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Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 54 - Evidence, June 9, 1999

OTTAWA, Wednesday, June 9, 1999

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-78, to establish the Public Sector Pension Investment Board, to amend the Public Service Superannuation Act, the Canadian Forces Superannuation Act, the Royal Canadian Mounted Police Superannuation Act, the Defence Services Pension Continuation Act, the Royal Canadian Mounted Police Pension Continuation Act, the Members of Parliament Retiring Allowances Act and the Canada Post Corporation Act and to make a consequential amendment to another Act, met this day at 4:00 p.m. to give consideration to the bill.

Senator Michael Kirby (Chairman) in the Chair.


The Chairman: Honourable senators, we are continuing our hearings on Bill C-78.

Our first witnesses this afternoon are from the Public Service Alliance of Canada.

Thank you for appearing this afternoon. We appreciate you taking the time to be with us. Please proceed.

Mr. Daryl Bean, President, Public Service Alliance of Canada: Thank you, Mr. Chairman and Senate committee members, for allowing us to appear here. With me today are Nycole Turmel, National Executive Vice-President of the Public Service Alliance of Canada, and Jeanne Smith, National President of the Association of Public Service Alliance of Canada Retirees; and Steve Jelly, assistant to the Alliance Executive Committee. On behalf of the 130,000 Public Service Alliance of Canada members who contribute to the Public Service Superannuation Fund and retired PSAC members, I want to thank the Standing Senate Committee on Banking, Trade and Commerce for inviting us to appear during your review of Bill C-78, to establish the public sector pension investment board act.

Before addressing the substantive objections that PSAC has with the design and implementation of Bill C-78, I should like to formally place on the public record our objections to the legislative process that has been used to date.

Despite the enormity of the legislation in terms of the amount of money involved, the government has consciously and determinedly stifled debate. It introduced and followed through on closure motions at every step of the legislative process. It deliberately and unreasonably denied the Public Service Alliance of Canada and others an opportunity to appear before the House of Commons committee. It limited representation and questioning of witnesses by the House committee to less than 10 hours, and it limited clause-by-clause debate to less than one minute per clause.

It is more than unfortunate that the undue haste with which Bill C-78 passed through the House of Commons is being replicated in the Senate. From our perspective, the first question the Senate and individual senators should address before even contemplating giving the government what it wants in terms of pension plan governance and the distribution of the surplus, is: why the rush? Unless you receive an adequate answer to that question, you owe it to the more than 700,000 current government workers, employees and retirees to suspend the legislative process.

The second question that the Senate and individual senators need to address is why the government has drafted Bill C-78 in such a way as to abrogate the many points of agreement that were arrived at over the course of six years of pension reform discussions between the government and representatives of the federal public sector unions and federal retirees. Why, in other words, has the government chosen to legislate less than it had agreed to following the extensive consultation and discussions over a six-year period?

The third question that the Senate and individual senators should ask is: Why, and for what reason, is the government structuring the public service pension investment board in a way that is at once authoritarian and paternalistic?

The fourth question that the Senate and individual senators should address to the government is why the public service pension investment board act is so fundamentally out of step with the Pension Benefits Standards Act.

In our formal submission to your committee, we outlined the extensive process in which the government and federal unions engaged in an attempt to reform the public service pension system and how substantive points of agreement, particularly with regard to pension plan governance, are being repudiated under Bill C- 78.

In essence, the government is using Bill C- 78 and what we regard as an offensive management structure to penalize plan members because the PSAC and others refused to voluntarily agree to the government's arbitrary and inappropriate position on the distribution of pension plan surpluses.

The Senate and individual senators should understand that Bill C-78 is, above all else, about money and, more particularly, about the distribution of the $30 billion surplus that has built up in the three plans as well as any future surpluses that accrue to the plan.


Ms Nycole Turmel, National Executive Vice-President, Public Service Alliance of Canada: The government would have you believe that employees and retirees have no proprietary interest in the surplus in the superannuation plan, and that it is entirely appropriate for it to move the surplus out of the superannuation fund and use it for whatever purpose it chooses. It takes this position even though the Public Service Superannuation Act is silent on the issue, and even though such arbitrary action on its part is contrary to the Pension Benefits Standards Act.

The PSAC takes the position that plan members and retirees not only have a proprietary interest in but also a legal entitlement to the surplus that currently exists in the superannuation fund, and any surplus that will accrue in the future. Moreover, our view conforms to the Pension Benefits Standards Act and the prevailing wisdom of pension experts and the courts.

During initial discussions on the distribution of the surplus during the pension reform exercise, the PSAC took the position that the entire surplus belongs to federal workers and retirees and should be used exclusively for their benefit. This position stems from the fact that while employers generally contribute to employee pension funds in at least equal proportion to plan members, the employer's contribution is a part of total compensation. In other words, the money contributed by the employer is nothing more than, nor nothing less than, a part of the wage package.

In short, the employer's contribution to pension plans in general, and the federal government's contribution to the superannuation fund in particular, represent a deferred wage that belongs to the workers in question. Had those funds not been set aside in the pension fund, they would have been paid out in the form of higher wages and other benefits. From this perspective, any surplus that accrues to a pension plan belongs exclusively to the plan members and should be used accordingly. When considering disposition of an accumulated surplus, it is also important to acknowledge what caused the surplus to develop in the first place. And here again, the weight of evidence would support the proposition that the entire superannuation surplus properly belongs to plan members and not the employer. The level of contributions to a pension plan is tied to assumptions and expectations with regard to future economic and demographic events.

While this can never be a precise science, and while prudent assumptions should normally result in some surplus, the size of the federal surplus is outside of the norm primarily because the government has legislated a severe round of wage restraint and employment cutbacks that were completely outside the norm. Hence, while the plan operated on actuarial assumptions that wages would increase in the 4 per cent range, the government initiated a six-year wage freeze.

If senators allow the government to expropriate the existing surplus as it intends to do pursuant to Bill C-78, you will be allowing the government to take the money that accumulated as a result of a wage freeze, thus penalizing federal workers yet again.

Notwithstanding the fact that a strong case can be made to distribute any accumulated surplus to the exclusive benefit of plan members, the Alliance and other federal public sector unions and staff associations were prepared to engage in discussions that would have resulted in a sharing of the surplus between the plan members and the employer. While these discussions took place throughout the pension reform process, the government was not prepared to move from its position.

In addition to using its legislative muscle to expropriate the existing 30 some billion surplus from the superannuation plans, the government is using Bill C-78 to establish a protocol for the distribution of any future surplus. While this will potentially shield the government from future legal action by plan members, the government's approach is fundamentally flawed.

Senators should understand that through Bill C-78, the government is putting in place a structure that will explicitly share the risks inherent in any pension plan, while giving itself absolute authority to determine how any future surpluses are to be disposed of.

Since neither the government nor the courts allow other employers to act arbitrarily when it comes to the distribution of pension surplus, we fail to understand why the government can be allowed to do so. Moreover, it needs to be underscored that since the money in the plan belongs to plan members in the form of direct contributions and deferred wages, the plan members should have a say, and a substantial say, in the distribution.

In our opinion, the distribution of future surpluses should be the prerogative of a properly constituted joint management board that includes representatives of all the parties to the plans. Not only is this what the advisory committee recommended in 1996, but it is the only system that will result in a fair distribution of any future surplus. At the very least, the legislation should be amended to prevent the government, acting as an employer, from assigning a surplus to itself either in the form of a contribution holiday for the employers or by simply withdrawing all or part of the surplus.


Mr. Bean: Finally, with regard to the pension plan surplus, it is important to note that the President of the Treasury Board advisory committee unanimously recommended that the questions with regard to distribution should properly be addressed by a joint management board. The structure that was amended to address the government's concerns and the objections of the consultative committee has been repudiated by the government in Bill C-78.

There is no disputing that joint administration is the appropriate vehicle for pension plan management. The government recognized this fact and has done so for a long period of time. Despite this, the government is legislating a pension plan management structure that is anything but joint. In what can only be regarded as paternalism, which is something that has absolutely no place in pension plan management, plan members and government employees are explicitly ineligible for appointment to the board of directors under Bill C-78.

In essence, the government is vesting absolute control over billions of dollars contributed annually into the hands of the board of directors that has no proprietary interest in how these funds are managed, accumulated or paid out. Hence, under Bill C-78, a properly constituted pension management board has been supplemented by what is essentially an investment board.

Before closing, I should like to address briefly the impact of Bill C-78 on our members who are employed by the Crown corporations and territorial governments. Under the existing pension arrangements, employer contributions for Crown corporations and territorial governments have been substantially lower than those paid by the federal government on behalf of its direct workforce.

The substantial contribution increases that will be required by the governments of the Northwest Territories, Yukon and Nunavut will have an impact on the overall financial position of the territories and on the collective bargaining relationship that the PSAC has with these governments.

We have already received indications from one territorial government that it intends to pay the increased contribution out of the total wage bill. In other words, territorial workers who have already paid for their pension benefits through deferred wages will be asked to pay for the same benefits again.

With regard to Canada Post, the situation is equally disturbing. The PSAC believes that the provisions for removing Canada Post from the ambit of the Public Service Superannuation Act need to be revisited. Two options are acceptable to the PSAC and our members who are employed by the Canada Post Corporation.

First, Bill C-78 should be amended so that Canada Post remains a part of the Public Service Superannuation Act (PSSA). If the status quo is not acceptable to the government, then Bill C-78 should be amended to allow Canada Post employees to keep their accumulated pensions within the PSSA or transfer the actuarial value to the new Canada Post plan and allow the union's representative at Canada Post to negotiate a new pension plan prior to the October 2000 implementation date.

In addition to these specific amendments, the PSAC submission recommends two other substantive amendments. First, we recommend that the Public Service Superannuation Plan be included under the Pension Benefits Standards Act to more appropriately address the surplus issue. Second, we recommend that the pension plan management structure be amended to include joint administration.

While these amendments are substantial and will likely delay the implementation of Bill C-78 until the fall, delay is, in our opinion, a small price to pay in order to ensure that the federal public sector retirees and existing plan members are protected.

Again, I want to thank you very much for your invitation. We are open to questions.

Senator Kenny: Welcome, Mr. Bean. It is good to see you here again.

I get the impression from hearing your presentation that you have been jerked around a little bit. During the course of your comments, you talked about discussions that had been abrogated over the past six years by this bill.

Would you care to elaborate for the committee what the nature of those discussions were? If you could summarize it for us, that would be helpful. As you heard the Chair say, we are meeting with the two ministers tomorrow. It will be interesting to compare what you have to say with what they have to say.

Mr. Bean: Yes, I can do it fairly quickly.

There is no question in our mind that we have been jerked around -- and I will use that term, although I could find stronger terms to express it.

Senator Kenny: It is a senatorial term.

Mr. Bean: I will try to stick with it, then.

First, there was the public service advisory committee in which we participated. In 1992, the President of the Treasury Board, Mr. Massé, asked the advisory committee to conduct a review of the superannuation plan, including its management and financing. We were told not to deal with improvements to the plan. The joint committee consisted of management representatives, union representatives and a retiree representative.

We prepared an extensive report that went to the President of the Treasury Board in January 1995.

Subsequently, the advisory committee tabled another similar report in 1996.

Subsequent to that, we again responded to the issues that the President of the Treasury Board raised as a result of those reports.

In 1998, I believe, a bargaining agents' committee was set up to meet with Treasury Board officials. We again went through the process. I find it particularly appalling that we had agreed to a joint union-management board consisting of some 14 people, six representatives from the employers, six from the unions or bargaining agents concerned, one retiree and one chairperson. The chairperson was to be appointed by the President of the Treasury Board in the first round and subsequently in accordance with the bylaws of the joint management advisory committee.

We were opposed to an investment board. We believed that it should be a committee of the management board, which is similar to what the rest of us deal with in our dealings with pension management boards. However, we finally agreed to an investment board and that it would report to the joint union-management board. The original proposal was that the management board would report to the investment board. It was accepted in the discussions. Now we find that we are back to an advisory committee that has no power whatsoever, and we are back to an investment board that controls the whole pension plan and determines what the terms, conditions and benefits will be. That is what we object to. We had agreement on those portions. If nothing else, that should have been instituted in the bill.

I guess that because we would not agree to give up on the surplus money, although we were willing to discuss sharing it, we were being punished by not being allowed to have a joint union-management board and joint investment board.

Senator Kenny: Where did the wheels fall off? Did you have a memorandum of understanding or was this all verbal?

Mr. Bean: We have minutes from those meetings, which I would be more than pleased to table with the Senate. A two-page sheet lays out the management board and the investment board, and it was produced from that meeting.

Senator Kenny: In your opening statement, you said that you thought it would be useful to compare this legislation with the Pension Benefits Standards Act. How would you like to do that for us?

Mr. Bean: The Pension Benefits Standards Act was amended by the Senate in Bill S-3, I believe. It requires a joint union-management board. Second, where there are surplus funds and if one is to try to do something with those surplus funds, it requires a two-thirds vote of the plan members as well as a two-thirds vote of the retirees.

Although the government is supposed to follow both the Pension Benefits Standards Act and the Income Tax Act, the superannuation plan has never done that. This legislative change will not find it complying with either the Pension Benefits Standards Act or the Income Tax Act.

Senator Kenny: You will hear the argument -- and I am sure you have heard it before -- that if the employer, or the government, takes the risk on the downside that it should take the surplus on the upside. What is your response to that?

Mr. Bean: It is not tough to take the risk on the downside if you control both the benefits and the contribution rate, which the government has and continues to do under this legislation. There is not much risk.

By the way, the government has increased the contribution rates, and we went along with those increases because we felt they were justified. They have, on occasion, changed the benefits. We can go back to 1982 when they restricted the indexing to retirees to six and five. Indeed, there have been changes there.

If we go back to some of the old bills tabled in 1978, for example, a certain Treasury Board document talks about employee contribution rates. It notes that since the pension program began in 1924, total employee contributions to the program for the whole period have virtually equalled total benefit payout for the same period. It is very clear that the Treasury Board or the government has not had to fund additional items.

Another statement is the fact that the federal government employee contribution was $490 million, and this is referring to 1978. The employee contribution was $310 million, and the interest earnings were $630 million. Last year, total pension payouts, including indexing, came to $365 million.

Again, that is a clear indication that the employee contributions and the interest have exceeded the payouts regularly. It is not really a question of the employer making this magnanimous gesture.

There is also a recognition -- and I will not read from the Treasury Board documents -- that public service employees have taken lower wage increases than others and have contributed higher rates to the superannuation plan and, therefore, were expecting to get better pension plans. I would agree that they do have a better pension plan than a lot of others. These references come from Treasury Board documents, not ones that I am producing.

Senator Kenny: I was not entirely clear on your previous answer when you described that you felt you were being punished in terms of the structure being proposed by the government. You wanted to have a management board with an investment board reporting to it. Somehow that was linked to the question of the surplus and how it would be disposed of. Explain the link to the committee and why you feel one is linked to the other. You had one position on the surplus and another position on the structure. Why is there a link and why do you feel you are being punished?

Mr. Bean: Mr. Jolicoeur headed up the discussions for Treasury Board. I believe that his title is assistant deputy secretary. In the course of our discussions, we came to what I referred to on behalf of the unions as the big question, meaning the surplus money and its distribution. Knowing that there was $15 billion, we proposed to him that there should be a start-up fund or seed money of approximately $1 billion to $1.5 billion for the new board. Given that the government obviously does not have this money and that it is part of Canada's debt, similar to what happened with the Ontario government, there should be possibly $1 billion a year for 10 years contributed into this fund. That way, the board would have an opportunity to review the plan and change benefits.

Mr. Jolicoeur immediately responded that we were not getting any of the surplus. At the same time, he said that the joint management is gone and so is the dental plan for retirees.

Obviously there has been a change of heart with respect to the dental plan for retirees, but there is no change of heart on joint management, both in the management of the plan and in the investment.

Senator Kenny: Perhaps I am slow, but I do not see the link between the position on the surplus and on the structure.

Mr. Bean: It was his link. He said they would not agree to giving up the surplus.

Senator Kenny: Those were his words.

Mr. Bean: Those were his words, exactly.

The Chairman: If I understand Mr. Bean's position, there are two sets of issues, one of which is the governance issue and the other is the surplus issue.

Senator Kenny: He said that they were linked.

The Chairman: As I understand, he said that the linkage was made by government negotiators.

Mr. Bean: The linkage was made by Mr. Jolicoeur, yes.

Senator Meighen: Senator Kenny is in rare form today. He asked exactly the questions I wanted to ask, but I am slow, too, and should like to revisit this issue.

Is it in the minutes that Mr. Jolicoeur said, "Well, if that is your position on the surplus and that is your position on management, then forget it"?

Mr. Bean: No, that part is not contained in the minutes.

Senator Meighen: I am not doubting your word.

Mr. Bean: I know you would never doubt my word. There were five or six union representatives there as well as retiree representatives, a couple of whom are in this room. They can verify that that was the statement.

Senator Meighen: I have information that that is what happened. It seems that there was a drastic change of heart.

Earlier, in answer to Senator Kenny's question, you said that you had made some proposals about the division of the surplus. Had you gone down to vague percentages or had you just said, "We believe that we are entitled to it all but, in the interests of coming to some agreement, we are prepared to discuss a three-part division, or whatever." Is that your recollection of the discussion?

Mr. Bean: Let me finish the other part that you mentioned. The backgrounder by Treasury Board talks about preferring joint management. Mr. Massé has also made statements publicly that if the unions were prepared to give up the surplus, we could have joint management. I recall hearing those statements.

With regard to the surplus money, our opening position was that, while we believe that all the surplus money belongs to the plan members -- that is, both existing plan members and retirees -- we were prepared to discuss a distribution of it. The opening proposal, which was endorsed by all the unions at the table as well as the retirees association, was that we would seek $1 billion to $1.5 billion for a start-up fund for the board. We would then seek to have the government put in $1 billion for the next 10 years. If you add that up, it amounts to between $11 and $11.5 billion. We knew that there was a $15 billion surplus in the public service part of it. I am not talking about the armed services or the RCMP because I cannot speak for them. That is when discussions broke off and that is when Mr. Jolicoeur said, "That is it. It is all over."

Senator Meighen: Why did he say that?

Mr. Bean: Because we would not agree to give up the surplus money. I recall public statements by Mr. Massé to the same effect. In fairness to Mr. Jolicoeur, I assume that he was representing Mr. Massé's position.

Senator Meighen: What is your explanation for the bill proposing to exempt the board from the Access to Information Act and the Privacy Act? Did that issue ever arise in discussions?

Mr. Bean: No. There were never any discussions that I can recall dealing with exempting the board from the Privacy Act or the Information Act. I have no idea why the government has done that. It does not make much sense to me.

Senator Meighen: Have you come across it in other negotiations in the public service sector?

Mr. Bean: No. It has never been raised with us in other negotiations or on this issue either. I have no idea why they did that.

Senator Meighen: I think you alluded to the fact that, perhaps, a delay in the passage of this bill would be one way to proceed. There are three alternatives here. The Senate can defeat it, approve it or delay it.

Mr. Bean: I would certainly accept the Senate defeating it -- that is, if that is the question you wanted to ask.

Senator Meighen: I guessed that you might, but what do you think about delaying it? If that were to happen, from your perspective, would you be prepared to enter into discussions to see if these outstanding issues can be resolved?

Mr. Bean: Absolutely. I must have a realistic point of view. I was not too optimistic that the Senate would defeat the bill, although I would be quite happy if you did.

