. It completely restructures section 5 of the act, takes out all the spent provisions and sets up the regime for Treasury Board to set the rates, as they do now, and to put the new limit of 50-50. That way, plan members, as Ms. Gowing was saying, will not pay more than 50 per cent of the current service cost of the plan.
It also makes a reference for the first time to Group 1 and Group 2 contributors. I will get to those when we come to clauses 482 and 483. I will describe a Group 1 contributor and a Group 2 contributor. In any case, you are not to pay more than 50 per cent of the current service cost of whatever kind of contributor you are. The plan is a little more generous for Group 1 contributors than it is for Group 2 contributors so they will pay more. They are now 65 and at the age of retirement, so the plan does not cost as much and, therefore, their contribution rates are a bit lower.
Clauses 477, 478 and 479 propose consequential amendments to the changes in clause 476 to reflect the restructuring of section 5 of the act. The same goes for clause 480.
Clause 481 is the first reference to Group 1 contributor. We have to put that terminology into the statute because we have these two groups of contributors. Clause 482 defines or sets out who Group 1 contributors are. Essentially, they were contributors under the plan prior to January 1, 2013. Some technical bits in it cover people who may have service that goes between 2012 and 2013; and due to the technical way the act works, they may not be contributors on January 1 but they are, in fact, plan members. It tries to take into account all such technicalities in the statute.
It also puts into Group 1 a person who may have had a pension entitlement under the PSSA prior to January 1, 2013. If they were to come back into the public service and become a contributor again, those people, because of their continuing connection with the pension plan, will continue to be Group 1 contributors. That is another important type of person in Group 1.
The clauses may look intimidating but they are kind of technical ways of trying to make the category as broad and as equitable as possible. The general rule is that if you were not a contributor prior to January 1, 2013, and you become one after that date, you will become a Group 2 contributor, which means that your normal retirement age is 65 as opposed to 60, which is the present rule.
Clause 483 defines cleverly a Group 2 contributor as anyone who is not in Group 1. It was much easier to do it that way than to try to list all the possible permutations of what a Group 2 would be. If you are not in Group 1, then you are automatically in Group 2. We start with that description.
Clause 484 is another consequential amendment as it adds ``Group 1'' to the heading before section 13 of the act.
Clauses 485 and 486 are consequential with this new distinction between Group 1 and Group 2 contributors. Clause 486 will establish the Group 2 contributors' retirement age of 65 years. Clause 487 is another consequential provision for the restructured section 5 of the act, which is in clause 476.
The Chair: You said that 486 is consequential and it runs three pages? That is pretty consequential.
Ms. Arnold: Essentially, it is. It must be section 13.001.
The Chair: Yes, it is.
Ms. Arnold: This act is getting a little creaky in places and there are some sections that go on for page after page. The present section 13 is about three pages in the present act, so we had to make a new provision for the Group 2 contributors. It is essentially exactly the same as the old section 13, but it ups all the ages by five years. It is consequential in that you now have Group 2 contributors; it has the same provisions but we changed the age thresholds by five years. Yes, it is actually four or five pages long.
Clause 487 is consequential on our updating and restructuring of section 5, which is the contribution section. Clause 488 is consequential on now having two groups of contributors, Group 1 and Group 2, so you have to make sure you make a reference to both section 13 and to section 13.001 of the act, which is the new provision for Group 2 contributors.
Clause 489 is consequential on the restructured section 5, which is in clause 476, and it also allows the Treasury Board to set contribution rates, additional amounts to be paid by individuals who are subject to the Correctional Service employees early retirement program. It allows the Treasury Board to determine that individuals who are subject to that early retirement program would pay a slightly larger amount to take account of their early retirement benefits, which are more generous.
Clause 490 is again consequential on the fact that we now have Group 1 and Group 2 contributors.
Clause 491 is the same. It takes into account that there are now Group 2 contributors so we must add references into sections 12.1 and 13.001, which are the new Group 2 contributor sections. Clause 492 is the same concept as clause 491. We must add references to Group 2 contributors.
Clause 493 adds provisions to allow for the restructuring of section 5 as it is presently restructured in the amendments.