We proposed what we think are substantive amendments. Recognizing that the House is planning on rising quickly, if you were to accept them, then they would have to go back to the House. One would assume that they would not be dealt with until the fall. We remain committed -- and I think I can speak for all national joint council of unions in this case, as well as the retirees -- to negotiating something on the surplus. That is the major outstanding issue. The rest of the items have basically been agreed to at this point in time. Again, we do not think that we need an investment board of 12 people. However, if that is what the government thinks they need -- and I understand that is driven by the Department of Finance -- then we can live with it as long as they report to the joint union-management board.

Senator Meighen: I take it that in terms of the surplus, you would acknowledge that any solution would probably incorporate a division of that surplus. You are opposed to the government taking it all and you recognize that it is unlikely that you would get an agreement for you to take it all, so we are down to a division of something.

Mr. Bean: We are certainly prepared to negotiate that.

Senator Austin: Mr. Bean, in enabling me to understand the PSAC presentation, I found a letter sent to me by Howie West, in Nova Scotia, entitled "Nova Scotia PSAC Pension Fight Back Committee," very helpful. This letter was dated May 26. I put several of his arguments to Treasury Board officials yesterday. Mr. West says in his letter that, "The disposal of the surplus and the appointment procedure for the board were the only issues still in dispute when the negotiations broke down."

I take it that, at the moment, the appointment procedure is not something that is of any real concern to you because you have stated that you will accept it if that is the way they want it. We are dealing really with the surplus position at this moment. Was the concept of joint management and risk sharing put to you by the government? Are you in any way willing to negotiate on the question of risk sharing?

Mr. Bean: You are correct that there was agreement on the appointment procedure. Basically, the government appoints their people; the unions appoint their people; the retirees appoint their person; and the President of the Treasury Board appoints the first chairperson. Once the management board was up and running, the bylaws of that management board would determine how the appointments took place.

What was the second part of your question?

Senator Austin: I was mentioning the question of risk sharing, which would be a major amendment to the way in which the pension system would work.

Mr. Bean: We had agreed to a 50-50 risk sharing and the administration of the pension plan by Public Works and Government Services, as it is now, and to those being charged to the pension plan fund, which was another saving for the government. They would be charged to the fund, which is not abnormal in joint pension management.

The Chairman: Your 50-50 risk sharing is similar to the agreement between the government and the Ontario teachers vis-à-vis the Ontario teachers' pension fund?

Mr. Bean: Yes, it is.

Senator Austin: Why was the concept of joint management and risk sharing not acceptable to the government?

Mr. Bean: The only reason we have ever heard is because we would not agree to give up the surplus money. They agreed to it during the discussions.

For years there was a traditional 60-40 split in contribution rates. That has crept up to a 69-31 cost sharing ratio and we agreed to increase contribution rates in a phased-in manner to go back to the government paying 60 per cent and the employees paying 40 per cent, representing a saving to the government.

Senator Austin: You referred to the Pension Benefits Standards Act in your presentation. I understood you to say that you would prefer a system that works in a fashion similar to that system; in other words, with the consent of the employees to transfers of the surplus, which comes back to saying that you are willing to negotiate the sharing of the surplus entitlement.

Mr. Bean: Absolutely. In fact, when we started the discussions, it was made very clear to us that the government wanted the legislation to comply with both the Pension Benefits Standards Act, which it now does not, and the Income Tax Act, which it also now does not. Obviously, this bill does not do that.

Perhaps you should ask the minister why he has changed his mind about compliance with the Pension Benefits Standards Act and the Income Tax Act.

Senator Austin: As our chairman has said, we will be questioning the minister tomorrow. Perhaps you will have someone present to see how well we do.

I want to pursue the matter of actuarial calculations. Are you in any way able to contribute, through your own actuarial people, to the analysis and setting of the actuarial conclusion?

Mr. Bean: No. We have never been asked to contribute. That is done by the Office of the Superintendent of Financial Institutions. They did not foresee the government freezing wages for six years while they were predicting a 4 per cent wage increase rate. That obviously contributed to the significant surplus.

We could argue about the percentage they have used for the rate of return because it is clear that as long as it was tied to the government bond, they were underestimating the 20-year bond. One could argue whether the inflation rate was accurate.

Senator Austin: It clearly was not.

Mr. Bean: Yes, it clearly was not in all three cases, and that contributes to the large surplus.

However, in fairness to the OSFI, they put forward actuarial assumptions that were in the ballpark. We have not argued much about those because we would prefer that they be a little conservative rather than underestimate.

Senator Callbeck: I should like to follow up on the board of directors for the investment board. I know that you did not get what you wanted. You wanted a joint management board and an investment board to report to it. That is not in the legislation. However, the legislation does provide for an investment board and for an advisory committee that would submit names to the nominating committee which, in turn, would submit to the President of the Treasury Board. Do you have any problems with that process?

Mr. Bean: We have a major problem with it because it really means that the president of the Treasury Board will determine who will be on the pension investment board.

Senator Callbeck: Is that the case even though all those names are agreed to by the nominating committee?

Mr. Bean: The nominating committee may submit names. I am not yet convinced that we will have a joint nominating board, but, even if we do, at best we will have a 50 per cent chance at submitting names.

Second, there is no requirement that the president will select people who are nominated. I think that is a very poor process, particularly when you consider that we represent members who are contributing money to this plan and that the process is contrary to the Pension Benefits Standards Act, which the Senate adopted.

Senator Callbeck: You say that you are not convinced that you will have a joint nominating committee. I thought it was already established that names would come from the three advisory committees.

Mr. Bean: Names can come from the advisory committees, which are made up jointly of union and management people. Therefore, that may give us a 50 per cent say on the name coming forward. There is no guarantee that we will agree with it.

Second, the president of the Treasury Board can accept or reject those names. I also object to the fact that there is no one on the investment board who represents the interests of the employees because, once again, it is the president of the Treasury Board who will determine who will be appointed.

Senator Callbeck: The president of the Treasury Board does not have to choose from the names on the list?

Mr. Bean: I see no reason why the president could not appoint someone who is not on the list.

Senator Callbeck: Does the union have a position on whether the 20 per cent foreign investment rule should apply to these funds?

Mr. Bean: I will only speak for the PSAC on this. I certainly will not attempt to speak for any other union. In the PSAC, we have traditionally limited our foreign investment to less than 20 per cent because we believe that the money should be spent in Canada in order to create jobs here. We are not saying that there cannot be some foreign investment, but we have traditionally limited ours to below 20 per cent. Doing this has not hurt our rate of return. There should obviously be some limit on foreign investment, and the PSAC prefers that it be lower.

The Chairman: To clarify one of your previous responses, Mr. Bean, clause 9(2) of the act requires that the minister appoint people from the list. Therefore, he cannot go beyond the list in making appointments.

Mr. Bean: Thank you for bringing that to my attention.

Senator Tkachuk: With regard to surplus funds, it is my understanding that the government could have taken control of surplus funds without the passage of this bill. If the government have the right to do that, why does it need the bill?

Mr. Bean: If the government believes that it has the legal right to do it, it does not need the bill. We will challenge that perceived right in court even if this bill is adopted because we do not think the government has that right. You are right that the government would not need this bill if it has the right to do that.

Senator Tkachuk: I agree that they do not have the right to take the surplus cash, but let us take this one step further. You obviously agreed on a number of issues as far as the management of the board itself, the appointment of directors and a number of other issues. The stumbling block was the cash. Therefore, there was no reason the government could not have prepared the bill without mentioning the money; is that not right? If that had happened, there is nothing in this bill with which you would disagree, is that not right?

Mr. Bean: That is correct. As long as they did not try to take the surplus money, there would be nothing in this bill with which we would disagree, based on those discussions.

Senator Tkachuk: Let us say that happened. Let us say they had gone in that direction and, at the same time, removed the surplus cash but presented a bill without that in it. I still do not understand why it is in here. You would have agreed to participate in this joint venture even if they were taking away the cash, would you not?

Mr. Bean: If the bill had not contained a provision to take away the $30 billion, and had it contained the agreement which we had on joint union-management of the plan and on the joint investment board reporting to the management committee, then we would have had no objection.

Senator Tkachuk: Perhaps it is because I come from the prairies that I see conspiracies everywhere. It seems to me that this should have been so simple. They could have presented the bill with all the stuff in it upon which you agreed. After all, why would you want to get in a fight with unions? I have been in those fights, and I always lose.

Mr. Bean: We are glad to hear it.

Senator Tkachuk: Why would you not just take the money and make it a separate issue? Perhaps they really did not want an agreement at all. Perhaps this was all a farce and, in reality, what they wanted was exactly what they got. They got total control and they put the $30 billion in there just to upset you.

Mr. Bean: They succeeded.

I really cannot understand their motive, except to say that we made it very clear from the beginning that we believed that the surplus money belonged to the plan members. In the discussions, we certainly indicated that we were prepared to share it. If they believe that they are entitled to it, then there would be no need to put it in the legislation. It may be that they are not sure whether they are entitled to it or not and they are trying to get around it by putting it into the legislation. I do not know.

Senator Kelleher: Let us go back to Bill S-3, which was passed. In the discussions you were having at that time, did the government, through their negotiators, ever give you any reason as to why they only included in that bill of rights, if you will, rules for private sector employers and did not include themselves in it?

Mr. Bean: No, they did not. In fact, at the beginning of the discussions they made it very clear that, in fact, the Pension Benefits Standards Act and the Income Tax Act would apply and that the Superannuation Act must comply with those two acts.

We did not have any objections to that, so there was no lengthy discussion on it. We agreed that the Superannuation Act should comply with both the Pension Benefits Standards Act and the Income Tax Act. We had no objection to that and agreed to it early on in the discussions. It was only after this legislation was tabled that we realized that they are not complying with either.

Senator Kelleher: Since they never gave you a reason, why do you not give us your opinion -- I know you are never short of opinions -- as to why you think the government exempted itself from the provisions of Bill S-3?

Mr. Bean: I think it is pretty clear. There are two reasons.

First, if they were to comply with Bill S-3, there has to be joint union-management of the plan. That is not a provision of Bill C-78.

Second, if they were to comply with Bill S-3 when it comes to the future surplus -- setting aside for the minute the present surplus -- Bill S-3 is very clear that you need the agreement of two-thirds of the plan members and two-thirds of the retirees. Obviously, it is very clear in the legislation that they want to have total control over what happens not only with existing surpluses but with future surpluses. I do not think it takes a whole lot of thought to decide that that is why they did not want to comply with Bill S-3 or the Pension Benefits Standards Act.

The Chairman: Are contribution rates part of the collective agreement?

Mr. Bean: No.

The Chairman: They are in many private sector agreements.

Mr. Bean: Under the Public Service Staff Relations Act, any matter that is covered under other legislation is not negotiable. We have been consulted in the past about the rates and we have always agreed with the increase. In about 1970 there was .5 per cent increase brought in for indexing and then in 1976 or 1977 there was an additional .5 per cent increase to cover indexing. We agreed with that because we believed it was legitimate.

The Chairman: You agreed to them, presumably on the basis of actuarial assessments.

Mr. Bean: Yes, and following consultations. Legally, they did not have to talk to us. They could have done it whether we agreed or not.

The Chairman: I have just one other question, which I think comes to the nub of one of the issues before us, and that is the question of entitlement to the surplus. In paragraph 39 of your brief you quote section 9(2)(1)(a) of the Pension Benefits Standards Act, which states that the employer can do certain things, if it is entitled to the surplus. In paragraph 36 you state that you believe you have a legal entitlement to the surplus. The government told us the other day that they believe that they have a legal entitlement to it. One of our common great advantages is that neither of us is a lawyer.

Have you had a legal opinion, which in your view establishes the point you make, which is that you have a legal entitlement to the surplus?

Mr. Bean: We have consulted with lawyers who believe that we do have a legal entitlement to it. They are going back through some of the other cases in which certain plans do not talk about what happens to the surplus. The first one that comes to mind is the Dominion Stores case when Conrad Black tried to take the money. There were also cases involving Ontario Hydro and the Singer Company. There are several that indicate that where the plan does not say what happens to the surplus it in fact belongs to the plan members. We are working on it.

Undoubtedly, we believe we have a case. We are quite prepared to go to the courts with it. All the other bargaining agents, along with the Federal Superannuates National Association, have joined with us. We believe that there is legitimate case to be made and that we can be successful.

Senator Kroft: I did not hear the answer. I heard you consulted. I did not get a clear answer as to whether or not you have an opinion.

Mr. Bean: We do not have a written legal opinion at this stage. We have an oral legal opinion from two different counsel which indicates that they believe that we have a legitimate case and can be successful. We do not yet have a written legal opinion.

The Chairman: I should just like to follow up on Senator Tkachuk's point because I think I might have misunderstood your response to his question. I think his question was that if the government has a legal right to take the surplus, why is it in the legislation? I thought you said that you agreed with his premise, which is that the government has a legal right to take the surplus. That is not what you are saying?

Mr. Bean: No.

The Chairman: Are you saying that, if they have a legal right, then it does not need to be in the legislation?

Mr. Bean: That is correct. That was the senator's question. If they have the legal right, there is no reason for it to be in the legislation.

The Chairman: Thank you for your brief and your presentation.

Senators, our next witnesses are a panel from the Canadian Union of Postal Workers, from the Fédération des travailleurs du Québec and from the Social Science Employees Association. Welcome and please proceed.

Ms Bourque, in particular, could you address the two specific points Mr. Bean made about the proposed change in the act affecting postal workers, particularly in relation to his comments about the need to change various other pieces of legislation, including the Income Tax Act? I wonder if you could respond as to whether you agree or disagree with the observations that Mr. Bean made specifically on your case.

Ms Deborah Bourque, Third National Vice-President, Canadian Union of Postal Workers: Mr. Chairman, our national president, Dale Clark, is not here today because of a commitment he made many weeks ago. As you may know, he was available to appear on the other two days on which the committee is considering this bill but was told that he could not appear on those days.

I want to say first that I am not an expert on pensions, but will attempt to give my union's position on Bill C-78. Certainly, I, along with others in the organization, will become expert on this fairly quickly because this is such an important issue to our members.

CUPW represents about 40,000 employees whose pensions are affected by Bill C-78, and I am sure you can appreciate just how important this issue is for our union, our members and their families. There are very few issues more important to working people than their retirement incomes.

I want to echo the comments from the PSAC regarding the process around this legislation. I have to say right off that my union and our members have not been consulted about Bill C-78, and there has been no real debate on this bill. The process has been hurried and anything but democratic. I would like to explain what I mean by summarizing what we have been through.

As you may know, CUPW participated in discussions to create a new public service pension plan for several years and Brother Bean has talked about some of those processes that went on. We sat on the advisory committee on the Public Service Superannuation Act. We even signed the report issued by the advisory committee, which contained broad agreement on many issues. After the advisory committee reported, it was dissolved and the consultative committee on the reform of the Public Service Superannuation Act was established and we participated in that committee as well, and at a very senior level. Our national president participated in those committee meetings, as did our director of research.

Late last year, as you know, talks at the consultative committee broke down primarily over the surplus issue. In February, CUPW wrote to Treasury Board to outline our concerns about the superannuation plan changes being proposed. We also wrote to Canada Post to request a meeting about the proposed changes. In March, Canada Post wrote back to say that the federal government had announced plans to reform the plan. They said that they did not know when they would be able to meet with the union, and that they did not know how soon after the legislation passed that they would be in a position to discuss the changes.

Treasury Board President Marcel Massé wrote back in March as well to assure us that he had noted our interest in seeing issues such as surplus disposition, pension fund investment and contribution rates established through a negotiating or consultation process.

Bill C-78, which was introduced the very next month, has not been subject to either consultation or negotiation.

When Bill C-78 was introduced, CUPW was astounded to find that it included a requirement that Canada Post establish one or more separate plans, even though there had been no discussion or consultation on a separate plan during the many years that Treasury Board, Canada Post and the unions discussed the reform of the Public Service Superannuation Plan. As I indicated earlier, there has been very little debate on those provisions.

Bill C-78, a bill that involves billions of dollars and the retirement future of hundreds of thousands of workers, was referred to a House committee after just a few hours of debate. CUPW was denied the opportunity to appear before this House committee. Like most of the members of the labour movement, we were at the Canadian Labour Congress convention in Toronto while the committee was having hearings on Bill C-78. The House committee did not even bother to respond to our letter requesting that the committee extend hearings so that we could appear or that it consider cross-country hearings so that people outside of Ottawa could be heard. We almost did not make it to this committee as well, although not for lack of trying. We were told last week that we would not be able to appear before your committee if we did not appear today and today alone.

When we finally met with Canada Post on May 14, the corporation was not able to tell us much more than we already knew from the legislation and the letter that the corporation had sent to our members in early May.

Incidentally, we contacted Canada Post to let them know that their letter to members was misleading. The corporation's letter suggests that employee contribution rates will not increase between now and 2004. This is clearly not true. Despite that, the employer has not informed its employees.

The whole process surrounding Bill C-78 has been a joke -- and not a very good one -- if you are someone who cares about the basic principles of parliamentary democracy. Simply put, after years of consultation on one plan, CUPW finds itself dealing with a plan that has not been subject to consultation of any kind. We find ourselves dealing with a bill that kills a joint process, which produced substantive agreement on most issues. We find ourselves dealing with a bill that gives Canada Post the right to establish and administer our new pension plan without our input until October 1, 2001, at the earliest.

I would like to state for the record that we are furious that Parliament is trying to push this bill through with absolutely no regard to the people it affects. If it were your pension, I believe that you would be angry, too.

On behalf of the 40,000 CUPW members who have pensions at stake, I would like to raise a few of our concerns around the substantive issues in Bill C-78 and urge you to suspend consideration of the bill, or, at the very least, amend the bill to address these concerns.

One of our fundamental concerns is that our pension plan will initially be imposed, not negotiated in a way that will take in the concerns of our membership. Canada Post will have its own pension separate from the public service pension plan. The corporation is required to establish no fewer than one pension plan no later than October 1, 2000. The legislation also adds the unnecessary restriction that the plan or plans not be the subject of collective bargaining before October 1, 2001.

The union sees no reason why our pension plan should not be negotiated from the start. Canada Post and Treasury Board have not provided us with an explanation as to why they cannot or will not negotiate before October 2001. Not only has the government failed to provide an explanation or rationale, but it has also failed to consider the labour relations problems that may ensue, given the wording of the legislation.

The legislation says that the plans may be the subject of collective bargaining if notice to bargaining collectively is given on or after October 1, 2001.

Given this wording, if Canada Post were to give notice to bargain in September 2001, it could thwart negotiations of a pension plan until the next round of bargaining, that is to say in our experience, many years.

The wording also has implications for the duration of our next contract. As it now stands, due to Bill C-24, the back-to-work legislation passed in December 1997, our collective agreement will expire on July 31, 2000.

While Canada Post may very well desire a new collective agreement that lasts two or three years, and it may very well be in the best interests of everyone to have a collective agreement last that long, CUPW would be foolish to bargain a collective agreement that lasts more than 14 months because it would prevent us from bargaining our pension.

The current wording could end up creating unnecessary problems for both Canada Post and CUPW -- problems that neither we nor anyone else in this room need.

If the Senate passes Bill C-78, the union hopes that honourable senators will seriously consider amending the wording of proposed section 46.5(2) so that any Canada Post pension plan may be the subject of collective bargaining once the collective agreement expires after the date upon which this legislation is proclaimed.

In the interim, our union hopes to prepare for a smooth negotiations process by holding preliminary discussions with Canada Post about the structure of the plan, the composition of the management board and all the issues relating to administration, the transition period and so on.

In addition to our concerns relating to negotiations, we have problems with the investment rules in the legislation. The government is proposing different investment rules for the Canada Post pension plan than for the public service pension plan.