Clause 494 adds a reference to Group 2 contributors in the provision regarding disability payments to reflect the retirement age of 65 for those contributors. Clause 495 is again consequential on the addition of Group 2 contributors in the re-employment provisions of the act, which is section 29 of the PSSA.
Clause 496 adds in appropriate references of section 5 as it is restructured. That was in clause 476. Clauses 497 and 498 are both consequential on the addition of the act — from the concept of having Group 2 contributors — and adding in the appropriate references for them.
Clause 499 is consequential on the restructured section 5, and also repeals the provision that allowed contribution rates for Correctional Service to be set by regulation. Those are now set by the Treasury Board.
Clause 500 deals with the Canada Post Corporation and makes it clear that previous restrictions the board of directors of Canada Post had to abide by when they were setting contribution rates for the Canada Post Pension Plan are now the same as the restrictions the Treasury Board has. As a little bit of history, when Canada Post left the Public Service Superannuation Plan and set up their own plan in 2000, there were a number of provisions left in the PSSA to deal with transitional provisions to Canada Post. One of those was to place the same restrictions on the Canada Post board of directors as Treasury Board was subject to in setting contribution rates. You could not exceed 40 per cent of the cost for plan members, and you could not raise the contribution rate by more than 0.4 per cent in any one year. Those two restrictions applied to Canada Post for their board of directors as they were the same for the Treasury Board. Now that we have the 50-50 rule, it is carried through to the board of directors for Canada Post.
Clause 501 is a provision that allows, for a limited period of time, some regulations to be made retroactive to January 1, 2013, in order to accommodate the new rules for Group 2 contributors.
Clause 502 is a consequential amendment to the Garnishment, Attachment and Pension Diversion Act to reflect the fact that we now have Group 2 contributors so we must make cross-references to the appropriate sections.
Clause 503 is the same thing. It is a consequential amendment to the Special Retirement Arrangements Act, which is a cross-reference to reflect the proper reference in section 5 of the PSSA.
That is all of the amendments for the Public Service Superannuation Act. Obviously, there are quite a lot more there because of the addition of the new group of contributors. A lot of it is related to that.
In the RCMP, it is pretty much the same as the Canadian Forces. Clause 504 updates of the definition of contributor and removes the reference to the superannuation account. Clause 505 is their restructuring of their section 5 for their contribution rates.
Clauses 506, 507, 508, 509, 510, 511 and 512 are all consequential on the restructuring of section 5 to ensure that the appropriate cross-references are in those provisions of the act.
Clause 513 is a cross-reference into the Special Retirement Arrangements Act to ensure it has the proper cross- reference. Clause 514 is coming into force, which is January 1 for everything except for the coordinating amendments because of the nature of those. If this act were not to come into force on January 1 and the coordinating amendments came into force first, you would have to ensure that the appropriate coming into force time is set. You would do that by the Governor-in-Council, but it only applies to those coordinating amendments. Everything else is to come into force January 1, 2013.
The Chair: You do not have Groups 1 and 2?
Ms. Arnold: Not in the RCMP or the Canadian Forces because their retirement ages, all their age thresholds and everything else are not changed at all. The only thing that changes in those statutes is that they will pay the same contribution rates as Group 1 PSSA contributors, and the restriction on increasing contributions by more than 0.4 per cent in any one year is removed, as well, for the forces and the RCMP. However, since they will pay exactly the same as public servants who are Group 1 contributors, that all fits together.
The Chair: You do not need the restriction any longer?
Ms. Arnold: No, we do not need the restriction or anything about people who are different groups of contributors because there are no changes to their ages.
The Chair: Please refresh our memory with regards to the retirement ages for the RCMP and the Canadian Forces. We know it is 60 to 65 and it is going up to 65 as the retirement age for the public service.
Ms. Arnold: The Canadian Forces and the RCMP are not really age-related as much as service-related, and that is 25 years at any age; you need to have 25 years of service.
The Chair: Thank you for that, Ms. Arnold.
Senator Buth: Thank you for being here again. I just have a couple of basic questions. With one of the clauses, you talk about the difference between an account and a fund. Can you explain that in a bit of detail?
Ms. Arnold: Sure. Extensive amendments were made to the statutes for the RCMP, the CF and the public service in 1999. The government established pension funds for each of these groups, and the contributions made by the government and by plan members were credited to what they called their new funds — the Canadian Forces Pension Fund, the public service pension fund and the RCMP Pension Fund. Those funds are the repositories for the contributions and are invested in the capital markets by the Public Sector Pension Investment Board for all service from April 1, 2000, forward. For all service prior to April 1, 2000, the contributions were credited to the accounts, which were the accounts in the accounts of Canada, and there are no assets associated with those accounts. The funds, the amounts of money and the contributions are not invested in the capital markets. It is the new regime that was established in 2000.
Senator Buth: It is establishing a specific fund, whereas, prior to that, it was just in general accounts; is that right? It is a liability for the government; is that correct?
Ms. Arnold: Yes.
Senator Buth: Now it is in a fund.
Ms. Arnold: Yes, and the amounts are backed by assets.
Senator Buth: Thank you very much.
Then you made a comment that the RCMP and Canadian Forces funds are more expensive. Is that just as result of fewer members?
Ms. Arnold: It is not their funds; their pension plans are more expensive. Their retirement provisions are more expensive almost primarily because their retirement ages are much lower and they can get unreduced pensions from earlier ages. It makes their plans more expensive.
The Chair: They can get a full pension after 25 years of service, can they not?
Ms. Arnold: A full would be a full-earned pension, which would be 50 per cent, because it is 2 per cent accrual per year of service. If one were to call a full pension the maximum accrual, one would have to have 35 years of service. If you only have 25 years, you can get only 50 per cent.
The Chair: There is no penalty for taking it at 25 years; is that right?
Ms. Arnold: That is correct.
The Chair: Is that the same for the RCMP and the Canadian Forces?
Ms. Arnold: Yes.
[Translation]
Senator Hervieux-Payette: My question is more general than technical. Have there been consultations with the public service unions on the changes? It seems to me that pensions are part of the collective agreements of government employees.
[English]
Ms. Gowing: Pensions are not negotiated; they are specifically excluded under the Public Service Labour Relations Act. However, during the process, we did consult with the unions through pension advisory committees. Each of the three public sector plans has a pension advisory committee made up of employee and employer representatives and one retiree representative. Their recommendations are made to each of their respective ministers.
During this process, we did consult on the plan changes. They were consulted on the phase-in period. Our committee was also consulted on the new age of retirement of 65 and the related-age thresholds.
[Translation]
Senator Hervieux-Payette: In certain cases, they talk about 25 years, and in others, 35. What is the rationale behind that? Why is it 35 years in some cases and 25 in others, since we are talking about the same government and the same country?
[English]
Ms. Arnold: In the public service, a full pension has always been established as a pension reflecting 35 years of service. That means that the maximum amount that one can attain for a pension would be 35 times 2 per cent, or 70 per cent of your best five years' average.
In the Canadian Forces, and in the public service, as well, a person can get a pension with fewer than 35 years of service, as long as you meet the other age thresholds. In the Canadian Forces, I am not sure what the origin of the 25 years is. Do you know?
The Chair: It was a five-year increase over the 20 that it used to be.
Ms. Gowing: Yes, it is. That was a change to the terms of reference. Also, the reason behind the RCMP and the Canadian Forces having different plan provisions is the type of work being done. It is in recognition of their military or police work, which is one of the reasons why they have an earlier retirement age in terms of years of service.
[Translation]
Senator Hervieux-Payette: If I understand correctly, all of the support staff, the administrative staff, whether at National Defence or the RCMP, are subject to the other rule. Only those who served in the army, the air force or the navy are entitled to pensions after 25 years, or in the case of the RCMP, those who are members of the police force. Are there two pension categories for the members of these two organizations?
[English]
Ms. Gowing: No. With respect to the Canadian Forces, under their terms of reference, whether their job is an administrative clerk position or a soldier in Afghanistan, they are all subject to the same pension provisions, so they can leave after they have completed 25 years of service.
My understanding is that it is the same with the RCMP: For the regular force members it is 25 years of service. There is a category within the RCMP, and that is ``civilian members.'' Their program is a little bit less generous. I am not 100 per cent sure how theirs differs, but it is a little different. It is more generous than the public service but less generous than the regular force members.