Bill C-78 provides restrictions or safeguards on the investment of the public service pension. The most important restriction by far relates to investment strategy. Bill C-78 requires that the public service pension plan adopt a passive domestic equity strategy over an initial fixed period of time. This restriction does not apply to the Canada Post pension fund.

Neither Canada Post nor the government has provided the union with an explanation as to why the investment rules for Canada Post are different. Canada Post officials simply said "no," when they were asked if they would consider talking to the government about amending the legislation, to provide the Canada Post pension with similar safeguards relating to investment.

The union strongly opposes the unrestricted investment strategy being proposed for our pensions. CUPW is also opposed to Bill C-78 because it gives the federal government ownership of the $30-billion pension surplus. The government has indicated that it will give approximately $6 billion of the surplus to Canada Post. We all know why the federal government says that they own the $30-billion surplus; we talked about that earlier.

The government would have us believe that since it has paid down deficits in the past and is responsible for future deficits, it has a right to the surplus. In fact, the federal government is wildly exaggerating the risks. Today, most pension funds generate surpluses. This is because pension contributions are based on cautious assumptions and expectations about the future.

Honourable senators can rest assured that Canada Post would try to make employees pay one way or another for any pension deficit. Our pension surplus does not belong to Canada Post because they will be taking the risks, it belongs to post office workers because the unions and management have negotiated superannuation payments as part of labour costs. Superannuation payments are nothing less than deferred wages that belong to workers.

Since it is our money that is held in trust to provide our pensions, we expect to be fully involved in all aspects of the pension plan, including distribution of the surplus.

The union would also like to point out that neither the government nor the courts allow other employers to act arbitrarily when it comes to the distribution of pension surpluses.

Furthermore, if honourable senators allow the federal government to take the surplus, it will compound the wrongs that have occurred due to back-to-work legislation.

The Public Service Superannuation Plan has operated on the assumption that incomes would be rising in the range of 4 per cent. However, due to back-to-work legislation, postal workers have received less than that figure. As a result, their pensionable incomes are less. This, along with the wage restraint imposed on public service workers, is why we have a $30-billion surplus today.

The superannuation fund was based on the assumption that it would be paying out more. Not only have employees been robbed of an adequate wage, their pension incomes are less than they should be. The federal government now wants to take the surplus that has resulted from being denied our rights.

Many honourable senators expressed concerns when I appeared before the Senate around the back-to-work legislation about the wage restrictions in our legislation. We now see that the implications are even greater than we thought at the time. To let the government take this surplus would be like double theft.

For all of the reasons outlined, I hope you will consider suspending consideration of Bill C-78. In the alternative, we ask that you amend Bill C-78 to, first, allow Canada Post and its unions to negotiate a plan or plans once collective agreements expire; second, require that any Canada Post pension have the same investment restrictions or safeguards as the public service pension; and, three, clearly state that any surplus belongs to the employees.

We believe that Bill C-78 is about how we as a society are prepared to treat pensioners and their retirement incomes. This bill erodes the rights of pensioners and sets the stage for other employers to roll back rights and abuse pension funds. This bill has implications that are too important and far-reaching to be passed in a perfunctory manner. We hope that you agree.

I would like to thank the committee for considering our views.

The Chairman: Thank you for your presentation.

Honourable senators, I now turn to our next panel of witnesses.


Mr. André Sénéchal, President of the Regroupement des syndicalistes à la retraite, FTQ Regional Council, Metropolitan Montreal: Thank you for the opportunity of allowing us to express our views on Bill C-78. I am accompanied by Mr. Martin Montoudis, Hydro-Quebec retiree, who has been negotiating pension plans for 30 years for his local CUPE-2000 of the Fédération des travailleurs du Québec; François Teasdale, income security auditor for the Communauté urbaine de Montréal, president of the retirees' group, member of the Syndicat des fonctionnaires municipaux de Montréal, local 429, CUPE, representing 1,500 retirees from the city of Montreal; and my name is André Sénéchal, retiree from the Federal Public Service, former meat inspector for Agriculture Canada, president of the Regroupement des syndicalistes à la retraite, FTQ Regional Council, Metropolitan Montreal.

The Regroupement des syndicalistes à la retraite is made up of 37 locals of former FTQ members, who worked in all of the various sectors. The retiree locals of PSAC Quebec are affiliated with the group and five members are part of the Association of Public Service Alliance Retirees. Ms Jeanne Smith is its president and she sent you a letter on June 2, 1998. The Regroupement des syndicalistes à la retraite and the Association of Public Service Alliance Retirees are affiliated with CLC's association of retired union activists.

In Quebec, we are very actively involved in the Front commun du Québec sur la fiscalité, grouping together some 60 organizations of retirees, the Montreal Citizens Forum, l'Association des retraités de Québec, the Alliance des retraités du Québec, representing some 680 000 retirees. All of the senators from Quebec have received a letter from the Front commun. This letter was translated and it is included in the yellow document. The RSR sits on the FTQ committee for the handicapped that represents approximately 450 000 members. All of these groups denounce Bill C-78 and several letters to this effect have been received by you.

There are many federal public service retirees who are members of the locals affiliated with our organization. These people have very modest pensions and would have hoped that the accumulated surplus in pension funds would first be used to increase their benefits. It is our view that they have contributed to this surplus through their contributions throughout their working life to their pension plan and that they are entitled to some say on the way in which these funds are to be used.

Furthermore, we fear the repercussions the bill if passed will have on provincial governments, municipal administrations and parapublic organizations, as well as on all of the private sector employers that offer pension plans. In fact, if the federal government, as the largest employer in Canada, sets the stage, other public sector employers and private sector ones will they too want to equip themselves with the means to have access to their employees' pension fund surpluses. Our presentation will not recount all of the arguments made by others who are opposed to Bill C-78, but we do wish to say that we support the statements made, for example, by the Association of Public Service Alliance Retirees.

Mr. François Teasdale, leader of the retirees' local, FTQ Regional Council: Mr. Chairman, we wish to emphasize four points, namely the pension fund surpluses, the retirees committees, disability benefits and survivor benefits.

With regard to the surpluses, we are outraged by the fact that the federal government is using its legislative power to unilaterally grant itself, as an employer, the power to confiscate its employees' pension fund surpluses. We believe that in doing so, the government-employer of Canada is robbing workers and retirees of their past and of their future by confiscating the surpluses of its employees' three pension funds.

In the pension fund, the surplus represents the balance of the fund over and above the monies necessary to pay present liabilities owed to contributors.

These liabilities include both the benefits being paid out now and those that will be in the future for entitlements accumulated by contributors up until now. We consider that these surpluses were provided by the contributions made by retirees when they were still working, by present employees and by the employer. The surpluses must therefore be shared between these three groups but must first and foremost be used to improve upon the benefits owed to present and future retirees. After all, is the primary purpose of any pension plan not to provide first and foremost for retirees? Is that not the primary purpose of any pension plan? Federal government retirees and employees have already contributed to the reduction of the federal deficit through successive wage freezes and very slim increases granted over the last two years. And must be added to this the taxes and income taxes they pay. And now they are going to be called upon once again to contribute to the reduction of the national debt through the confiscation of their money held in retirement funds.

Lastly, we believe that the confiscation of these surpluses could jeopardize the future of federal government employees' retirement funds should the country enter a new period of economic strife. The other point we would like to bring up relates to retirees committees.

Mr. Martin Montoudis, leader of the retirees local, FTQ Regional Council: We support the creation of a joint committee made up of active civil servants, retirees and employer representatives. To our great astonishment, Bill C-78, contrary to what would be logical, does not provide for the creation of a true committee or council made up of active civil servants, retirees and employer representatives that would have an administrative, custodial, management, supervisory and investment responsibility.

Such a council would be able to recommend improvements to the federal public service retirement plan and/or rule, if need be, on the equitable distribution of the surplus between active employees and retirees. We must recognize that to not provide for such a committee or joint committee made up of active civil servants, retirees and employer representatives is to open the door to arbitration and social disorder. It is also to go against present day legislative trends aimed at protecting the heritage of active and retired employees. As an example, we would simply mention the Loi sur les régimes de retraite de la province de Québec, Bill 116 that, it must be said, is but a fair and acceptable minimum. The purpose of this Quebec act, passed following broad public consultation at the end of the 1980s, was to protect all active and retired participants by giving them direct and democratic rights and powers pertaining to the administration, management and supervision of the investments of their retirement fund, which is their legitimate heritage, that they accumulated with difficulty over the years.

This law applies to active employees and retirees of the public service, of the para-public sector and of the private sector in Quebec. It provides for the establishment of committees made up of representatives of the employer and of democratically elected representatives of active employees and retirees. Given their composition, these committees are able to administer, manage and supervise the funding, the payout of benefits and the investments of the fund. These committees must accept and approve the payment of Quebec pension plan benefits and are accountable for the carrying out of their mandate to the active employees and retirees gathered in statutory general assembly. We are hoping for nothing less than that for our brothers and sisters of the federal public service.

Before legislating arbitrarily, it would be wise that our federal government withdraw Bill C-78 and set up as quickly as possible a commission of enquiry and a process of public consultation on federal public service pension funds. This commission would be made up of experts from the employer's side, of active union members, of retirees and of independent representatives, and its mandate, following study and public consultations, would be to make recommendations to the government on framework legislation, such as exists in Quebec, covering retirement plans and funds under federal jurisdiction.

There is no rush in this area because the money is there. We hope that the Senate of Canada will not set a precedent by accepting an arbitrary and retrograde bill that Quebecers already perceive with astonishment and with reason to be the beginning of a threat to their future rights regarding their dearly paid for public sector, para-public and even private sector pension plans.

Mr. Sénéchal: We are tabling with you the letter sent to the senators from Quebec on June 2, 1999 as well as the brief tabled on May 4 by our sister, Jeanne Smith, national president of the Association of Public Service Alliance Retirees.

With respect to the improvement of the CPP/QPP compensation formula, we deplore the fact that Treasury Board did not take the opportunity to improve it, taking into account the financial losses of persons who have become disabled and declared as such by the health services of Health and Welfare Canada.

Under the CPP/QPP, persons who are declared disabled after January 1, 1999, will see, at age 65, their CPP/QPP benefits reduced by 0.5 per cent per month for all the months they have been declared disabled between age 60 and age 65, which could mean a maximum reduction of 30 per cent. Now, Bill C-78 is silent on the financial adjustment which the federal public service pension plan could implement in this regard.

The .007 reduction factor used at age 65 could be lowered for persons who have been disabled after January 1, 1999. In order to absorb this income reduction at age 65, and based on our calculations, the .005 reduction factor could be used to compensate this serious financial setback for persons who have become disabled.

In Quebec, in certain institutions, the level will be reduced to .005 to compensate for the income reduction of disabled persons who reach the age of 65.

You will also find attached, based on the annual report of the public service pension plan, 1997-98, the pension benefits payable to contributors, as well as the survivor benefits. You will see that the popular notion that federal employees have a goldplated pension plan is only a myth.

In closing, Bill C-78 was very ill-conceived. There are gains, certainly, but there are also losses that will be to the detriment of the 700,000 active workers and retired members, in areas such as the dental plan, same-sex spousal rights and death benefits. The new coordination formulas will have long-term repercussions, resulting in weakened labour relations, if maximum use is made of the employer's formula and the role of the State. Retirees, through a boomerang effect, will more and more be candidates for the guaranteed income supplement. When I talk about these retirees, I am talking about retirees who have become disabled as well as of widows and widowers.

What will the public sector registrars in the province do faced with the central government's exemption following the passage of Bill C-78? You are our last hope. We do hope that you will send the bill back out for public consultations in all of the regions in order that the bill not be passed in its present form.


Mr. William Krause, President, Social Science Employees Association: Mr. Chairman and honourable senators, I will not read to you our five-page letter that maps out our concerns. I will, however, give you our recommendations to summarize our position.

First, we believe that Bill C-78 should be amended so that contributor and retiree consent is required for the withdrawal of surpluses while any plan is ongoing. Alternatively, we recommend that Bill C-78 be amended so that the act and its regulations are consistent with the provisions regarding surplus withdrawal as set out in the Pension Benefits Standards Act.

Our second recommendation is to amend Bill C-78 so that the act and its regulations are consistent with the Income Tax Act regarding the use of the surplus by an employer.

Third, we recommend that the advisory board be made a true management board, which functions with plan administrators and has broad stakeholder participation.

Fourth, make existing and future surpluses in the plans and decisions regarding contribution holidays subject to administration by the proposed management boards.

Our fifth recommendation is to amend Bill C-78 to obligate the government to provide employees with a broad range of information on pension plan operations and personal entitlements so that employees have a mechanism to ensure that discretionary powers are being exercised in an appropriate manner.

This last recommendation doubly concerns me after hearing today that this bill exempts the government from reporting under the Access to Information Act. In any pension plan, it is critical that members of the plan have a mechanism for ensuring that discretion is exercised in an appropriate manner. Clearly, when you give this kind of exemption to that legislation, you set up a mechanism for decisions being made in secret and being kept from plan members who are directly affected. That is unconscionable.

I will mention two specific concerns with regard to governance. The first is that, under this plan, the government will determine what plan costs are. While the legislation provides for actuarial estimates, the government does not have to use them in determining plan costs. It is can pick numbers as high as it wishes out of the air. It has a mechanism, therefore, to increase plan costs, thereby increasing contributions of employees to the 40 per cent maximum.

If it changes its assumptions at any future time, it will create a windfall of pension surplus. Under this legislation, anything above 110 per cent of plan requirements is automatically siphoned off into general revenues. Therefore, the government has an excellent mechanism for creating a surplus over time and then siphoning it off. It is quite clear that this mechanism could be used to generate revenues for the government. I believe that there is a conflict of interest between the fiduciary responsibility to administer this plan and the mandate of the government to generate revenues. Let us face it, this bill is about revenues; it is about the government getting its hands on $30 billion.

Second, a surplus is very important to guard our seniors against future poverty. We need to protect our seniors and the surviving beneficiaries of this plan whose payments under the plan are very small. We believe that we should always have an element of discretion and that we should think very seriously about withdrawing surpluses. We think that the government action of taking $30 billion puts those people in jeopardy. Our older retirees are looking to the Senate to speak for them because they are at risk and we must protect them. Although they may not be members of the Social Science Employees Association, I believe that I have an obligation to speak out for them. I hope the Senate will consider this very seriously.

I should like to address comments regarding the plan made by other witnesses before this committee. I will do so very briefly.

I have heard it said that negotiations failed to result in an agreement about sharing risk in the future. As a result, we have this bill before us. To put it more bluntly, the unions failed to succumb to blackmail. The government has proceeded in a vindictive manner in labour relations. I think you have seen that in other pieces of legislation. The government operates with its unions is a very simple manner. It says, "Agree with us on what we want in the negotiations. If you do not concede to us what we want, we will bring forth legislation to penalize you and give you less."

The government has done that in back-to-work legislation and is doing it in this pension legislation. The question for the Senate is simple: do you wish to be party to a process of vindictive labour relations where, as a rule of law, those people who do not agree with the government are penalized? I think that is an unconscionable position. It is one that I cannot support and I do not think you support it, either.

There have also been questions about the surplus and how to share it. If you look at the moral arguments, the arguments of common sense, and the legal issue, you will understand that we are reasonable people. Let us share it. Let us give taxpayers a good chunk of it; let us give our employees a fair chunk of it; and let us give retirees a fair chunk of it. That is reasonable and that is what well-meaning and reasoned individuals would decide.

An economic argument has been made that, because the government bears the risk, it should take the surplus. The argument advanced on this front is simplistic. First, risk can be shifted from employer to employee. That happened in the six-and-five program. When the six-and-five program was introduced, the Senate courageously said that the money taken from seniors should be given back to them at a later date, that their benefits should be capped only temporarily. Well, it was not temporary. It was permanent. We have never fulfilled the promise to give our retirees back the indexation that was taken from them. Therefore, the government has a way of shifting risk to the employee.

Furthermore, defined benefit plans such as ours are back-loaded. That means that benefits relative to salary are greater the longer the employee has been in the plan. Back-loading makes a plan risky for employees who may be laid off, and that is currently an issue with government employees.

Employees have another element of risk because employers often decide pension benefits based on a concept of total compensation. When you have total compensation, you obviously reduce current wages to reflect what you are contributing into a pension plan. It is your total wage bill that matters.

I want you to keep in mind that the argument on the risk to the employer has been grossly overstated and is quite simplistic.

If you look at the moral, legal, ethical, and common sense arguments, you would come to the conclusion that this surplus should be shared. This legislation does not achieve that.

I thank you for the opportunity to speak, and I would like to take your questions.

Senator Oliver: I am sorry that Ms Bourque had to leave just now but perhaps her assistant can answer my two questions. In her presentation, she spoke about a letter that the president of the Treasury Board wrote in March to assure us that he had noted their interest in seeing issues such as surplus disposition, pension fund investment and contribution rates established through a negotiating or consultation process.

I would like to know if we could have that entire letter put before us so we can read what he actually wrote in context because "surplus disposition" seems to imply that he wants to sit down and perhaps negotiate the surplus. Do you have the full letter? Are you able to tell me the context in which those lines were written? What was he referring to? Had you had previous discussions about negotiating what was going to happen to the surplus, and if so, how much? Was it the $6-billion surplus?

Mr. Jeff Bennie, National Union Representative, Canadian Union of Postal Workers: Unfortunately, I do not have the letter with me right now, but we can get a copy of the letter.

Senator Oliver: Can you get it to us before the president comes before us as a witness so we can ask him about what was written?

Mr. Bennie: Yes.

Senator Oliver: Later on, Ms Bourque talked about the surplus of $6 billion. She said that the government "has indicated that it will give approximately $6 billion of the surplus to Canada Post." Can you tell us about that, and how that is documented? Do you have letters, correspondence or documentation?

Mr. Bennie: We had a meeting with Canada Post in May, after the legislation had been tabled. We were able to meet with them finally in May. Canada Post officials told us that they had been informed by Treasury Board that the assets, or the amount of money, that would be transferred over to Canada Post to establish the separate Canada Post plan would be $6 billion. As you know, currently under the Public Service Superannuation Act, the cash is really not there. It is paper money. It is figures on a ledger. Obviously, the $6 billion has to come from somewhere so the government would be turning over $6 billion in assets to Canada Post as a start-up. That $6-billion figure represents the amount of money that postal workers and Canada Post, as the employer, have paid into the superannuation fund for the workers who have not yet retired. That money has to be transferred over by the government.

Senator Oliver: In her presentation, Ms Bourque talked about "$6 billion of the surplus." Is this the $30-billion surplus that she was referring to or is it $6 billion out of the public revenue?

Mr. Bennie: We are not sure where that is going to be coming from right now. We assume that it would be coming from the surplus. However, it could be coming from public revenue. The government has to turn over $6 billion to the Canada Post Corporation so that the corporation can establish the plan by October 1, 2000.

Senator Oliver: I understand that. I will go back to my first and my main point once again. I gather that March refers to March 1999?

Mr. Bennie: Yes.

Senator Oliver: The president of the Treasury Board said he wanted to negotiate "surplus disposition." Are you able to tell us, although you cannot find the letter, what he was referring to or what the context was?

Mr. Bennie: My understanding based on the discussions that were happening in the previous forums, prior to the introduction of the bill, is that there had been discussions at the advisory committee on how to deal with the pension surplus. We had written to the minister asking how that surplus was going to be dealt with and he responded that the government was interested in negotiating that point.

Senator Oliver: Then, the next thing you saw was Bill C-78?