[Translation]
Senator Hervieux-Payette: How is it determined that they are not entitled to the same things as other public servants? The only hazardous thing about working on the other side of the river here is having to cross the bridge. Why would we not have the same standard for all government employees, whether they work in the capital or elsewhere in Canada?
[English]
Ms. Arnold: I think perhaps we may have misunderstood. Anyone who is an actual public servant working in the Department of National Defence and working in a support role for members of the military is under the PSSA; they are under the public service plan, so they have the same rules as all other public servants. It is the same as public servants who work in support roles for the RCMP. Those people are not under the RCMP plan or under the Canadian Forces plan.
[Translation]
Senator Hervieux-Payette: That is clearer, because the previous answer seemed to indicate that the opposite was true. It is now clear to me that that is the case for all of the public servants who work here, in any of our institutions. When we talk about public servants, do the people who work at the Federal Development Bank have a particular status when it comes to pensions, or are they also covered by the same system? I am talking about federal public servants.
[English]
Ms. Arnold: I am not certain about organizations such as the Business Development Bank of Canada, but all public servants who are under the PSSA are in the same regime. That is a very broad spectrum of people — it covers all departments, most government agencies and a few Crown corporations. As I mentioned, some of them may work in support roles in the RCMP or with the Canadian Forces.
I think Ms. Gowing was talking about persons who have administrative support roles but who are still soldiers. f they are still regular members of the Canadian Forces, they would be under the Canadian Forces pension regime. I believe that is what you meant.
[Translation]
Senator Hervieux-Payette: I think it is more precise than that. There has to be a certain balance, I would say, between the public servants who have similar roles, similar educations, whether they work for a department, a crown corporation or the Royal Canadian Mounted Police.
Senator Bellemare: I would like to go back to the matter of the 50 per cent increase related to the cost of past service. The government, with regard to public service pension plans, has established two groups: group 1 and group 2. It is clear that group 2 is going to fund 50 per cent of the cost of its own plan and its current service, and past service.
In the case of group 1, we know that capitalization began in 2000. Before that, there was pay-as-you-go funding. We know that there have also been amendments to curtail benefits in the public service pension plan as well, to align it with what is normally found in the private sector.
So are we changing the cost of that service before 2000? Will employees fund 50 per cent of it, or does that apply only to the service that is accumulated from the time this act comes into effect?
In other words, public servants who were employed in 1998 accumulated benefits according to a certain formula. Will the premium take into account only the part of the amended plan from that day on, and will the previous service be funded by the government as it used to be in the past?
I do not know if I expressed that clearly enough. The plan is being amended, and there are employees who pay 50 per cent of the cost of their benefits, but as of when? We know that it is very clear for group 2, but for group 1, it is less clear. Are they going to pay 50 per cent of the cost of their past pensionable service, or simply 50 per cent of the service they will accumulate as of now?
Jean-Claude Ménard, Chief Actuary, Office of the Superintendent of Financial Institutions: They are going to pay 50 per cent for the service they accumulate in the future. So, the liability recorded in government books remains the same. How was it created? It was accumulated through the contributions of the participants and of the government. In fact, these accounts started being kept in 1924, and so there is a long history of cost-sharing, and there are different methods to arrive at a summary assessment of cost-sharing for past service.
Now, as for the bill we are studying here, it concerns the cost of current service, and future service, and that is true for both group 1 and group 2.
Senator Bellemare: This brings me to my second question. We passed Bill C-46, concerning parliamentarians, under which we pay 50 per cent of the cost of pensions for parliamentarians. Could you compare the funding of parliamentarians' pensions and tell me whether the rationale is the same as in this case, since for parliamentarians, there is no capitalization?
In other words, will the contribution rate for parliamentarians as of 2013 be 50 per cent of the cost of future service, or 50 per cent of the cost of service accumulated previously, when the plan was far superior?
Mr. Ménard: For the parliamentarians' plan, the contribution rate paid by the participants is set in the act at 8 per cent for 2013, 9 per cent for 2014 and 10 per cent for 2015. Afterwards, the objective is the same, and that is 50 per cent cost-sharing between the employees and the government, both for the public service plan and the parliamentarians' plan. The big difference regarding the contribution rates to be paid by the participants is of course set out in the provisions of the plan.
Senator Bellemare: So, in the case of parliamentarians, it is a pay-as-you-go system, if you will, since current contributions are used to pay the current service under the plan, which includes commitments made prior to 2013.
Mr. Ménard: You are correct, but if we do a calculation, the main reason why the parliamentarians' pension plan costs more than the public service one is that parliamentarians are entitled to 3 per cent per year of service rather than 2 per cent; that 1 per cent has to be financed by different mechanisms.
Senator Bellemare: With the introduction of the Canada Pension Plan, parliamentarians will have approximately 2.78 per cent per year of service, because they already participate in the plan.
[English]
The Chair: I just want to follow up on that question, if I can, so that I understand. The pension for parliamentarians is an account. In effect, it is an account in the public accounts and is unfunded?
Mr. Ménard: It is not backed by invested assets, yes.
The Chair: We expressed a concern about that when we dealt with that and you were here before. In each one of these three that we are dealing with here, it became a fund as of the year 2000.
Mr. Ménard: Yes.
The Chair: There was a period before that when it was in general revenue like the parliamentarians' pension is now.
Mr. Ménard: Indeed. In the report, you could see the division between the value of the liabilities for years of service before 2000 and after 2005. If you look at the big picture, about 30 per cent of the total pension liabilities are backed by invested assets — all of the service since 2000. As time pass, this 30 per cent will go up to 35 per cent. Eventually, in 2050, it will be 100 per cent fully funded, backed by invested assets.
The Chair: It is easy to determine what the growth and interest is on the invested assets. It is what it is each year.
Mr. Ménard: Yes.
The Chair: For the purposes of calculating the service charge to be attributed to each of the members of these three different programs, do you attribute an interest rate for the amount that is in a general account of the government?
Mr. Ménard: Going forward, to give you a rough number, I am using an evaluation interest rate, for the PSSA, of about 6.2 per cent or 6.3 per cent. For the MPs, it is 5.2 per cent, and, of course, it is divided by two if it is the RCA components over the taxation unit. Yes, in the public service, the evaluation interest rate is higher than in the MP pension plan.
The Chair: There was some discussion, even something in Bill C-46, I think, to reduce the interest rate, but you say that that is not a problem because we are already using a lower number anyway. I recall that discussion previously. It is not critical to hear, but it helps us to understand the broader picture and how each of these fits in.
The issue raised previously was whether this was voluntary or mandatory. Is there any option to opt out if you are in the RCMP, in the Canadian Forces or in the public service?
Ms. Arnold: No, it is mandatory.
Senator Buth: Can you tell me what the impact will be on take-home pay? Do you have any examples of that?
Ms. Gowing: For the public service, it is estimated that by 2017 the after-tax impact will be $1,197 per year.
The Chair: May I have that figure again?
Ms. Gowing: It is about $1,200.
The Chair: Is that more than it is today?
Ms. Gowing: Yes. For the public service, the figure is based on an average salary of $70,000, which would be under Group 1, which I want to clarify. For the new entrants, which we refer to as Group 2, the after-tax effect will be approximately $1000 based on a salary of $70,000. For the Canadian Forces, based on a salary of $60,000, the estimated figure will be approximately $1,100 per year. For the RCMP, based on a salary of $80,000, the estimated after-tax effect is approximately $1,200.
Senator Buth: Is that less salary?
Ms. Gowing: Yes. It is less take-home pay.
The Chair: What are we adding that to? Let us pick one of them so I have an idea.
Ms. Gowing: I am not sure that I follow the question.
The Chair: The impact is $1,200 more going into a pension than went in previously. That is what I understood you to say. It is a reduction in the take-home pay of that amount.
Ms. Gowing: Yes.
The Chair: If it is a reduction in the take-home pay, it is as I was saying: The additional amount will go into the pension.
I am trying to think of your funds that you have created here with all this extra money going in. What amount goes in now, before this additional $1,200?