Mr. Bennie: Yes. I might add that we first became aware of the separate Canada Post plan when we got the information on Bill C-78 on April 15, 1999. Canada Post and Treasury Board, we found out since, had been in negotiation since February.

Senator Kroft: What, in your opinion, is the ideal relationship in terms of the post office, your union and the superannuation fund? Is the fact of a separate pension fund a matter of issue with you or is it the mechanism and the amount of money that is involved?

Mr. Bennie: The fact of the separate pension plan is not an issue for us. In fact, ever since I have been involved in the union, we have wanted to have a separate pension plan with Canada Post, one that we could negotiate. That has always been our policy.

We have three main concerns. We cannot negotiate any provisions until after October 1, 2001. As Ms Bourque pointed out in her brief, what the legislation actually says is that you cannot negotiate anything about the pension plan unless you submit notice to bargain as of October 1, 2001, or after that. If we have a long collective agreement during the next round, we may not be able to sit down and negotiate a pension plan until 2003 or 2004.

We have talked to Canada Post about sitting down now, regardless of the legislation. We want to meet and talk and come up to a mutual agreement. Canada Post has rejected that position.

Senator Kroft: Have you spoken to Canada Post about this 14-month window that was identified as a dilemma?

Mr. Bennie: We have. Their response is that this is what the legislation says and that this is what they are going to do.

The Chairman: For clarification, since I regard that as kind of a bizarre clause in the bill, someone must have a rationale for that. Even though they have not told you the rationale, what do you think that it would be?

Mr. Bennie: I assume that the bill is going to allow Canada Post to establish the pension plan as they see fit. Only after they have had a chance to do that will we have a right to sit down and bargain. It makes no sense to me. It is only going to ensure that there will be one more issue where we are going to be at loggerheads with Canada Post.

We are not the only union not being allowed to get involved. It is also the PSAC, the Association of Postal Officials of Canada, which represents the line supervisors at Canada Post; the Canadian postmasters and assistants in rural Canada; and people in management themselves that are not represented by associations.

Basically, you have a situation where the board of directors of Canada Post will establish a plan. Maybe a year or two down the road all the unions may get a kick at being able to negotiate something that is already been put into place.

Senator Kroft: Mr. Krause, I would like to pursue a line of thought you took towards the end of your presentation because it seemed to reveal your attitude.

At the end of our last session, our chairman put a question to officials regarding the purpose of creating the surplus. I want to take you back to what you said. I understood you to present a line of reasoning that began with an attack on the concept of risk and being at risk. Therefore, the entitlement to the surplus is a trade-off for risk. You have challenged the element of risk. You proceeded to the offensive after defining the defensive position in that you suggested that this really was a plan for income generation. By taking excessive, if not hyper-conservative actuarial assumptions, you would create a greater surplus and, having preserved the right to remove the surplus, you would just create a tax.

Mr. Krause: Yes, an employment tax.

Senator Kroft: You would create an income-generating capacity through the plan. Is that what you would like to say?

Mr. Krause: I wish to elaborate on that. In 1992, I had an experience where I sat down with Treasury Board representatives and pension experts who were meeting with all NJC bargaining units. They informed us that, in 1992, the pension plan was in a very sorry state and that the actual surplus in the plan was just $2 billion. I asked them, "Really? Could you explain to me why it is in that position?" We then got into the analysis of it. Being an economist, I dug fairly deep. They had put into the analysis an assumption that government salary increases would be 2 per cent above the rate of inflation in perpetuity. If you put that assumption in, you can whittle down the surplus in no time. I soon began to realize that the government plays with these numbers and plays with actuarial estimates to suit its objectives. Its objective at that time was to get unions to agree to having an increase in plan contributions.

I do not look upon the Estimates as something sacred; I look upon them as something that the government uses to fulfil its objectives. I have had this sorry experience and I believe that there is a potential for abuse here as long as Treasury Board ministers are, first, not bound to use the actuarial estimates. They are certainly provided but they do not have to use them. As long as they determine plan costs, they can increase those estimates and, because government employees pay 40 per cent, their contributions can be increased indefinitely, as necessary. If, at a future date, the government should decide to change its estimates, it could potentially create a windfall surplus. That windfall surplus would be siphoned off automatically under the plan into general revenues. That potential is there in the legislation and there is no mechanism to prevent that from happening.

Senator Austin: When Mr. Bean was here, I asked him about the actuarial levels and whether they made a contribution to the discussion, and so on. He said that they were not asked to make a contribution but that they were generally satisfied that the 4 per cent actuarial calculation that was made was reasonable, based on the assumptions of the time.

I take it your position is a "worst-case worry" position. You have not seen any evidence of the finagling of actuarial numbers, have you?

Mr. Krause: In 1992, finagling was done. They told us that the surplus was about $2 billion in the public service account and now it is $16 billion. Clearly, they were quite far off in estimating the surplus. They were off because, at the time we had discussions with them -- and, as they were seeking to increase our payments into the plan -- they used an assumption that wages would increase at 2 per cent above the rate of inflation. When I questioned them on this, by saying, "Excuse me, gentlemen. Public service wages have been below the rate of inflation for 25 years. Now you are going to assume that they will be 2 per cent above." The argument fell apart; the discussion ended, and no action was taken.

I tend to think that these numbers can be used or abused. We have had concern over that particular experience. I am not saying that that categorizes in total our experience with the employer on this issue, but we have some concerns. Naturally, we provide neither the actuarial estimates nor the expertise. However, we have the ability to look at the underlying assumptions to analyze how realistic and reasonable they are. Through that process, obviously we can question it. My concern at present is that, even while the current legislation allows for actuarial estimates to go in, there is no obligation on the part of Treasury Board ministers to use those in determining what the plan costs are. They can go with different assumptions if they wish to do so.

Senator Austin: They would have to explain the situation to a lot of stakeholders.

Mr. Krause: There is no disclosure provision in the legislation, either. Remember that they are exempt from the Access to Information Act. If I, as a plan member, wanted to know about meetings of the board in which various assumptions were accepted, I would be precluded from getting that information.

Senator Meighen: Have you any concerns about the independence of the actuary or the actuarial assumptions?

Mr. Krause: No, but I have seen it in the past when an actuary disagrees with the Minister of Finance. That is a chilling observation.

The Chairman: Just so that you are clear, actuaries are not the only ones who tend to lose arguments.

Mr. Krause: I wish to ask Mr. Kelm to make a further comment.

Mr. Kelm, Pension Adviser, Social Science Employees Association: To reinforce the point about the government not necessarily following the assumptions of the actuary, if you take a look at the public accounts for the last six years or so, you will find a revelation by Treasury Board that for the last six years, on the public service pension accounts, they have used assumptions that are different from those that they get from the chief actuary.

Senator Austin: Yes, but they are not assumptions produced by other actuaries.

Mr. Kelm: They do not explain how they got them but they use assumptions that are different from those that they receive from the chief actuary in the actuarial reports of the public service pension plans.

Senator Austin: Are those reports a matter of record?

Mr. Kelm: Yes.

Senator Austin: Can you tell what deviations will take place if other elements are introduced by Treasury Board?

Mr. Kelm: That is right. Each year in the public accounts, Treasury Board will indicate one or two of their assumptions. They never give you all three, but they will give you one. If you compare them with the ones the chief actuary has given in his last actuarial report on the PSSA, the armed forces pension plan and the RCMP pension plan, they are different.

Senator Austin: Is it strange that you get an actuarial report that is based on a number of assumptions that are the kinds of assumptions that actuaries make and then you have two, three or four years of experience. I presume that it is not strange to make adjustments.

Mr. Kelm: As a matter of fact, actuaries do that because they must do these actuarial evaluations every three years. If, as a result of that three-year experience, they consider that what has happened in the last three years is not a blip but a change of something more significant, they will change their assumptions.

Treasury Board has been ignoring these assumptions consistently. If you look at the public accounts since 1994-95 until the present, they indicate the assumptions that they used, which are different from those presented by the chief actuary and the actuarial evaluations of the three public service pension plans.

Senator Austin: You said that you can get no further information from Treasury Board, did you not?

Mr. Kelm: They will give you only one or two of the assumptions.

Senator Oliver: Such as inflation?

Mr. Kelm: They will sometimes give you inflation, yes.

Senator Austin: In other words, they give you the obvious ones?

Mr. Kelm: Yes.

Mr. Krause: The current government started to withdraw surplus from the plan illegally in 1995, I believe. Since 1995-96, they have taken out $11.2 billion from the plan and we are looking at a further $30 billion. Obviously, one of the reasons that the legislation is being hurried is that the Minister of Finance would find it particularly embarrassing if a court found them to be in default of the pension act and ordered them to recredit the plan with the $11.2 billion. They would have to issue estimates for its deficit and debt estimates for the previous three years, which would show that the government had not achieved a zero deficit but, in fact, had deficits in each of the last two years.

Senator Austin: Your view is that the major purpose of the legislation is actually to extinguish the legal claims that you have commenced?

Mr. Krause: It is not the major purpose but it is one of the other things the government would like to achieve. We have two actions in court right now: One is for failure to credit the plan with the surplus as required by Parliament; and the other one is for illegal withdrawal of surplus moneys through amortization. Both those things violate the laws passed by Parliament. We have both actions before the court. The government, for its part, has tried to delay these actions on a technicality and recently the Court of Appeal has found their case wanting and has ordered trial for the matter. It will go to trial, but not quickly enough as far as we are concerned.


Senator Hervieux-Payette: I begin with the belief that no one has any ill will. The people who drafted the bill work for the government. These are employees who will one day receive benefits. This is what is confusing me the most.

However, the consultation process is very shocking at the present time. Are there benefits that employees have acquired and that will not be granted under Bill C-78? Will employees be deprived of the pension they would normally have received by virtue of their collective agreement?

Mr. Sénéchal: No one will be deprived of his or her pension except that as Mr. Bean mentioned earlier, there are surpluses belonging to unionized employees and retirees that could be used to improve the present plan. There is improvement, but it is minimal. In the document you have received, we talk about disability benefits. When a person retires for reasons of disability, he or she receives 70 per cent of his or her salary. These 70 per cent are the total of: a reduced pension, payments under the Régie de rentes du Québec and payments under Sun Life.

When this person reaches the age of 65, he or she continues with his or her reduced pension, and if the person had to retire for disability reasons before the age of 65, the QPP and CPP are reduced by 30 per cent. It is a reduction of $2,706 for the Régie de rentes du Québec if he or she continues to receive benefits adjusted by the .007 factor.

In Quebec, unions are presently negotiating in order that the reduction at age 65 be brought down to .005 instead of .007. You have the document showing how the QPP reduction will be absorbed.

Senator Hervieux-Payette: We are in the process of negotiating the way of redistributing the 30 million dollars in future collective agreements. What is paid out to employees at the present time is being respected. We are participating in the negotiation process relating to the surplus.

I do not understand why no one before today told us, with the collective agreements negotiated previously, what level had been reached. It was stated earlier that in 1992 it was around 12 or 16 billion dollars. I do not see why that would have been hidden; it is like the false unemployment insurance fund.

In order to fully understand and to be able to reach a decision, the question that must be asked is the following: what do we do with the 30 billion dollar surplus? You want to sit at the negotiation table to see how the people who have worked and who have contributed to this fund might share it out, is that correct?

Mr. Sénéchal: That is correct.

Senator Hervieux-Payette: Legislatively speaking, no worker will be deprived of his or her rights. Let us suppose that there was no fund; workers would receive what is provided for under their collective agreements in their retirement funds upon their retirement. They would not lose anything. What you want is to improve their fate by negotiating what is not already included in their working contracts.

Mr. Sénéchal: Bill C-76, for example, improves dental plan coverage by reducing the cost in a proportion of 60 to 40. If the government is saying it has no money, then how is it able to make these improvements? The government has this money and the unions are saying that this money must be shared between the retirees and the workers who are contributing.

Senator Hervieux-Payette: That is clear.


Mr. Krause: I do not think we have given the impression that we want to see $30 billion spent on some shared basis with us taking a portion and actually using that money and giving it to employees. All the unions -- and I would say I speak for all of them -- have asked for very prudent action with the moneys. They would like to see a portion of them used as seed money for new investments in the new plan. That is important.

Everyone has said that we should take care of our retired members who may be surviving widows and widowers to ensure that they are not living in poverty. It does not do anything for our members, but it does something for people in society whom we believe are disadvantaged and should be taken care of by the government. We want to see that happen.

We also say that taxpayers should benefit to some extent, too. We have been fair about that one. However, by no stretch of the imagination do we want to take a chunk of that money and spend it in an imprudent manner. We want to see that money protected and used to guard our seniors in the future, to ensure that we have sufficient surplus as needed by the plan in the future, and to ensure that we take prudent steps for setting up a new plan.

In this connection, our actions fall on the sides of being prudent and taking reasonable judgment. We believe that the employer's plan to take the money and spend it against the debt is very imprudent and places many things, including the new plan, as well as our seniors, at risk.


Senator Hervieux-Payette: It is a little bit as if we wanted to open up the collective agreements signed by you over the last four years saying that with the available funds we would be able to improve the situation of the people in place. Collective agreements have been signed since 1992 and the money has accumulated. These collective agreements could have included clauses that would have resolved this issue, but such was not the case. So here we are today with Bill C-78, a $30-billion surplus, and we are asking how, in the collective agreements, we might improve upon the existing plans?

Mr. Sénéchal: There have never been negotiations relating to the public sector pension plan, at least not while I was there. I have been retired for 10 years, but in the 25 years during which time I worked, I never negotiated a public service pension plan. Treasury Board does as it wishes.

Senator Meighen: In his brief, Mr. Bean deplored the fact that the government does not come under the Pension Benefits Standards Act. More particularly, section 9.2 deals with the reimbursement of the surplus and the method to be used. I take for granted that everyone here is in agreement with this formula and with the fact that if the government came under this act, and more particularly under this section, then part of the surplus problem would be resolved.


Mr. Krause: We are in agreement with Mr. Bean's position, which is certainly a position that all unions would support. We have an interesting observation on that position. The federal government has an obligation to set an example for other employers in Canada. It is certainly the largest employer and it administers the pension plans of other employers under the Pension Benefits Standards Act. We face the question of whether we wish to encourage the government to set an example that says, "Do as I say but not as I do." If this legislation is passed in the form that is before you, are you ready to hear your constituents and corporations in this country say, "Give us nothing more than you gave yourselves"? When we pass legislation, we open the floodgate to abuse.

Senator Meighen: I wanted to be satisfied that this formula suits you.

Mr. Krause: Absolutely.

Senator Callbeck: I have a short question addressed to Mr. Bennie on the brief from the Canadian Union of Postal Workers. You make reference in here to a letter that Canada Post sent out to its employees and you suggest that the corporation was being misleading. You say that the corporation's letter suggests that employee contribution rates will not increase between now and 2004. I understood that that was the case and that the rates were frozen at the current level from 2000 to 2003. Then there would be an increase if necessary. Why do you consider that to be misleading?

Mr. Bennie: The current premiums are 7.5 per cent of pensionable earnings. In 1999, 3.5 per cent will be for the Canada and Quebec Pension Plans and 4 per cent for federal superannuation. In 2000, the superannuation share will be frozen at 4 per cent until January 31, 2003. However, the CPP/QPP premiums will rise to 3.9 per cent in the year 2000, 4.3 per cent in 2001, 4.7 per cent in 2002, and 4.9 per cent in 2003. That means that in 2003 we will be paying pension contributions of 8.9 per cent, not 7.5 per cent. To say that the rates coming off our paycheques will be frozen until 2004 is misleading.

Senator Callbeck: I see what you are getting at.

The Chairman: Thank you. We appreciate you taking the time to be with us this evening.

Honourable senators, our next witnesses are representatives of the Professional Institute of the Public Service of Canada and the RCMP Association.

Gentlemen, I know that all of you have been in the room for the last couple of hours. In order to maximize the time we have for asking questions, rather than read your detailed briefs, perhaps you could just hit the highlights. I think that would be of particular benefit to the committee.

Senator Kroft: Mr. Chairman, further to your request for highlights, it would be helpful to me and to others if at this stage the witnesses could be asked to focus on points where they differ from what has gone on before. That would allow us to hone in on particular issues.

Mr. Steve Hindle, President, The Professional Institute of the Public Service of Canada: I appreciate the time constraint, Mr. Chairman, and I have been giving some thought to how to do this a little more quickly. I will not read the entire brief, but there are important points we would like to get on the record. I will start on page 4 with our first recommendation.

The institute calls upon the government to fulfil its long-standing promise to place the public service pension plans under a true system of joint management. The institute recommends that clause 90 of Bill C-78, which refers to a public service pension advisory committee that would advise and assist the minister, be amended as to read as follows:

There is established a Public Service Pension Management Board, comprised of employee, employer and pensioner representatives, which is responsible for designing the plan, its funding, managing the surplus or deficit, its administration, as well as for ensuring the funding level is adequate to deliver the pension benefits.

The next portion of the brief deals with complying with Canadian legislation. It is fairly brief and to the point.

In 1992, the then President of the Treasury Board stated that the government has every intention of complying with its own rules and that it is not taking advantage of its unique position as a non-taxing employer and the maker of the rules. On many occasions since then, the Honourable Marcel Massé has publicly stated that he was of the same view. We find such comments ironic, given that the government has continually delayed the process of bringing the PSSA in compliance with the Pension Benefits Standards Act. Bill C-78 does not make provision for compliance with the Pension Benefits Standards Act.

The Pension Benefits Standards Act of 1985, as amended by Bill S-3, currently applies to all federally regulated employment, except employment by Her Majesty in Right of Canada. Public service employees do not want to be a privileged or a disadvantaged class of Canadian society. They only want the same rights and privileges as other Canadian citizens.

Our recommendation is that the government modify the PSSA to clearly state that it is subject to the Pension Benefits Standards Act and to modify the PSSA to ensure such compliance. Modification should apply to the current PSSA and the PSSA as amended by Bill C-78. Furthermore, the Pension Benefits Standards Act should be modified to repeal sections 4(5) and 4(6), which exempt employment by Her Majesty in Right of Canada.

Dealing with the Income Tax Act, the proposed amendment to section 71(1) of the Superannuation Act provides that "the Governor in Council may...." As previously stated, federal public service employees do not seek preferential treatment. They simply want to be subject to the same laws as other Canadians. The institute recommends that section 71(1) of the PSSA be modified to state that:

The Governor in Council shall for the purpose of enabling the pension plan provided by this Act to conform with any provision of section 147.1 of the Income Tax Act and Part LXXXV of the Incomes Tax Regulations, make regulations.

I will not go through the entire preamble on the surplus, but will go right to the recommendation. The institute recommends that the PSSA be subject to the Pension Benefits Standards Act and, more specifically, that section 44 of the PSSA be amended to reflect the PBSA restrictions on the withdrawal of plan surplus by the employer.

The 1990s have been very difficult years for public service employees. We have seen our rights being eroded, one after the other. Parliament has adopted piece after piece of legislation to stifle the rights of public service employees. Here are some examples: a wage freeze for almost six years; suspension of binding arbitration, which is the only mechanism available to resolve an impasse at the bargaining table other than the strike route; back-to-work legislation coupled with legislated collective agreements.

This legislation will allow the government to commandeer the $30 billion surplus in the pension fund, which was generated in large part by prolonged wage freezes. The pension plan is an important aspect of the employee-employer relationship and part of the total compensation package for service performed.

For all of us, our pension fund is a sacred trust. A pension is the fruit of many years of labour and commitment to an employer. We ask that you reconsider this piece of legislation out of fairness to ensure that federal public service employees are subject to laws and enjoy the same protection as their fellow Canadian citizens.


Sergeant Gaétan Delisle, staff sergeant, Royal Canadian Mounted Police: Mr. Chairman, our brief deals with the issues that are of particular concern to the members of the RCMP. I am accompanied by Mike Niebudek, Division A sergeant, who represents the members of the association from Ontario. I am also the spokesperson of a group mainly made up of members of the Canadian Security Intelligence Service. They are governed by the RCMP Superannuation Act and they are all beneficiaries or contributors to the fund. They have no other way of submitting their views to you. We have communicated with them, since they are our brothers and sisters, and they authorized us to put to you their concerns regarding Bill C-78. These people are model employees of the government.

Mr. Chairman, has Bill C-71 been passed by the Senate?


The Chairman: It was not referred to this committee. It is my understanding that it is still in the Senate awaiting third reading.

Senator Oliver: I spoke on it today.

The Chairman: It has not received third reading.

Mr. Delisle: We appeared on that bill. In fact, we were the only witnesses to appear before the House of Commons on Bill C-71. It was rushed. Bill C-71 also touches on pension entitlements for the RCMP, the Armed Forces and the public service.

I am amazed that when we are talking about Bill C-78 we are talking about an investment venture. Yet, Bill C-78 refers to five years and four years and to different pension plans. According to my prior testimony, that was Bill C-71 in the making.

I am a little concerned about where to go between Bill C-71 and Bill C-78. Will both of them pass at the same time? We are very concerned when we see a piece of legislation, which is Bill C-78, that touches the benefits that we as members can be provided with. Yet, we are only talking now about an investment venue.

In all fairness, when you touch the RCMP Superannuation Act you have close to 90 pages that also refer to benefits to members. Therefore, we would never expect to be ready to talk about all those benefits when we received that piece of legislation the same day that we were appeared on Bill C-71.

As a matter of fact, we raised the question with members of Parliament. We said that Bill C-78 also makes reference to the Members of Parliament Retiring Allowances Act. They did not understand that that was the case. Therefore, we were amazed, to say the least, that all those pieces of legislation are being pressed upon us. They are very sensitive to our people.


As an example, in our brief, we talk about the pension fund surplus. All of the witnesses have mentioned that we come under a system whereby the global compensation dictates the working conditions of all federal employees and all members of the RCMP. I am happy that at the second reading stage, senators Tkachuk and Stratton mentioned that the official representative of the Royal Canadian Mounted Police, staff sergeant Kevin MacDougall, appointed by the Governor in Council to discuss RCMP member benefits with Treasury Board representatives, was not even consulted. The regulations of the Royal Canadian Mounted Police Act require that he be consulted. I am a typical example of someone who apparently did not follow the rules. I was suspended for a year and a half because of my being elected mayor of my small municipality and that, apparently, is not allowed by the regulations. However, that is apparently unconstitutional according to the court's ruling. If the rule that I disobeyed applies, then how can we denounce the attitude of Treasury Board that refuses to talk to people? Members of the RCMP are not unionized. We come under a special act, and Treasury Board applies regulations? We naturally find that unacceptable.

I have for 30 years been contributing to the RCMP pension fund. I have also been depositing money in a bank account for 30 years. My manager asks me what I want to do with that money. I have rights over that money. Over these 30 years, I have invested more than $90,000 in my pension fund. I believe that I am at least entitled to know what is going to happen to my money. I have given that money to Treasury Board and I have never been asked if I wanted to continue giving money. I was obligated to do so: as an employee, I come under the Royal Canadian Mounted Police Superannuation Act that stipulates that I must do so.

When I handed over that money, the Act dictated to Treasury Board representatives what they were supposed to do with it. That is set out in section 29. When they come and take my surplus, which is contrary to section 29, then I am flabbergasted. I am saying this not only for myself but also on behalf of the members we represent here today.

As members of the Canada's premier police force, we must participate in various activities so as to show that Canada is a national unified entity, that Canada has a transparent system, that Canada listens to the people and is capable of negotiating agreements that are fair with all parties.

We will probably be called upon to go to Kosovo. When we went to Serbia, to Haiti, to Rwanda, wasn't that the message we were conveying? Honourable senators, our purpose is to represent you. At least have the decency to treat us in the same way! What message do you want us to give to Canadians on behalf of the government.

Grant us this transparency. Change these regulations in order that there be real discussion. We are asking for fairness and justice. All of the rest of the text is well written and I believe you will be able to understand it.

Senator Hervieux-Payette: Indeed our witness' case is before our regulatory review committee. You make recommendations, but I must tell you that your order of priority seems a bit vague. Each and every one of you has made recommendations. If we were to make changes to Bill C-78, what three recommendations would you suggest in order for us to avoid generalized government employee unrest? If we meet 12 or 15 groups and some 175 amendments are suggested to us, I doubt that even if we are two very reasonable political parties we will be able to choose those that should be moved. I would like you to give me three major priorities. It is important for us to make the distinction between what might be desirable in the future and what we must do right now.

Mr. Délisle: If you look at the recommendations contained in the brief, I believe that they are very direct, especially those relating to the surplus. It is my understanding that Bill C-78 deals with the way in which the fund will be managed. I am taking for granted that there is a surplus in the fund. The various governments that have succeeded each other have given themselves laws so as to ensure that all citizens would be treated in the same way as far as retirement fund standards are concerned. In our brief, we also deal with the standards set out in the legislation concerning taxation of pension funds. Unfortunately, I haven't seen that in Bill C-78. I would say that that is a very grave concern of ours and that it should be rectified.


Mr. Hindle: Before I answer, I should like the opportunity to correct an oversight and introduce the gentleman on my right, Mr. Rudy Loiselle, the pension and benefits advisor for The Professional Institute of the Public Service of Canada. He is the one who lets me pretend I am a pension expert.

Our three priorities would be to subject the public service pension plan to the laws of the land; to leave the surplus alone, including the future surplus; and to create a management board. I think our recommendations are along those lines as well.

Senator Meighen: Could you clarify what you mean by "leaving the surplus alone"?

Mr. Hindle: It means: Do not allow the federal government to remove the current surplus from the plan over any period of time. Leave it where it is, and do not pass legislation that allows them to have access to future surpluses without the requirements under the Pension Benefits Standards Act.

The Chairman: Were you in the room when Daryl Bean was testifying?

Mr. Hindle: I caught the end of it.

The Chairman: I will summarize one of his points. He said that PSAC had negotiated with the government on a management structure for the plan which is not included in this bill but which they had agreed to. Had you agreed to that same management structure? Were you part of that negotiation? Were they done collectively or separately?

Mr. Hindle: They were done with a number of the unions. The Professional Institute of the Public Service of Canada was involved in the advisory committee report that was produced prior to the beginning of those negotiations.

The Chairman: So that is the process, then.

Let me get to my real question. Mr. Bean indicated that PSAC had agreed to a management structure. Had you also agreed to that management structure?

Mr. Hindle: As part of the union side and as the representatives of the people who are the members of the plan, we had come to the same agreement. It was done not bilaterally with the Treasury Board and individual unions but with a committee of unions.

Senator Meighen: I am still confused about the surplus. Had they agreed in any way, the same as Mr. Bean who had started discussion with respect to the division of the surplus?

Mr. Hindle: We had been involved in some discussions and had been privy to how the Treasury Board wished to divvy up the surplus and we knew of some of the items they were going to use the surplus for. We were part and parcel of the whole agreement, and we were all part of the failure at the end to come to an agreement on an equitable distribution of the current surplus.

Senator Meighen: Do you remain prepared to discuss a division of the surplus?

Mr. Hindle: Absolutely.

Mr. Delisle: If the question was addressed to both of us, I can tell you, without a shadow of a doubt, that we were never involved. There is no process in the RCMP to be involved in such discussions. Therefore, on our side, we have to say unequivocally that there was never any discussion whatsoever with us.

Senator Angus: Were you aware of these consultations and discussions?

Mr. Delisle: The only time we became aware was when we called people in the public service asking if there was something going on. They said, "Yes, there was an advisory committee." Then we went to Mr. MacDougall, the chair of the pay council, and asked if the council was aware of them. No, they were not. Even management was not aware, according to a letter we have. How can you have 18,000 uniformed employees and not let them know what is happening with their money?

Senator Oliver: In addition to your brief, we have a letter dated June 7 from Kevin MacDougall, the chair of the pay council, and he said that he is writing on behalf of 18,000 men and women of the RCMP. I want to ask one question about what he would like this committee to do, and then I want to ask you what I call a corporate governance question with respect to one of your recommendations regarding a pro rata basis of choosing directors.

Let me deal with the first question first. Mr. MacDougall says he would like this Senate committee to delay the implementation of the part of the bill that deals with the RCMP. The reason he says he would like us to do that is that there is not the legislative framework here to deal with future things that should be negotiated. Specifically, in item 15 of his letter, which was sent to all senators, he says:

At numerous times during debate at second reading, members of the government, including the President of the Treasury Board, indicated that even if the proposed legislation were passed the government remained open to the possibility that a jointly managed plan could be developed. As Bill C-78 stands, there is no legislative framework or provision which would allow for any such changes.

On that basis, he is asking that we take the RCMP provisions out of the bill while that can be negotiated. What can you say about that?

Mr. Delisle: This is the first that I hear of that. As you know, RCMP members do not have the right to unionize or associate, so we do not have that collective bargaining issue that any other employee in the public service enjoys.

I am interpreting what he is saying, but I do believe that Mr. MacDougall would like to have a separate plan for the RCMP. Does he go further in his correspondence to say that it should be a self-funded plan or should be like it is now? I am not sure. I am a little uneasy, because I do not know where your entonnoir is leading. If I knew that, perhaps I would be more assured about the meaning of it.

In our brief, we touch on an issue that is very important and should be addressed, but I do not believe I see it in Bill C-78. We have senior officers in the RCMP who receive large bonuses and merit pay that are not accountable, yet those funds are pensionable.

How can I, in all fairness, be subject to something that I may not actuarially put an amount of money on?

That is the reason we directed that they should have their own pension plan and do whatever they want with their bonus. That is fine, if they want to pay for the outcome of it.

The RCMP has two totally different categories of employee under the same pension plan. We have the regular uniformed members and the civilian members. Civilians are not entitled to the same pension plan under the same pension act; they cannot take early retirement. Honourable senators must also recognize that the majority of those civilian employees are women.

The RCMP population is mostly male. That means that there are many widows who are directly affected by pensionable benefits. Now when the pensioner dies, the widow receives only half of the pension. Perhaps, technically, that is systemic bias, because at one time only men were entitled to work in the RCMP.

As you can see, I should like to be able to answer "yes" and "no," but this is a large issue.

Senator Oliver: I shall turn now to the corporate governance issue. In your second recommendation, you say that Bill C-78 should be amended to reflect the number of directors on a pro rata basis equal to their share of contributions to the fund. Can you explain what that means in view of clause 9 of the bill?

Mr. Delisle: Senators who live in the Quebec area will know that the members of the Montreal Urban Community Police Service have a self-funded plan. They manage their fund. We are in total compensation compared with them. We have copies of their yearly disbursement to members and the surplus in that fund. It is totally open to everyone. They have a formula whereby if they disburse 40 per cent of the money, including the employer's share, they technically have a 40 per cent vote in the way that that money will be managed.

We put in that part about pro rata because contributions might fluctuate from one year to another. We can see that, with Bill C-78, contributors might have to pay more eventually. Perhaps at one point my portion should be higher than the government's. That would only be fair, because, the way I read it, there is a possibility that the government will take a leave at some point. If the government does not pay during that year and I am the only one to pay, then I have a concern.

Senator Oliver: Unless there is an accumulated surplus and you can have a holiday.

Mr. Delisle: Our recommendation is that the surplus is there to start the fund. That is my $90,000 that is in there.

Senator Oliver: Why did you say pro rata?

Mr. Delisle: We said pro rata because it exists elsewhere. That is the only reason. The main message in there is that there should be some representation by the employees.

Senator Angus: My first question relates to the legality of the government's right to the surplus. I know it is done pro rata elsewhere and I know you have proposals. However, do you seriously challenge their right to take it out?

Mr. Delisle: I do not know if you are aware, but we have joined in the action to recoup it.

Senator Angus: You heard Senator Kroft earlier and another committee member ask whether the witness had a written legal opinion. The witness did not have a written legal opinion, but had an oral opinion. Oral opinions tend to cover many things.

Mr. Delisle: Oral opinions may cover many things, but when you have been an investigator in the RCMP for a long number of years, you know that when it is written it may come back to haunt you.

However, the issue here is where do we start. We are a non-partisan party to the discussion. Nobody in the RCMP knows what is happening, not even the representatives who are named by Governor in Council, who are supposed to know. We are told nothing, and yet we know by what we see that the surplus is diminishing. What do you expect people to do?

Senator Angus: I take your point. I have listened to many witnesses. I have read this material. Many good points are made.

First of all, there is a high degree of frustration about the lack of consultation. You say you have a legal opinion. I am a lawyer and I realize that these legal matters can be argued in both ways. Often you take a lawsuit to create a forum for discussion of settlement.

As I am listening to you, I have sympathy for the points you are making and particularly for the GRC. You are talking about the fact that you were not involved in any of the prior consultation groups. You are not, perhaps, subject to the criticism or the accusations that the discussions were perhaps sabotaged. I read in The Ottawa Citizen of April 29 that it is alleged that the unions were deliberately trying to scuttle the bill. I do not go by what I read in the newspaper and I am interested in your point.

Assuming that this committee is persuaded by all of this excellent evidence that we are hearing today that some changes should be made, is there some area of common ground?

I am from a party that certainly does not like letters that find their way to Switzerland and places like that, so you and I have an understanding.

Mr. Delisle: I am not on that investigative team.

Senator Angus: We do not have the numbers here, but if there were a compromise for the future use of surpluses, my sense tells me that, perhaps, the government might be open to something like that. The $30 billion is one thing. It comes from all the different pensions involved. However, an undertaking could be made for letting this bill go as is, notwithstanding the lack of consultation.

I do not fully buy the idea that there was no consultation. Apparently there was none with the RCMP, based on your evidence. I think the consultation process did happen, but in a different way. It was not a consultation word for word on Bill C-78. There was consultation on this whole process concerning what we will do in the future.

There needs to be a rationalization of these pensions of the public service. There is a large surplus and the government wants to use it for the common benefit of the Canadian taxpayers. There may be an argument there, but the consultation process broke down for some reason. The government then decided to proceed unilaterally and the bill is there. A lot of it makes sense to me, but I am very persuaded by what you are saying.

This is half a loaf, second best or perhaps third best, but would you agree, if they were to say in the future that the surplus will involve a new deal and you will have total input, consultation and so on?

Mr. Delisle: In other words, serve your time now and, after that, apply for parole?

Senator Angus: We use legal language; you use jail language.

Mr. Delisle: I am being truthful. We have over 500 members of CSIS who have no right to speak either. We do not have the possibility of going over to Treasury Board. We are not recognized to do that. There is no law that says, "You will have to deal with them." We are awaiting a Supreme Court decision on my own case so that one day perhaps we will have that option of negotiation. Presently, however, what we have is what we get.

Senator Angus: That is why I am so glad that you have come here to this committee. This is a free country and you have the right to express your views.

Mr. Delisle: We were not allowed to do so in the other committee.

Senator Angus: I find that reprehensible, frankly, but that is water under the bridge.

Would you be able to serve your time and have parole later, or however you want to characterize it? That might be a reasonable way to go.


Mr. Delisle: It is a matter of recognizing that the money that I put into the RCMP superannuation fund as a contributor is my money, that I invested for myself and for my family. That is what is being attacked here, and not simply the amount of money. Are they going to be drawing on the benefits of my spouse and my children?

Senator Angus: But we are all poor. We do not draw on losses if our investments do not deliver.

Mr. Delisle: But the money that contributed to that surplus is my money and is their inheritance. I hope that that will not be forgotten. That is the fundamental aspect in the discussion. You are asking me nothing less than $30 billion this time! It is not bad; next time, it will be less. I simply wanted to say that. We are talking about $30 billion. Have there been three hearings of your committee?

Senator Angus: This is the second one.

Mr. Delisle: You are having a third meeting and afterwards, it is all over and it is the holidays!

Senator Angus: That depends. It is the chairman who is in charge.

Mr. Delisle: If you divide up the $30 billion by the number of minutes that the government has taken to study the breadth of the bill, you will get a result of about $200 million dollars a minute. Is that fair? Do the math. It is unbelievable.

Senator Angus: It is not the first time. You listened to me, I agree, I am very impressed by your arguments, but we are faced, you and us, from the opposition, with something that is not quite a fait accompli but we are able to read between the lines. Isn't that what is going to happen soon? So I am looking for any possible compromise that would satisfy you to some extent. This could show that in the future, given that you have a defined benefit plan, despite what will happen, you will get your pension, even if the fund is poorly managed and if it loses considerable amounts of money on the stock market. Even if the government has contributed to the retirement plan and you have contributed, it is the government that is responsible, whatever the circumstances.

That is why the other party has an argument. We are prepared, for example, if we are talking distribution, to agree to a compromise. I'm simply wondering what might be done. That is all.

Mr. Delisle: It will not be very long. I would like to answer the senator who talks of a compromise with which we would let $30 billion fly away. There have been predictions made regarding the cost of living and very uneven salary increases for civil servants and members of the RCMP. It would be totally unfair for our retirees. Today we have a surplus that has been paid by Canadian workers. You are saying that for those who are already retired, let us forget about the $30 billion, but down the road, we will take care of you. If you are asking me if I would support a promise of the government for 10 or 15 years in the future, then my answer is: Absolutely not.


Senator Austin: Perhaps I could ask a question that relates directly to what Mr. Loiselle said. Hypothetically, if the $30 billion stays in the fund, how would you administer it, appropriate it and distribute it? What would the management policy be with respect to those funds?


Mr. Mike Niebudek, Vice-President Royal Canadian Mounted Police Association: I am far from being an expert in the area of pension fund management. This is a question for the people hired by our representatives to manage these funds. Your question is extremely technical and I am not competent to answer it.

However, what was suggested by the group that preceded us was some form of management carried out by the employer and by employee representatives.


Mr. Hindle: I have a quick comment on two things that arose in the exchange. The first comment is on legal opinions. This has been asked before. I am curious that senators are so interested in whether or not we have a written legal opinion. Mr. Chairman, if you tell me that if I can produce a written legal opinion that indicates that the government is doing something illegal then that will make them stop, I will get you one tomorrow. However, I think senators should realize that, with or without a written legal opinion, the unions and certainly the other members of the pension plan are taking the government to court to let the courts determine whether or not what the government is doing is illegal. We are not leaving it up to one or two lawyers but to the nine, as we suspect there will be, who sit on the Supreme Court.

On the breakdown of consultation leading to a unilateral government action on legislation, I should like to remind honourable senators that regardless of agreement, any changes to the superannuation plan would require legislation.

The breakdown could be characterized as the unions and the members of the pension plan not being willing to pay the price of the surplus in order to get the pension management board and the government side not being willing to pay the price, again the surplus, of having us appear before you to support the legislation. I would characterize that as a fair rendition of where the breakdown occurred and why we are here arguing the way we are as opposed to supporting the government's legislation.

The Chairman: On the written legal opinion, none of us were hung up on it. Whether written or not, we understand that the government has legal opinions, which we have not seen and which they will not give us, that simply outline their position. We are trying to understand the essence of your legal argument. That is all.

Thank you for attending.

Honourable senators, our next witnesses are from the Federal Superannuates National Association and the Armed Forces Pensioners'/Annuitants' Association of Canada. Gentlemen, since you have been in the room, I would ask you to address those points that are unique to your case as opposed to just restating the position that you have heard from several other groups. I should like to maximize the amount of time available to us for questions.