Ms. Gowing: I would not say that there is additional money. It is just how it is being divided. Currently, the government is paying a certain portion. I believe that for the public service, it is approximately 63 per cent; and Mr. Ménard will correct me if I am wrong. That means public servants are contributing 37 per cent. Therefore, overall it is not a difference in the amount of money but rather how it is being split for contribution.
Ms. Arnold: You will move to 50-50. It is the same total but more will be paid by plan members.
The Chair: I am thinking of the poor RCMP officer, who might be watching this program, wondering how much this will cost personally. How much more will be taken out of that paycheque each year after this bill is passed?
Ms. Arnold: It will be approximately $100 a month for the RCMP and the public service, and a little less than that for a member of the Canadian Forces.
Senator Stratton: As a supplementary, you said $100 per month. Is that over and above what they currently pay?
Ms. Arnold: Yes.
Senator Stratton: What do they pay now?
Ms. Arnold: This is after a five-year phasing. Five years from now, in 2017, there will be approximately $100 less per month in take-home pay. It is hard to know what the take-home pay is now. In five years, it will be different. Maybe I am not understanding it.
Senator Stratton: Look at it in today's world. Currently, there is so much taken off their paycheque each month. How much is that?
Ms. Arnold: That is difficult to say because, of course, one pays above the year's maximum pensionable earnings, YMPE, for CPP, and the other pays below that rate. It is not as straightforward as a simple 8 per cent.
Senator Stratton: I thought that would be the answer, but the guy sitting there watching will go to his pay stub to find out what he is contributing now and add $100 per month to know the amount. That is the simple question.
Ms. Gowing: I believe I have the figures here with me; I apologize.
Senator Stratton: Awesome.
Ms. Gowing: I am sorry, I do not have that. It is the increase. I apologize. I do not have that number with me.
The Chair: That would be helpful for people to bring it home in a clear way. Do you think you might be able to provide us with the after-tax impact of this bill if we deem it worthy of passage?
Ms. Gowing: Yes, we can provide that.
The Chair: I see no other senators who wish to engage in any question or discussion. Therefore, I thank each of you for being here to help us with that division. We have been waiting in anticipation of getting to this final division on pensions. We thank you for taking us through it.
[Translation]
The Chair: We are continuing our study of the subject matter of Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures. We are now going to examine Division 24 of Part 4, entitled the Canada Revenue Agency Act, on page 389 of the bill.
[English]
From the Treasury Board Secretariat, we are pleased to welcome Dennis Duggan, Labour Relations Consultant. This is a new angle for us in this committee. We are also pleased to welcome David Belovich, Senior Director, Compensation and Labour Relations, and Sylvie Tanguay, Senior Policy Analyst.
You know the approach. This is a fairly short section, but tell us the state of the situation at the present time, what you are hoping to achieve with these changes and why they are desirable.
David Belovich, Senior Director, Compensation and Labour Relations, Treasury Board of Canada Secretariat: At the present time, the Canada Revenue Act has the CRA management receiving its collective bargaining mandate from the board of directors of the CRA. The CRA management board essentially is the human resources oversight board put in place by the statute about 10 years ago. Clauses 515 and 516 of Division 24 propose that the arrangement be modified somewhat, specifically under clause 515(1). In lieu of consultation and receipt of authority from the Canada Revenue Agency board of directors, Canada Revenue Agency management will receive its authority to make changes to terms and conditions of employment relating specifically to pay that were not in collective agreements from the President of the Treasury Board in consultation.
In 515(2), instead of the President of the Treasury Board being consulted on pay, in this context the President of the Treasury Board would be consulted on issues relating to payment as opposed to pay. This would take into account hours of work, changes to leave provisions, standby or overtime benefits that relates to payments, for example, regarding reimbursement for travel expenses.
Under clause 516, which is really the meat of the changes to the Canada Revenue Agency Act, two things would occur. First, the Canada Revenue Agency would require a formal mandate from the President of the Treasury Board for purposes of entering into collective bargaining with one of its two bargaining agents. Second, upon receiving an agreement in principle with one of those bargaining agents, the Canada Revenue Agency would require approval of the Governor-in-Council prior to signing a collective agreement with one of its two bargaining agents.
The Chair: Are the bargaining agents for Canada Revenue Agency two different bargaining groups that work for Canada Revenue Agency or for other government departments?