Mr. Jean-Guy Soulière, Executive Director, Federal Superannuates National Association: Honourable senators, thank you for the opportunity to attend before you. I am sort of in a dilemma, if I could express it that way. For the past three hours, you have been listening mostly to the presentations and the points of view of employees and employees' representatives, with very little input from pensioners. It is very important that you understand the point of view of pensioners, even if we repeat what has been said.

I am also in a dilemma because, being a non-profit organization, we do not negotiate benefits, so we have to make our presentations to the employer. On a number of occasions we have had the support of unions in our endeavours, but we do not negotiate. It is very important that you understand where we are coming from.

Let me tell you a bit about our association first. I know that some of our points are repetition, but tomorrow retired people and seniors, the group that uses the computer in growing numbers, will be looking at the report from this committee. If 100,000 members of our association see my name and I have said only a few words, my job is in jeopardy. I will therefore ensure that you understand our position.

We represent over 100,000 members who are retired from the Public Service, the Canadian Forces, and the RCMP. We are the only association that represents the three elements.

We were probably the first group that understood that the consultation process in the House of Commons was an exercise in futility. When we realized that, immediately after our appearance in front of the board, we sent you a letter with a package containing information on where we were coming from, what our recommendations were and what our concerns were. I would hope that the record will show that you have all read that document and therefore I do not have to repeat it and can keep my job.

It is important that you understand the elements that we raised in these documents. I will not read the document that you have before you, but I will summarize some of the points.

We agree entirely with the three major recommendations that have been made that are not negotiable, even if we do not negotiate from our point of view.

On the matter of the surplus, we insist on an equitable distribution of the surplus. We agree with the recommendations on that front.

Our immediate past president served on the negotiating committee representing all superannuates and pensioners from the public service. We therefore participated in the negotiations. As an association, we strongly support the establishment of a joint management board consisting of representatives from the unions, the employer and, of course, the superannuates.

The third recommendation that we strongly support is that the government should practise what it preaches and do with the surplus and other parts of the management of a pension plan what the Pension Benefits Standards Act requires.

I also want to raise a few other points.

In relation to the surplus, in the House of Commons committee we challenged the government to prove that it took risks in the past and that it dealt with a surplus. We challenged them openly. We still have not been answered. In fact, Mr. Patterson, who is our expert in this area, shows by his research that at no time was there any risk taken by the government, and you can ask him questions on that. Indeed, there was almost no possibility of a deficit. We are quite secure with our research in this area. You must consider that point because that is a major argument that the government makes in wanting to distribute or dispose of the surplus.

I want you to know how angry 300,000 pensioners are with this action. It is dangerous from many dimensions. The first is what it is doing to their pension plan. You must realize that the average pension of a public servant under the three acts is below the poverty line. The average pension of a surviving spouse of a pensioner is about $9,000. How do you explain a surplus of $30 billion to people who are receiving a payment under the poverty line? How do you explain the fact that the government wants to use this for anything other than to give them a little bit of that surplus through additional benefits? Our documents indicate the type of benefits that we are proposing.

It is also dangerous because our members are very skeptical about this whole process, as they have said when we travelled across the country and consulted with them. When they read the report from the House of Commons committee about Bill C-78, it contained only a small paragraph or our presentation. Our members had spent money <#0107> and we have a very limited number of dollars in our budget <#0107> doing good research for a logical, objective, non-partisan presentation, and it was not even mentioned. That is the case with all of the other reports that were made. So, our members are becoming skeptical. When you have a growing number of people becoming skeptical about the process, it is very dangerous.

The third reason it is dangerous is that the government has used as an argument for the distribution of the surplus the assumption that, since it is not mentioned in an act, it therefore belongs to them. Any government using that argument can go ahead with any agenda it wants. You might not realize that, but we do. That was pointed out to us in some of the meetings that we have held across the country.

We have a lot of concern about Bill C-78. It should not be submitted the way it is or accepted the way it is. Given the government's attitude in the House of Commons, we have to be a bit skeptical about the process here today.

There are many witnesses; I do not know how many. We are asked to limit our remarks and we cannot express everything we want. That is fine, but we must be a little skeptical about where all of this will lead.

Let me conclude these remarks. I hope you will take the time -- or at least half the time or even one-third of the time -- that we put into writing it to read it. It contains some very good research. We give you an example of a technical flaw in the bill itself.

Senator Oliver: Is that section 50?

Mr. Soulière: Yes. We found that one after only a brief analysis. We were not given the time, nor were you, nor has anyone been given the time to look at this 200-page document. We hope at least to communicate the fact that it is not acceptable that such a technical document could be passed so quickly, without further analysis. We will be very pleased if we can achieve that much.

We make a number of recommendations in all of our documents. Please take the time to examine them. We addressed a letter to you on May 5. It is not that you have not had time to read them. It contains our basic philosophy, premises and recommendations and where we are coming from.

Mr. E.W. Halayko, National Chairman, Armed Forces Pensioners'/Annuitants' Association of Canada: Honourable senators, I am accompanied by Ms Fiona Campbell, our legal adviser. We are also participating in the court case mentioned by Mr. Krause.

As you are aware, honourable senators, there must be differences between associations. Otherwise, we would all be Liberals or all Progressive Conservatives or of all one party. There are variations. Therefore, our association represents the military retirees only. Of the 96,000 potential members, we have 26,000 registered around the world. Amongst those 26,000 are a few people who are actually serving.

I mention that fact because when this bill was introduced, our first notification, notwithstanding the fact that apparently there were negotiations going on, was on April 1. I personally was made aware of it a little earlier. When I appeared before the House of Commons Standing Committee on National Defence and Veterans Affairs I alluded to this going on. The chairman of that committee took me to task for quoting a rumour. I told him I had information from one of our moles within the military that something is going on and the government is planning to do away with or make major changes in the Superannuation Act.

We did not realize the horrendous change that would amount to what we consider to be the theft of our deferred pay or retirement savings from the military to the tune of over $12 billion -- that is our portion -- after already having taken $4.6 billion. That is why we are in the process, along with others, of suing the Crown to get that money back and to establish who owns it.

You have heard all the arguments from others as to what should be done with the surplus. This is our view. Fifty-five years ago this week we landed in France. I did not personally; I was in Sicily, one of the "D-Day Dodgers" as they called us. We were there to return democracy to France and to Europe. Ten years ago, democracy was destroyed in China by gunfire and tanks. On May 25, 1999, democracy in Canada was killed by nothing but closure, closure, closure. A bill went through without any proper consultation. It is a 200-page document that is so complex that even our lawyers have not had a good chance to analyze it.

Now you are being asked to send this back to the House of Commons, probably tomorrow or the next day or certainly in the very near future. If no changes are made, we will have lost all our retirement savings. Do not forget; we paid into that fund. I paid 30 years' worth into it. A lot of it is mine.

The government is sending troops into a war zone. I was told by someone not to use this expression but I must use it. Some of them will be coming back in body bags. Let us face it; they are going into a war zone.

In the meantime, the government that they are going over there to represent or to defend is effectively stealing their retirement savings while their wives are at home, in some cases going to food banks. From limited research -- you will hear more of this from another witness -- we found out that there are food banks in at least four major cities. Camp Shilo has one right in the camp, as does the one in Winnipeg.

There is definitely something wrong with the picture when our military families have to resort to food banks while our soldiers are overseas serving their country, all the while losing part of their survivor benefits and their retirement savings. If I had known then what I know now, nobody would have gotten me into Europe in 1939 where I stayed for five and a half years to come back to have my government take my savings away from me. This is without any consultation. We were not consulted. The first time that we actually saw something was when the bill was introduced on April 15.

That is the not way to treat Canadian citizens, particularly those of us who actually fought and bled, nor those who are in the process of possibly fighting and bleeding. Why should we be treated so shabbily? There is something wrong.

If you look at the numbers, you will see that we are being hit much harder, percentage-wise, than any other retirees. We are being hit 1.6 times the rate of anyone else. Why? What have we done to deserve that?

The last time I appeared before Parliament on an issue was when our people lost all their entitlement to employment insurance. It took a suicide and a march on the hill with a piper and the nettles and all the rest of it just to tell the government that they had done something wrong. That mistake was fixed.

Why must we come and march on Parliament Hill against the government that we have sworn to defend? Actually, we swear to defend Canada, but the people in Parliament are the ones who control us.

This process has been going on almost two months in actual fact. We have something like 58,000 people in uniform. We have 70 generals and not one of them, to my knowledge, has even made a peep about this.

When there was a major overhaul of the military, way back in the days of Mr. Hellyer, one admiral and several generals retired over a similarly major issue. In this case, not only are the retirees losing their money, but the active military themselves may have to pay more in the year 2003. Yet here is a surplus. Why should they have to pay more when there is a surplus in their savings? That does not make sense.

Also, why is there the rush to get this through?

It is interesting to note that other pension reform bills dealt with senators, judges, prime ministers and governors general. However, it seems that all of those people have been deliberately left out of this bill because, if they were included, you would be telling Parliament that this bill is not on.

We will probably end up in the courts. There will be no conflict for the judges because they are not affected. Therefore, they may, unfortunately, favour the government action. I am only speculating, not making accusations. However, it seems very odd that all previous pension reform bills included a number of other groups. This time the military, the Mounties, the civil servants and the postal workers were chosen.

In Canada, people largely see civil servants as fat cats. Because of that, there has been very little media attention. Yet, I was a guest on an open-line talk show a couple of weeks ago. I was scheduled to be on for only 15 minutes but ended up being on for 45 minutes. We received calls from all across Canada, many from RCMP members complaining about this bill.

What can the military do? As was mentioned, they are not unionized. If they complain, there could be mutiny. The RCMP are in the same boat. The military has served this country honourably in uniform, and the Mounties serve and protect. Yet, we are being penalized.

I have three recommendations. First, I suggest that this bill be sent back, that we start all over again and do a proper job of pension reform, negotiating with all stakeholders, as was promised under Bill C-55.

To my knowledge, no one in the military has been consulted. We retirees were certainly not invited to consult. We were not even informed. When we did ask for information, we were told that it is secret. What is secret about our superannuation? There is nothing secret about it.

There are a few things that must be sorted out. The first is compensation for the six-and-five losses, as has already been mentioned. There must be immediate indexation upon release and increase of survivors' benefits to at least 60 per cent.

It is interesting to note that the Members of Parliament Retiring Allowances Act does not talk about 60 per cent. It talks about three fifths. However, if you divide five into three, you get 60.

We must eliminate the age discrimination on marriages and provide a survivors benefit. We have already gone to the courts on that point. Unfortunately, the Supreme Court did not have time to review that so it stayed at the Federal Court of Appeal. We were ruled against but we are still trying to get this changed.

Many people serve in the military and do not get married until they are 60. At that age, they want some companionship. There are such marriages on record that have lasted 25 years. Those people are well into their 80s, but there is no survivor benefit for the widow. In a couple of cases, widows were two or three years older than their husbands. They are not gold diggers, as the government described them in a court case, and these are not deathbed romances. Occasionally, a younger woman will marry an older man, but it is unusual.

When a person has paid 7.5 per cent of his pay toward superannuation, he should be allowed to marry at any time with a benefit going to his spouse. The Canada Pension Plan has no restriction on age, nor does the Ontario Municipal Employees Retirement System.

It was said in the court case that this resulted from the American Civil War. Well, Canada did not fight in the American civil war. Why are we being treated this way?

Senator Kelleher: Mr. Chairman, I should like to address my questions to Mr. Soulière. There is something I want to establish on the record, if possible, in anticipation of our discussions tomorrow with the minister.

As I understand it, in the bill that I call the bill of rights for private sector employees, which deals with their pension plans, the government set out rights that are acquired by employees with respect to their pension plans. They get a say in surplus disposal and things of that nature. I think you are familiar with that. Then the government very kindly exempted itself. It said, "No, it is not necessary for us to be there." One justification for the government doing that is that the government plan is guaranteed; employees do not have to worry about whether they will get paid.

As I understand it, that is not exactly true, because the government reserves unto itself, since it is the government, the right to amend legislation or regulations. As I understand it, in 1982-83 the government unilaterally rolled back pension indexing. I believe that was known as six-and-five. Am I correct in that?

Mr. Keith Patterson, Deputy Executive Director (Research), Federal Superannuates National Association: With Bill C-133 in 1982, the government did reduce pension indexing to 6.5 per cent in 1983 and 5.5 per cent in 1984 when inflation in those years was 11.5 per cent and 7 per cent. For those in receipt of a pension at that time, that reduction resulted in their pensions being reduced by 7 per cent each subsequent year.

The total amount of loss was from $50,000 to $100,000, depending on the size of the pension. A huge amount of money has been taken away, even though the Supplementary Retirement Benefits Act guaranteed indexation. That was done unilaterally and without discussion.

Senator Kelleher: Has the government ever attempted to correct the inequity that occurred at that time? Has it ever tried to reimburse or to increase benefits to take care of that loss?

Mr. Patterson: No. They have always refused to consider it.

Mr. Soulière: Correct me if I am wrong, Mr. Patterson, but they did correct the wrong to a certain extent for employees when they were brought to court by, I believe, The Professional Institute of the Public Service of Canada. They worked out a deal whereby the dental plan, which at that time was subsidized 60 per cent, is now provided free of charge. For years, we have submitted to the government that they owe the same to pensioners. Nothing has been done.

Senator Kelleher: Could that reimbursement not be taken care of out of this pension surplus?

Mr. Soulière: Yes, sir, it could. I do not know how many times we have suggested that. It is one of our resolutions. It is one of the recommendations that we always put forward in our meetings with the Treasury Board.

Mr. Halayko: That is one of our recommendations as well. The Ontario provincial pension plans are kept at 6 per cent. When there was this massive inflation, everyone stayed at 6 per cent. When we got the six-and-five, they stayed at 6 per cent. However, for the following years, they kept receiving 6 per cent increases in their superannuation plans until they caught up to what they lost. It is now down to whatever the annual indexing is. They did get it. However, those of us who retired prior to 1970 were the losers. That is part of that surplus.

Senator Callbeck: I have a few questions on the brief of the Federal Superannuates National Association. In it you talk about an appeal system.

Mr. Soulière: That is right.

Senator Callbeck: I do not think any other witness brought that matter up.

Mr. Soulière: These are improvements that we should like to see in a revised Bill C-78. Currently, there are few recourse mechanisms under any of the three plans for an individual who feels that they have been wronged. There are cases in which people have been wronged in terms of the amount of pension they should be receiving. There is no appeal. It goes directly to the minister and the minister can make a decision with whatever information is provided to him or her.

This would be a very valuable provision to have in the new pension deal. It would probably report through the pension advisory committees or the joint management board.

Senator Callbeck: You also mentioned pensioner representatives on the pension advisory committees. How many retired people are on that board now?

Mr. Soulière: On the public service superannuation committee, there is one representative for all pensioners. On the Canadian Forces superannuation advisory committee there is one individual named by the Minister of National Defence who represents all retired personnel. That is inadequate and does not reflect the proportion of people in the plan.

Senator Callbeck: You mention that more power must be given to the nominating committee. What do you mean by that?

Mr. Soulière: Now all they do is suggest names. As was pointed out by a previous witness, the minister can accept or refuse any name from the list.

Senator Callbeck: That was clarified, though.

Mr. Soulière: I did not say that he can select from outside the list. For example, if the minister receives from the nominating committee the names of 15 people who represent the interests of employers and the names of 15 people who represent the interests of employees, there is no guidance provided to the minister as to how many of the employees' representatives he should select. He could select 15 individuals who have the mindset of the government of the day, as opposed to having an equitable distribution of the members. That is why we say more power should be given to the nominating committee.

Senator Callbeck: What should they be able to do?

Mr. Soulière: The legislation could be changed to say that they will represent a number of candidates and the minister is obliged to take a certain number of the nominees from that committee. They should also oversee the nominating process. It should not be a one-time process; it should be an ongoing process.

Senator Austin: I want to take advantage of your presence, Mr. Patterson. Currently, what is the employee contribution level in percentage terms? It will rise to 40 per cent under this legislation.

Mr. Patterson: Currently, it is around 33 per cent.

Senator Austin: How does that compare with the contribution level under the CPP program? Are public servants today contributing less or about the same amount to their pensions as people who are contributing to the Canada Pension Plan?

Mr. Patterson: That is a difficult question to answer because they are different plans. Under the CPP, the employer contributes 50 per cent and the employee contributes 50 per cent.

Senator Austin: That would rise from about 30 per cent today to 40 per cent under Bill C-78; is that correct?

Mr. Patterson: Yes, it would, eventually.

Mr. Halayko: In terms of the public service, one level was established because they could work to age 65. With the military and the RCMP, other levels were established. At one time, members of the RCMP were kicked out at age 55.

With the military, they started to kick them out at age 42, 43, 44, depending on age and rank. Therefore, in order to maintain this basis of 2 per cent per year, the military got a larger proportion, which was paid for by the employer, than was the case with the civil servants. If you want to level all the percentages out, you will hit 35 per cent and 40 per cent. However, there is an imbalance in the percentages by virtue of the three different acts.

Mr. Patterson: The reason the Canadian Forces and the RCMP cost more to the government, if I may use that term, is because the government uses the early retirement provisions in those acts to manage its personnel. Therefore, it costs more. In those acts, the Canadian Forces and the RCMP are paying individually less than 30 per cent of the total costs. However, a big chunk of that cost is for the objective of the government itself, not for the benefit of the members.

Senator Austin: I appreciate that. As you have all said, the legislation does not take into account any additional advantages for those who have already retired and are beneficiaries. I wondered whether the Public Service Alliance of Canada took a position on behalf of your organizations during the negotiations in 1998.

Mr. Soulière: As I pointed out, the committee had one pensioner representing all superannuates. That was Mr. Claude Edwards. He had an equal voice and participated equally. Mr. Keith Patterson was a technical adviser to Mr. Edwards on those negotiations.

Senator Austin: I should like to ask the question directly and receive a straight answer. Did PSAC take up your cause that the pension benefits of those who had already retired should be enriched out of the surplus? Did they do that?

Mr. Soulière: Yes.

Senator Austin: Did they have a formula that they were advancing?

Mr. Soulière: It was not a formula, but they supported the position being put forward by Mr. Edwards on the distribution of the surplus.

Senator Austin: Thank you.

The Chairman: Thank you, gentlemen. We appreciate you being here this evening.

Senators, our next witnesses are from REAL Women of Canada, the Evangelical Fellowship of Canada and the Focus on the Family Association. May I ask the witnesses again to make your points as succinctly as possible so that we will have lots of time for questions.

Ms Landolt, you have a very comprehensive brief, which I have read. Please proceed.

Ms C. Gwendolyn Landolt, National Vice-President, REAL Women of Canada: We are a women's group that supports equality for women, although we also focus on the family and its importance. We come here to raise two issues. One is that some of our members are civil servants, some are in the military and some of them are wives of civil servants, and we regard the fact that $30 billion dollars is going to be taken away from civil servant pensioners as a human rights issue.

Our view is that the $30 billion should not be used by the government's board of directors appointed by the minister, the nominating committee appointed by the minister, the president of the Treasury Board and the Solicitor General and the Minister of National Defence. This is a closed shop for the government to use the $30 billion. That money should have gone back to the ordinary people who made those contributions to be used in either reducing the costs of their contributions or raising the amount of money that they are receiving under the pension scheme.

One of the previous speakers mentioned the difficulties faced by a civil servant who has a salary of $31,000 to $32,000 annually. That person will receive only around a $9,000 pension, and the survivor benefits are only half of that amount for the widow or widower. This action should be rethought because it is a very dangerous precedent, not only with regard to employees, but also concerning what the federal government can do. It means that private employers will already be doing it.

I understand that in the Province of Quebec this happened to some employees in the past. The Singer Company took the money from the pensioners and used it for its own purposes. It seems to us that this is a major change when an employer can take any surplus. We must remember that most of the surplus came from a wage freeze on the public servants and the armed services.

In that regard, we have major concerns about the precedent that is being set and about the implications for the ordinary men and women working as public servants and in the armed services and for their wives and children. We want to speak for the families who will be cut off when this $30 billion goes into the coffers of the government.

Our second concern deals with the issue of who is considered a survivor. Traditionally, the legally married widow would be the survivor. However, I understand that in proposed new subsection 25(4), in clause 75 of the bill, the widow has been replaced by a person living with the contributor for at least one year in a relationship of a conjugal nature. But the expression "relationship of a conjugal nature" has not been defined. As a lawyer, I have tried to find some legal reference in the courts, but there has never been a court definition of "conjugal relationship." I looked in Black's Law Dictionary, which refers to a man or woman living in a married relationship. However, suddenly proposed subsection 25(4) refers to people living in a relationship of a conjugal nature. The ordinary dictionary meaning would certainly be interpreted, as is the case right now, as a man and woman who are legally married.

We understand, however, that that is not what the government intends by the expression "a relationship of a conjugal nature." They look to the Rosenberg case, which was decided in November 1998 by the Ontario Court of Appeal. In that case, Madam Justice Abella uniquely decided that under the Income Tax Act "conjugal relationship" refers to homosexual and lesbian couples. That, however is a decision of a lower provincial court and therefore is not binding on the federal government.

The first question we have to ask is why the government uses "conjugal relationship" when it really does refer -- certainly in the dictionary and we do not have a legal interpretation -- to a man and woman of the opposite sex. The second question is why is the government relying on the decision of a lower court that does not bind it?

The third point we should like to raise is why this conjugal relationship suddenly appears in this very complex and difficult piece of legislation that deals with $30 billion and the superannuation of employees. Why do we suddenly find, tucked away, this revolutionary concern? This is the first time, legislatively speaking, that we have ever given same-sex benefits under any federal legislation.

We are asking: Why was "conjugal relationship, whatever it means, tucked away? Why was this never properly dealt with? Why do those who are involved in a sexual relationship get benefits and those who are not sexually involved receive no benefits? What does that have to do with survivors? You either have a traditional family as understood by the dictionary in terms of the conjugal relationship between a man and a woman, or you open the definition to include other people, like a mother, a daughter, or two friends living together.Why are we saying that because you have a homoerotic relationship or another kind of sexual relationship you are entitled to benefits? Do we not think that other people in a family setting -- sisters, brothers or even two friends who committed to each other and who are interdependent -- are also valuable? Should not the definition, if you are going to open it to include sexually involved individuals, include others as well?

In this regard, we should like to bring to your attention that the Supreme Court of Canada in a decision handed down on May 20, 1999, dealt with the issue of same-sex benefits. They were dealing with only one particular section of the Ontario Family Law Act, but the court said, "We will not deal with whether there is a requirement to open it up to everyone." However, Mr. Justice Gonthier said, "Yes, it is. By your reasoning, it must be opened up to everyone."

The court referred to an Ontario decision, Molodowich v. Penttinen, which is referred to at the top of page 6 in my brief. In M. v. H., the Supreme Court of Canada quoted the Molodowich case with approval and said that "conjugal relationships" could mean many things. They said they were not involved in it and were not going to make a decision, but the court said that there does not necessarily have to be a sexual component. That is obiter dictum. Mr. Justice Cory and Mr. Justice Iacobucci, who wrote the majority decision together, clearly implied that survivor benefits must be broadened.

What has happened? One, the legislation has dealt with conjugal relationships and no one knows what it means. Two, we look to obiter dictum only, which came up in this case, and we do not really know what it means because it is not the ratio, not the majority decision. Three, these cases indicate that the government will be facing enormous court challenges and that the government will have great difficulty trying to deal with the costs involved.

The government has stepped into a hornet's nest knowing that there are numerous court challenges ahead, but what will be the cost to the taxpayer? That has not been worked out. No one has thought this thing through. It was something obviously slipped in without any in-depth thought or consideration.

It is our view as a women's organization that at this time the only thing one can do is to give survivor benefits only in the situation of a legally married couple of the opposite sex. This has been the tradition historically since Hyde v. Hyde, a leading case in 1866 that defined a legally married couple. As well, it is part of the religious tradition of all the major religions of the world. It is part of all the UN conventions to define what is a spouse and family.

All of a sudden, the government is trying to put something in that is totally contrary to UN policies and to all the rest. We have had legal definitions of "spouse," and those must be maintained.

We suggest that the government is bound by a May 1995 Supreme Court of Canada decision in Egan v. Canada, where the court stated that it is perfectly acceptable and it is not discriminatory to give benefits to married couples. They have an important social role in that they are the only ones who have the capacity to give birth to and raise children. For that reason, society has always given them special benefits. That is still binding. M. v. H. did not change that.

The decision in Egan v. Canada states that it is not discrimination to eliminate benefits to other people, but if you are going to give them to other people, they must be given to everyone, not just those who are sexually involved.

Suddenly, we have a whole new world out there that no one seems to have looked at or examined. Our recommendation is that the government should remove the definition under proposed subsection 25(4) that changes "widow" to "survivor," which could mean anything at this point. It would not be fiscally responsible or socially responsible to do otherwise.

Mr. Bruce Clemenger, Director of National Affairs, Evangelical Fellowship of Canada: I appreciate the committee fitting me in on short notice. Most of my comments focus on the latter points that Ms Landolt made, so I will be brief.

Conjugality was used as a criteria for extending benefits and obligations to opposite-sex couples because the heterosexual conjugal relationships are, among all other forms of domestic partnerships, unique in their ability to procreate children.

When considering benefits to domestic relationships other than the spousal heterosexual relationship, is sexual activity an appropriate criterion on which to extend benefits? What about other long-term relationships of financial and emotional interdependency that do not involve sexual activity?

The new definition in Bill C-78 would include roommates who are sexually active or intimate once in the course of a year-long cohabitation, and yet exclude an unmarried adult brother and sister or two adult sisters who have lived together in a household for many years.

Our concern is that if Parliament moves to extend benefits beyond the spousal relationship to other types of relationships, it should consider the original rationale for giving the benefit and determine on what basis non-spousal relationships should qualify. This type of broad discussion should take place before changes are made in a piecemeal fashion. We recommend that the criteria used to extend benefits in Bill C-78 be reconsidered.

Mr. James A. Sclater, Director of Public Policy, Focus on the Family (Canada) Association: I am privileged to be here to have a chance to weigh in briefly on the social aspect of this bill. I do not come here as an expert on tax or pensions, but I represent many Canadians who listen to our programs and understand that we support marriage and family.

We have real concerns with this bill and the trend in our society. We seem to be in the midst of a great social experiment, and Bill C-78 is another example of the experimentation that seems to be going on at various levels. Part of our challenge would be for government to provide leadership.

Government seems to quote the courts and say that the trend is being created by them, but we have heard references in the last couple of days in Ottawa to the effect that the courts have asked for guidance and that they want some leadership from government.

To go to the bottom line of our recommendations, we suggest that this bill be removed and be reconsidered. In reading it as a virtual layman, I see some real flaws in it. For instance, I found a provision stating that for married people to have a survivor designated, there must be proof of health. There must be proof of health on the part of the contributor that he will survive for a year before he can designate this. I do not find that proof in regard to this new category. I just stumbled on to that. I do not know if that is a real flaw, but it certainly looks like one to me.

I concur with what others have said about there being a concern over extending benefits in the pension realm to someone on a conjugal basis. It has been well said by others. It was said on the hill today and in the House of Commons yesterday that this is something that cannot be proven. In fact, the hope is that the government does not ever make an attempt at it. If they do not make an attempt at proving conjugality, then why in the world is this word in there? I would venture to say that it is absolutely meaningless because nothing could ever be stated to prove conjugality.

Ms Landolt referred to there being no legal definition. I have referred to four or five dictionaries myself, and the definition I put in the appendix of my brief simply says that "conjugal" comes from the Middle French or the Latin "conjux," meaning husband or wife. It refers definitely, specifically and only to marriage. I see conjugality, if it has to do with marriage, as an another encroachment on that category.

Focus on the Family believes that marriage is the fundamental building block of our society. Unless this Senate committee, the Senate as a whole and Parliament as a whole wish to engage again in another social experiment to change the fundamental building blocks of society, then this bill needs to be rejected on those grounds.

My bottom line is this: Reject the bill. Do not yield to the ideology of the day. The ideology of the courts will change. The question is whether government will give leadership. We look properly to the institution of the Supreme Court and other courts with respect and assume that they are operating out of ideology. Our president has said that we are now determining the basis of the family on ideology, not biology, and that is social experimentation.

I would finish by saying that we must ensure that economic dependence is the only criterion on which pension benefits are based when you move beyond marriage.

Senator Tkachuk: I asked certain questions of the government witnesses on this issue yesterday. It seemed to me that they were telling us that even though they used the term "conjugal relationship," it meant sexual relationship. They said that there were all of these things such as having a home, sharing a bank account, how long people lived together. I asked whether people who did all of those things excluding the sexual relationship would be able to benefit from a survivor benefit in the pension plan, and they said, "No."

That bothers me, because it seems the government wants to change the institution of marriage, which I think this little amendment does. They are saying that same-sex couples who live together for one year and have sex are married. It is a common-law relationship, because those are the only qualifications for a spousal benefit. It has nothing to do with anything else.

If society wants to have same-sex benefits, I do not mind that as long as they say it. It should be said up front, and it should be done openly. It should be discussed in Parliament and passed. It does not matter to me.

The issues that you have raised here, we have been told, are in reaction to what the Supreme Court has ruled -- I think they say Supreme Court, but perhaps it is another court. That is why this particular clause is there in this huge bill. Is that true?

Ms Landolt: In the Ontario Court of Appeal, in the Rosenberg case, Madam Justice Abella looked at the Income Tax Act. It says that you are entitled to survivor benefits if you are living in a conjugal relationship.

She arbitrarily and without even looking at the dictionary said that that includes same-sex couples. This lower court decision is arbitrary at best as she ignored the Egan v. Canada decision of the Supreme Court. She said it was wrongly decided.I was there and heard her say that. I had never before heard of an Ontario appeal court judge saying that a Supreme Court decision was wrongly decided. That was a rather shocking position. She said that she did not have to pay attention because it was wrongly decided. She said that "conjugal" includes same sex. It was arbitrary and not based on the normal understanding. Nowhere else had she ever picked that out.

The government is saying that they are bound by that lower court decision. They are not bound by that. They are bound by Egan v. Canada, which is a Supreme Court decision. That decision was that marriage is traditionally protected because of the capacity and the very important role married couples of the opposite sex play in creating and raising the next generation. It is not discrimination.

Senator Tkachuk: I agree.

Ms Landolt: It is not discrimination to exclude others from family benefits. They are relying on the decision of a lower court judge as an excuse, if I could be so rude as to say so, to bring in same-sex benefits. M. v. H., a Supreme Court decision last May, said that the decision that it is not discrimination to give survivor benefits to a traditionally married couple still stands in effect. That is the ruling

M. v. H. did say that under a particular provision of the Ontario act, common law could be extended to same sex, but only because the purpose of that particular section was to keep people off the welfare rolls. That was the raison d'être. That was a bit absurd, but it is what they said. It did not apply holus-bolus. The Supreme Court said that they were not prepared to deal with other legislation. They claimed that they do not know about marriage and will not say. However, the duties and obligations of marriage have nothing to do with this. They were dealing only with this one tiny section of the Ontario legislation for the purpose of preventing dependent couples from going on welfare.

That does not apply at all to this particular situation. If the government says that they have to do that, it is simply ludicrous under law. They are not bound. But it seems to be a social policy. They want to do it. They are using this term "conjugal relationship," which only Madam Justice Abella has said means same sex. Nobody else has said that, and it is not the ordinary meaning. It seems that it is an excuse, rather than a necessity that they are bringing in this amendment.

Senator Kroft: You are concerned about many aspects of the bill, but there is obviously a central issue in the minds of all three of the groups on this panel.

I was sort of with the first two speakers at the start as you talked about the need to consider mutually dependent relationships and so on. But as I listened, it seemed to me that in all three of your cases, your focus then narrowed to a much more what I might call traditional position.

I should like to put a question to you, and this is not hypothetical, because it may be something that we will have to deal with: If we could come up with a phrase or a word, with a definition that truly encompassed mutually dependent relationships, that did not exclude homosexual relationships, would you find that acceptable?

Ms Landolt: I guess I was misunderstood. I said that the only thing you can rely on is the married couple. If you want to extend benefits to homosexual and lesbian couples, then you cannot cut out other people.

Senator Kroft: If you had a definition that successfully defined a mutually dependent relationship, would that be acceptable to you?

Ms Landolt: If you could define that, I think that could be acceptable. But, before we do that, we better find out what it will cost the taxpayers.

Senator Kroft: I understand. But you have narrowed your focus to a very specific area. I want to try and stay on that specific area. Would the fact that the definition of a mutually dependent relationship would include a homosexual relationship exclude the possibility of that definition for you?

Ms Landolt: If you would include everyone who is dependent, and it could be two friends living together as friends without sex, that would be acceptable.

Mr. Sclater: I should like to answer briefly for Focus on the Family. We would not in any way want to cut out gays and lesbians or any other people who may or may not have sex. What we would want to do is preserve the concept of marriage. I talked about social experimentation, and I see the whole trend moving the concept of marriage.

Senator Kroft: In all fairness, we are talking about a working definition for a specific piece of legislation. We are not redefining society. I asked you a specific question, and I am interested in an answer.

Mr. Sclater: The problem is, as you have identified, with the word "conjugality."

Senator Kroft: I did not use the word "conjugality." My question is: If we could find a phrase that would satisfactorily include the broad range of mutually dependent relationships but did not exclude homosexuality, would you find that acceptable or is it sort of out of bounds for you?

Mr. Sclater: My short answer is that it would be acceptable only if a category that did not impinge on the definition of marriage were created.

Senator Hervieux-Payette: I wish to stress that I share your view about not necessarily granting benefits by what is happening in the bedroom, for the simple reason that that was the philosophy of the Liberal Party in the past for any other matters or pieces of legislation.

I agree with you when you talk about two persons who agree to live together and support each other and take responsibility for each other. In my family, my aunt was supported by my cousin. My cousin worked all her life because her father died and they had no pension. She provided her mother with care and I feel it would have been more civilized if my aunt could have had access to her daughter's health care plan, dental plan and other plans and, if the daughter had died first, if her mother could have had access to the pension. This is perhaps a matter for another debate, but as a result of the decision of the Supreme Court, not because of this legislation.

In discussions with the Minister of Finance, I indicated that when people wish to take charge of another person, normally it should cost society less and it would provide us with a better society because people would say, "I care for my brother; I care for my friend." That has nothing to do with what we do after midnight.

I certainly heard what the three of you told us, and for me the traditional family is the nuclear one. The new concept was inserted in the new immigration legislation, enlarging that concept so that people who would not have any kind of sexual relation would be considered as part of a family nucleus. I just hope that we will be able to see you on another piece of legislation where this question will be solved for all pieces of legislation, not just this one. We should clarify that. We have a Charter of Rights and I think it would be a liberal approach to say, "Yes, I agree to take care of my brother and I cannot throw him in the street when it suits me." I have no brother but I can adopt other people.

I welcome your comments. I felt that you were talking about a new model of society, but I would say that it could certainly have a positive impact. Where I come from in the rural area, the family was much larger than just a couple with children. Very often, we adopted people who were not even members of the family and they were taken care of. There was no social assistance at that time but no one was dying of hunger and they were not in the street.

Thank you for your comments and I hope that you can trust that the old senators and the younger ones might come up with a recommendation not necessarily amending the bill but having a specific provision in the next session so that we can clarify this and convince the Department of Finance that this is a plus rather than a minus.

Senator Oliver: When the Treasury Board appeared yesterday, they gave us a paper with their rationale for the use of the term "conjugal." I wonder if I could read three short paragraphs.

They said:

Here again the Courts have provided direction by setting out the recognized elements of a common law relationship. Factors looked at by the Courts include various elements of cohabitation and conjugality such as the commitment of the two individuals to each other, financial contributions toward the necessaries of life, the arrangements concerning the acquisition and ownership of property, the attitude and conduct of each of the partners toward members of their respective families and how such families behave toward the partners and how the partners present their relationship to the community.

Near the end of their assessment, they said:

The provisions of Bill C-78 refer to a "relationship of a conjugal nature" in order to capture the judicial meaning of conjugal in reference to same-sex partners while ensuring that the Bill does not go beyond what the Courts have said. For these reasons it is not necessary to define the word conjugal in the legislation.

Finally, they said:

From a legal point of view, physical intimacy is not considered the essential element in establishing the conjugality of a relationship. Rather the Courts have focused on the existence of a committed monogamous relationship in assessing whether a conjugal relationship exists.

Ms Landolt: Those ingredients are taken directly from the Molodowich case, but it is significant that, in the Supreme Court of Canada, Mr. Justice Cory said that since there does not have to be sexual content in it, it would really apply to everyone.

We are suggesting that by putting "conjugal" in there and ostensibly limiting it to same sex, they have in fact opened this up inadvertently to all kinds of court challenges as soon as this is passed. There will be many court challenges. Why does the government not deal with it now? The explanation came directly from that Ontario Molodowich case where they said it was open to everyone. Why is this legislation opening itself up to all sorts of court challenges? Why do they not change it? Why do people have to go to court? Why do a mother and daughter or two friends have to go to court to challenge Bill C-78 when you can do it right now? We know what the answer will be. It will be that it must be opened up to everyone.

We are suggesting that giving this recognition to same-sex couples is foolish because it means, if you have sex, you have benefits, but if you have no sex, there will be no benefits, until they go to court to widen it up. It does not make sense. Why not make the amendment here and now and deal with it, instead of having to have all of these court challenges? The cost to the people of everything is ridiculous.

The Chairman: Our next witnesses were to be Iain Benson and Peter Jervis. I believe only Mr. Benson is here. Welcome, and please proceed.

Mr. Iain T. Benson, As an Individual: Mr. Chairman, I wish to make some comments that I think are of importance not only to this bill but to the future of Canada.

Before I begin my comments, it is appropriate to tell you that my friend Mr. Peter Jervis of Toronto is unable to appear with me this evening. Mr. Jervis and I are constitutional lawyers who have done some work on the cases involving the issue of spousal status under the Charter of Rights. In fact, we were co-counsel before the Supreme Court of Canada in the first case that analysed this issue, the 1995 case of Egan v. Canada, which you heard about from the witnesses who just testified. Mr. Jervis and I were here a few weeks ago before a House of Commons committee on Bill C-63 dealing with citizenship and immigration, but unfortunately we cannot be a tag team this evening. I have soldiered out here from Vancouver alone.

In the Egan decision, a majority of the Supreme Court of Canada decided that the Old Age Security Act definition of spouse that did not include same-sex couples was constitutionally justifiable. It decided this by the narrowest of margins; five judges to four. However, that decision has not been overturned nor distinguished by the Supreme Court in its more recent decisions touching on same-sex status. That five-to-four judge majority held that the legislature has the latitude to decide the matter of spousal status and, in obiter dictum, the question of marriage in relation to common-law status.