Mr. Belovich: It is a fair question. I apologize for the language. The bargaining agent technically is like the Public Service Alliance of Canada or the Union of National Defence Employees. That would be the bargaining agent or, for all intents and purposes, the union representing the employees. The bargaining unit, of which CRA has two, would be the group of employees that has been certified pursuant to provisions in the Public Service Labour Relations Act to be the group whose rights and interests are represented, for purposes of expressing their labour voice, through the bargaining agent that they had selected by vote.
The Chair: Essentially these two sections are removing what was an authority of the board of directors and giving it to the minister?
Mr. Belovich: Giving it to the President of the Treasury Board.
The Chair: Who is sometimes referred to as a minister.
Mr. Belovich: Understood, yes. Currently, all separate agencies are required to obtain collective bargaining mandates from the President of the Treasury Board, with the exception of the Canada Revenue Agency.
The Chair: I see. This just puts Canada Revenue Agency in line with the others?
Mr. Belovich: For purposes of mandating, that is correct.
[Translation]
Senator Hervieux-Payette: I have a question on compensation and salaries. We talk about a global envelope, and I understand that this concerns the President of Treasury Board. However, I always thought that some compensation was related to employee performance. I would like to know if that still exists, or if it is a thing of the past and has been eliminated without my knowledge — I have not been on this committee for very long.
Secondly, I would like to know if this affects all types of compensation. I understand that if a person receives 52 cents a kilometre, everyone in the federal government will receive 52 cents a kilometre and not 55 cents. As for contributions officers, I thought there was a type of compensation related to performance. Does this affect that sort of thing?
[English]
Mr. Belovich: The short answer to the first part of the question is yes, there are performance pay provisions within the Canada Revenue Agency. Currently those are under the purview of the Canada Revenue Agency Board of Management. They could notionally, in the absence of these changes, pretty much put in place any performance scheme. We have some separate agencies, for example, that currently have performance pay schemes that apply to all employees in the organization as opposed to the employees of the Treasury Board specifically where performance pay, performance compensation is typically paid to executives and certain other groups but not to all employees of the organization.
[Translation]
Senator Hervieux-Payette: So that is not affected. The President of Treasury Board will not intervene regarding these details. Only certain elements will be affected, such as travel allowances. For instance, if a policy prescribes that public servants are to use economy class rather than business class when they travel by plane, I suppose it will be the same thing for the agency. Are we talking about the same type of provisions?
[English]
Mr. Belovich: I will answer the second part of the question first. I am specifically speaking to that, and clause 515(2) is the provision that would oblige the Canada Revenue Agency to consult with the President of the Treasury Board. Currently, although it is not the case, there is nothing precluding the Canada Revenue Agency management from setting different travel policies and travel reimbursement schemes than are mandated by the Treasury Board for the employees of the Treasury Board. That is certainly within the purview of the Canada Revenue Agency Board of Management.
Back to the first part of your question, 515(2) is in regard to changes to payments, but 515(1) is specifically for any changes to compensation. Broadly speaking, that would include pay, performance pay and overtime pay. It is not currently the case, but if the board of management decided they wanted to give five more days of annual leave at the Canada Revenue Agency irrespective of the standard for Treasury Board employees, technically speaking they could proceed in that direction as well. It is for both pay and for payments under clause 515.
[Translation]
Senator Hervieux-Payette: So that means that as of now, they will not have five additional days. Treasury Board will harmonize practices with this new provision?
[English]
Mr. Belovich: I would not go so far as to say there would be harmonization, but certainly the broader impetus for these changes to the Canada Revenue Agency Act is to provide enhanced oversight and accountability for the government when it comes to compensation spending and predictability of compensation. Certainly, the mandate that would henceforth be provided to the Canada Revenue Agency, as is the case with mandates that are currently provided to the other 25 active separate agencies, would be in line with the mandate that is provided for collective bargaining within the core public administration for employees of the Treasury Board. Unless it is operationally critical, the intent is to have employees have similar terms or conditions of employment so that employees doing the same work receive the same or similar compensation.
[Translation]
Senator Hervieux-Payette: I wonder what we have gained through the creation of this agency. It used to be a department, and employees were governed by the same rules as other public servants. We created an agency with a particular status to make everything more effective. And yet you say that they will be using the department's rules. Why? Were there abuses? Why are you doing that?
[English]
Mr. Belovich: It is a fair question. I will ask Mr. Duggan to my right to speak. The changes we are proposing to make here are with regard to compensation setting. The prima facie argument for having a separate agency in the first place is much broader than just compensation setting. The delegations tend to be quite broad on HR authorities for the hiring and the staffing classification, that kind of idea. None of those are being changed under these proposed changes, but Mr. Duggan will expand on that.
Dennis Duggan, Labour Relations Consultant, Treasury Board of Canada Secretariat: Certainly. Broadly speaking, a lot more happened in 1999 when CCRA, the former agency prior to the separation of the Canada Border Services Agency, that provided a whole range of authorities and flexibilities to the CRA management board in a whole number of areas, including procurement and such. This is specifically with respect to the determination of terms and conditions of employment, broadly speaking, including for those who are unrepresented and bargained in terms of terms and conditions that are not included in a collective agreement, and also those covered by a collective agreement.
CRA is still the employer for those employees, so they can negotiate within the mandate. Nothing will change necessarily in terms of what things employees are entitled to currently. This is more for looking forward and trying to provide a better control on the expenditure of compensation in the future. Therefore, it will not go in and necessarily change anything that is in the collective agreement now to the extent that CRA has different terms and conditions of employment on a whole range of issues, including travel, relocation and leave entitlements that are included both in a collective agreement and that are not included in a collective agreement.
Senator Hervieux-Payette: Could you be more specific about better control? Does the agency not have any auditing being done on the management?
Mr. Duggan: In terms of human resources management authority, frankly, no, not with respect to how the Treasury Board interacts with it. There is a consultative arrangement at a very high level, but it does not get into the more specific things when you are talking about expenditure management accountability with respect to how bargaining is done and how terms and conditions of employment are set.
Senator Hervieux-Payette: Personally, Mr. Chair, I think we are going backward instead of forward. I cannot appreciate if it is a good or a bad thing.
The Chair: Ms. Tanguay, you are the senior policy analyst. Do you have any comment on this?
Sylvie Tanguay, Senior Policy Analyst, Treasury Board of Canada Secretariat: The reason this is being done is in part to ensure, as Mr. Belovich said, greater accountability for the Government of Canada. That is one of the reasons for the decision.
The Chair: The board of management is losing some authority here in setting mandates. In fact, it would appear they are losing authority to set the amounts that the bargaining team can take into the bargaining session.
Will the board of management still be involved in the tentative collective agreement that is negotiated?
Mr. Belovich: Yes. In fact, we met just yesterday with senior labour relations representatives from CRA. My understanding is that the board will still be approached with regard to its intended expectations prior to a prospective collective bargaining mandate being requested from the President of the Treasury Board going forward.
The Chair: After negotiations have gotten to the stage where the employees are reluctant but prepared to enter into this agreement, what happens then? Will the bargaining agents for the agency go to the board of management or go back to Treasury Board and say, ``Can we do this?''
Mr. Belovich: It would be both. The CRA would write to the Treasury Board Secretariat to advise it where it had landed with one of the two bargaining agents. Assuming all was in accordance with the mandate provided by the President of the Treasury Board, the senior ADM for compensations and labour relations would write back a non- objection letter. My understanding is that the board of management for the Canada Revenue Agency would then be approached for concurrence. Subsequently, the Governor-in-Council approval would be sought for authority to enter into the collective agreement and commit the funds related thereto.
The Chair: Lady and gentlemen, that concludes that segment and your appearance here to help us with Division 24. We thank you very much for being here and waiting for the very last division at page 389.
We will have some other witnesses, honourable senators. Tomorrow we have witnesses who are impacted by the pensions we just looked at, and we are also dealing with a witness with respect to pooled registered pensions. However, as far as the Canada Revenue Agency is concerned and the Treasury Board in relation to collective bargaining, I suspect that this is the last we will hear on this before we go to clause-by-clause consideration.
Thank you very much.
(The committee adjourned.)