Most recently, the same court, in deciding that a property division provision section of the Family Law Act in Ontario that applied to common-law relations ought to apply to same-sex relationships, in the M. v. H. decision of a few weeks ago, did not do what was done by the Ontario Court of Appeal in both M. v. H., the case before it a few weeks ago, and the Rosenberg decisions. It did not read in the language that it suggested might be used. It left matters to the legislature to address. This is extremely important, particularly my comment on Rosenberg, for reasons I will get to a minute when I refer to the Honourable Marcel Massé when he spoke on Bill C-78 when it was in the other place.

I wish to comment on the question of the processes by which the matters central to our common good are dealt with in Canada at the moment. Mr. Chairman and honourable senators, I am gravely concerned by what I see. We are witnessing, with respect to certain foundational notions in our culture, not the coordinated thoughtful processes of ordered government that mark a civil society, but the piecemeal, fragmented, patchwork approach that testifies to indecision, fear, lack of clarity and even political cowardice.

What is needed is leadership. It is the role of every man and woman who has taken an elected office, or the appointed office of this chamber, to exercise that leadership. I say that with great respect. It is leadership and vision I am asking you as a concerned citizen of Canada to consider tonight. It is an aspect of this bill that has had only the slightest attention prior to being reviewed by this committee that provides the general context for my comments. The surrounding years of litigation and public debate provide the specifics.

Some weeks ago -- Tuesday, April 27, 1999, to be exact -- when this bill was discussed before a House committee, there were some brief and illuminating exchanges between the Honourable Marcel Massé, President of the Treasury Board, and members of Parliament on the definition of "survivor" in the bill and the incorporation of the term "conjugal," the question that I wish to address this evening.

First, a member of parliament, Mr. Jim Abbott, asked why two women who had lived together for 35 years in a long-lasting and loving relationship, but who were not sexually active, should not have access to benefits, the point made by one of the senators earlier. Mr. Massé's response to this question was that it is a very enlightened position to argue that relationships of dependence of that type, especially long-term relationships, should be entitled to a number of benefits. I happen to share that view. It is not yet implemented through legislation. As you know, there are many studies on this and, in a few years from now, that may actually be the situation.

The minister stated that what they tried to do in the legislation about conjugal relationships was implement the law as it has been made explicit in court judgments, in particular Rosenberg. The minister went on to say that they had tried not to deal with other situations that are still contentious, in particular those involving marriage, or the definition of spouse itself, but in using the words "conjugal relationship" they have incorporated homogeneous compared to heterogeneous common-law relationships because these have been interpreted in law by the courts.

Mr. Abbott, in response to Marcel Massé's comments, suggested that by focusing on a definition that made sexual activity the key to inclusion, the government was unduly getting into the bedrooms of the nation and that the definition of conjugal was inappropriate. Again, Mr. Massé relied upon the Rosenberg decision as authority for the inclusion of conjugal relationships. He said that they were applying exactly that definition in the law, not extending it further, and dealing with the more general problem that the member was raising.

The second person to question the Honourable Marcel Massé was Mr. Eric Lowther, who asked why a conjugal relationship was the basis for the government's choice of category. He asked why a person's private intimacy should be the basis of a category; why the government should be using that as a criterion and what the costs would be. In answer to that, Mr. Massé said that the government's view was based on consultation with the lawyers from the Department of Justice and that it was their view that the legal meaning of conjugal in this case means an extension of a heterogeneous common-law relationship to a same-sex common-law relationship.

I wish to suggest, with the greatest respect for the able member of Parliament, Mr. Massé, and to whatever lawyers advised him and the government, that the approach they are taking is not in fact a good one, not a responsible one for a government to take. It is one that one legally could write in a brief, but in my view it is not a wise one. I will now attempt to explain why I think that.

The Supreme Court of Canada's most recent decision a few weeks ago in M. v. H. did not, as Madam Justice Abella and two others in the Ontario Court of Appeal did, read in the term "same sex." Why not? Because they wanted the legislature to do its job. They wanted Parliament to pull the camera back on this question of human relationships in Canadian society.

More important, Rosenberg is not a good example of a robust base upon which to argue for federal government policy. In the reasons for judgment, Madam Justice Abella noted that the Attorney General presented no evidence of anticipated costs of the inclusion of same-sex benefits and noted clearly that the substantial evidentiary burden that is necessary in a Charter of Rights case was not met by the Attorney General of Canada.

My question then is: If there was no evidence, did the Attorney General and her lawyers try to provide a basis for a distinction to be made? Far be it from me to suggest collusion on the part of an attorney general; however, I may say that the Supreme Court of Canada has, on several occasions, criticized in strong language the caving in of attorneys general on constitutional cases. It happened in Rosenberg, the very case relied upon by Honourable Minister Marcel Massé in an attempt to create a legal basis for the very definition that is key to the bill that is before you this evening.

The attorneys general have a role, the same way we all have roles in culture. Their role is to make a real and sufficient effort to defend laws, to create the best case for why the law came into being, present the best evidence, fiscal, philosophical and legal, for its being. That is not happening. This is extremely serious in Canada today.

Mr. Chairman, honourable senators, we stand at a moment where key aspects of society seem to be failing to do their jobs. This committee must not simply pass on this bill. It must not simply add one more example of a failure to seek evidence in support of the extension of marital or marital-like categories to same-sex couples.

The remedy chosen by the Ontario Court of Appeal, and not appealed from by the Ontario attorney general -- Rosenberg was never appealed to the Supreme Court of Canada -- was considered inappropriate in M. v. H., the most recent Supreme Court of Canada authority in this area only weeks ago.

In M. v. H., did the Supreme Court of Canada read in the definition the way Madam Justice Abella did in the Rosenberg case? They did not. They left it to the legislature of Ontario to make a considered, thoughtful determination with the best evidence at their command.

You cannot rely upon your Department of Justice lawyers telling you that Rosenberg is the last word on conjugality. That is not so. You have the work to do here to get the best legal, philosophical and other arguments.

The Supreme Court is not the organ of Canadian democracy best suited to committee deliberations with analysis, philosophical and theological rigor and insight. Why do legislators sit back and fail to deal with the key foundational matters that we know are at issue in this kind of amendment? Only a person of considerable naïveté would see it as a simple extension following court precedence to extend conjugality to same-sex couples. It is nothing of the sort.

The term "conjugal" is a marital term. Look it up. Any reading other than that "conjugal" means the same as "having sex" was probably invented last month or before the most recent flurry of parliamentary activity. It has no historical depth, no philosophical rigor, and it is worthless, in my opinion.

Those who wish inclusion in marital categories for same-sex people are moving slowly, carefully and incrementally to claim the definitional support. "Conjugal" is "marital." It is folly to suggest otherwise. If it is merely sexual and it means that any sexual joining is conjugal, then why limit the category to a specific degree or duration? No. This is simply hiving off one term, since the attempt to claim spousal inclusion failed in Egan in 1995.

In 1995, the court said that the issue of how the term "spouse" should be defined is a fundamental social policy issue and Parliament should decide it and Parliament should listen to and balance the competing social issues, the philosophical issues, the legal, moral, theological issues that go into the definitional process. The courts should not be deciding it. Parliament should be deciding it and the courts should defer to Parliament.

Where is the rigor of analysis before you, the honourable members of this committee? The federal and provincial governments are faced with a time of opportunity -- that is, an opportunity to look at what has happened to marriage and the danger of creating false analogies to marriage. The statistics on common-law marriage are now coming in. They call for your attention. Let me tell you briefly about some details from Statistics Canada's most recent study.

In 1998, Statistics Canada's national longitudinal study of children showed that 20 per cent of all births from 1993 to 1994 were from common-law unions -- double the rate of only 10 years before. The study states that the children followed in the study will experience changes in their family environments of unprecedented proportions as a result of their parents' changing relationships. This is significant because common-law relationships break up more quickly than marriage, even where there are children. The study further states that 12 per cent of married couples with children break up within 10 years, compared to a break up of 63 per cent of common-law couples with children.

The effects of single parenting on children are well documented. In addition, common-law relationships have a much higher incidence than do marital relationships of all sorts of social problems, including alcoholism, poverty and domestic violence. If that is so, how can legislators responsibly continue this experiment begun in the late 1970s? By "experiment," I mean including common-law relationships as marriage. We now want to add other groups to this unproven category -- a category that is showing itself to be flawed. You cannot do this in conscience.

In Egan v. Canada, the Supreme Court of Canada majority judges made it clear that the legislature can distinguish between "common law" and "marriage." They can also distinguish between "heterosexual marriage" and other categories. The statistics on common law show that it is not analogous to marriage. It has been, for many children and their parents, a disaster in this society. The Senate and other parts of government have a responsibility, a duty and, above all, an opportunity to assist in pulling the camera back and assisting the common good of Canada.

Other categories should be considered. I can deal with some of those during the question period. They have been in other countries and jurisdictions. Hawaii has done extensive work on the notion of reciprocal beneficiaries, categories that look at financial dependency and commitment but do not focus on sexual conduct. Those need to be looked at in Canada.

The government has indicated that it wishes to proceed with an omnibus review of legislation. Let it do so, but let it do so with rigor, analysis and an awareness of history, philosophy and theology. Let it do so in open chamber in committee, with discussion and debate, and not in the back rooms by stealth, where fear and chill of political correctness have lead to so much truncation of what questions may be asked in Canada.

You have an opportunity to do great good. I ask you to hoist consideration of this bill or strike the specific sections that are problematic. This matter will and should come in a comprehensive manner before Parliament and Canada and be discussed openly and intelligently. In that role, you will play an important part.

Senator Meighen: Your message is clear. In many respects, it is similar to the message that we heard from the three witnesses who preceded you.

Perhaps I should let Senator Kroft ask the questions, but if I were Senator Kroft I would ask the same question. How would you respond to it?

Mr. Benson: To the question Senator Kroft asked earlier?

Senator Oliver: Yes, regarding the word "conjugal."

Mr. Benson: This is not the place to do this. The government has sent the bill here and they have asked you for your considered review. In my view, sufficient arguments have been raised to cause serious doubts about certain provisions. My whole argument is that this matter needs to be more comprehensively engaged.

Senator Meighen: You would not try advise us to seek an amendment to clarify the term "conjugal" in one way or another?

Mr. Benson: The government raising the hope of an omnibus approach to legislative amendments is precisely the framework in which this legislation and Bill C-63 need to be addressed.

Senator Meighen: Your advice would be not to proceed with the bill?

Mr. Benson: Not the bill, the section.

Senator Meighen: That is fair enough. You are not asking us to delete it.

The Chairman: The witness said that he would delete those sections and proceed with the bill otherwise. That is what I understood the witness to say. Is that correct?

Mr. Benson: That is correct.

Senator Meighen: If there were no section, it would be difficult to know to whom you are paying benefits and to whom you are not paying benefits.

Mr. Benson: This bill, insofar as it deals with pension survivor benefits and the government's entire remedial approach to benefits, would be part of a wider discussion beyond this bill. Your term is "hoist it," which is to say, put it on the shelf and let the House below deal in a more comprehensive and rigorous manner with all of its benefits legislation touching on central human relations.

Senator Meighen: You would prefer that approach to the one I heard Ms Landolt prefer, which would be keep in the more traditional interpretation of conjugal relationships within the family?

Mr. Benson: There are good arguments to be made for extending additional beneficial categories.

Senator Oliver: For example, the same-sex category?

Mr. Benson: Yes, same-sex benefits would be included, but under the grounds that there is a remedial beneficial need for them. What is happening here is what the great Canadian philosopher Charles Taylor calls "the politics of recognition." There is a desire for recognition by a group in society that has historically been on the outside. The question of how that group of Canadians will be incorporated within society and to what extent recognized is the issue before us. We cannot avoid that. We have a deeply philosophical side to that. There is a beneficial aspect to that. For many other Canadians, there is a moral and religious aspect to it. That whole discussion, namely, the nature of maleness and femaleness, must be raised. We cannot continue to avoid these difficult questions or we will pay for it in the end. Why? Because these are foundational notions to culture.

Senator Tkachuk: You were here on another bill. What bill was that?

Mr. Benson: It was Bill C-63, citizenship and immigration.

Senator Oliver: What is the issue in that bill?

Mr. Benson: The issue there is the spousal extension definition. The honourable Marcel Massé says, with respect to comments on this bill, that we are not dealing with the definition of spouse; yet, with respect to the citizenship and immigration bill, spouse was the extension definition.

The Chairman: It is my understanding that Bill C-63 is not finished in the House of Commons. Part of the problem is that everyone refers to bills by number, and, if the number has not gone to the Senate, we do not know all the problems.

Mr. Benson: There is one very important point, since Bill C-63 may come to this chamber. The key objection that Mr. Jervis and myself made was that in Egan v. Canada, the Supreme Court of Canada gave the legislature the responsibility to craft the social policy legislative response to these questions. In the regulatory provisions at the end of the bill, Bill C-63 purports to give the Governor in Council the power to determine the definition of "spouse." As a teenager would say, "Feature that."

The Chairman: Mr. Benson, thank you very much.

Senators, our last three witnesses are single individuals, and I will ask them to come forward now.

Ms Helen McGurrin, As an Individual: Mr. Chairman, thank you for allowing me a few minutes to present my views on Bill C-78. I am not speaking for any organization. I am speaking as an individual. I am speaking as a retired public servant, a mother and a grandmother. I would ask you to please consider several recommendations in reviewing Bill C-78.

First, recognize retirees' and employees' contribution to the surplus. If there is one recommendation to be accepted, please let it be this. Publicly recognize that retired and current public service employees have contributed their fair and contractual share through pension plan deductions from their salaries, and recognize that their contributions helped create the existing surplus.

I am not asking for one cent of that surplus. I want to be proud to say that I was a public servant and to be able to share that with my grandchildren. Right now, with my own government portraying me as a drain on the taxpayer and as one who never contributed to my pension, I am ashamed to say that I was a public servant. If nothing else, please tell the Canadian public that we paid for our pensions and we are not sponging off them.

My second recommendation is a win-win sharing of the surplus.

It is a win-win situation for retirees. I am pleased that in Bill C-78, or before or with it, the government has indicated its intent to honour its contract with past employees. I would expect nothing less, since that was part of my benefits package when I joined the public service. Since I will be keeping my current pension with indexation, and I trust future governments will honour this commitment, I do not need or expect any more money. However, some surplus should be used to increase the pensions of those retirees or survivors whose income is below the low-income threshold. It should be easy to track those individuals. The government can, through its own records, determine who is in receipt of a public service pension and receiving a Guaranteed Income Supplement or GST rebate cheque. Retirees would regain their pride in having served in the public service and pride in themselves. They would see this change as the difference between paying their own way or being dependent on a government handout.

It is a win-win situation for employees. You have already heard from the unions. As a past employee, all I can say is that I am glad I am retired and have the government's commitment that my benefits will be maintained. I am not so confident about my children's retirement future under Bill C-78. I would like the new plan to have a financial cushion to protect employees and the government as an employer from having to increase deductions too rapidly or unnecessarily. Why risk taking the whole surplus out without having any history or actual experience on how the new plan will perform?

As well, as a mother of adults not in the public service but who work for employers with pension plans covered by the Pension Benefits Standards Act, I am concerned. I can see those employers asking why they cannot do the same as the government with a surplus, especially when some employers are paying 100 per cent of the contributions. How can the government refuse them?

It is a win-win situation for the government. Under these recommendations, the government reduces its costs in GST rebates and Guaranteed Income Supplements. It protects itself as an employer by keeping a financial cushion within the pension fund and so reduces the chance that it might have to increase its own contributions, should the plan not perform well in later years.

It is a win-win situation for taxpayers. The government has not been honest in telling taxpayers about the pension surplus, and that statement has hurt public servants, retirees and the taxpayer. In the long run, the truth will be known and the government's credibility will be seriously affected.

Mr. Chairman, honourable senators, the government can use my portion of the surplus towards debt reduction, and I am sure many other retirees feel that way, but tell the people where that money came from and protect future and current employees if you want to give taxpayers renewed hope in government honesty.

The Chairman: I appreciate your positive comments about public servants. A number of people sitting around this table are, in fact, former public servants. We have suffered not just the abuse we get for being in the Senate but also the abuse that goes with being either a current or former public servant.

Mr. Brian Westbrook, As an Individual: Mr. Chairman, thank you very much for the opportunity to speak. I feel strongly about this bill. I flew in from Portage la Prairie, Manitoba, to be here.

I wish to put personality behind my words. I live in Portage La Prairie, Manitoba. I joined the Royal Canadian Air Force in 1964 as an aircraftman, second class. My first tour was in Gimli, Manitoba, where I met my lovely wife. We have two children, and both live in the Portage area. I had the privilege of serving in Quebec, Ontario, Manitoba and Alberta. I retired from the Canadian Armed Forces in 1992, at the rank of major.

This is a serious matter that influences the lives of over 97,000 military pensioners, practically 20,000 of whom are widows, widowers and orphans. There are 3,800 of these pensioners living in Manitoba. It also affects the 60,000-plus Canadian forces members who serve around the world.

This bill essentially takes away the surplus and moves it into the government's general revenue account. This evening there was much discussion on Bill S-3, which looks at private corporations and how they are required to respond to their employees. With surpluses there, a 50 per cent vote by members is required to remove the money under certain circumstances.

Under the Canadian Forces Superannuation Act, the pension plan is not a private pension fund per se. However, I would suggest that the government is morally responsible to act in the same way that they expect private corporations to act in our country. They must sit down with the employees and figure out what to do with the surplus.

One of the things that I find most reprehensible is the speed with which this particular bill was passed through the House of Commons.

The bill, which was referred to the Standing Committee on Natural Resources and Government Operations, had second reading in the House of Commons. The bill, which is a highly technical 200-page one that amends eight acts, was given approximately eight hours of debate and then closure was invoked. This bill has had four closure motions against it, and that tells me a great deal.

Only one week was given to consider a bill that directly affects so many retired survivors and serving Canadian forces members. A week allows very few members and stakeholders to present their views. For example, I know that the Armed Forces Pensioners'/Annuitants' Association of Canada was not even asked to present. That association has 26,000-plus members.

This bill troubles many parliamentarians. This was demonstrated at third reading. There were 137 yeas and 118 nays and 16 abstentions. The bill was discussed on Peter Warren's national radio show on May 30. The national chairman of our organization was allocated 10 minutes and he spoke for 45 minutes because of the numerous questions and concerns that people across the country have on this bill.

I suggest that it is not true -- as the government maintains -- that Canadians are complacent about this matter. They are not complacent because this bill hits real people.

The bottom line is that the Canadian Forces Superannuation Act is growing too fast. The government has an IOU for that particular surplus.

I also have a problem with the removal of the funds from public accountability. It was suggested that Bill C-78 will be removed from the Auditor General's oversight and no longer subject to Access to Information legislation. I suggest that there should be openness and transparency with this particular bill.

I am afraid that the government has opened up a Pandora's box on the subject of same-sex benefits.

I wish to clearly specify for the record that the public service has contributed $14.9 billion; the RCMP has contributed $2.4 billion; and the Canadian forces have contributed $12.9 billion into that fund.

The government has been on TV and radio suggesting that for the 1999 contribution, approximately 70 per cent was contributed by the employer and 30 per cent by the employee. I suggest that the government look a little further back. I found that between 1924 and 1998, the government's contribution to the employee's fund amounted to 48 per cent. That was published in Hansard. Yet they are taking 100 per cent of the surplus.

They contributed 48 per cent in 74 years, yet they are siphoning off 100 per cent of the surplus.

I suggest that this surplus can be handled in a better way. These contributions were made by soldiers, airmen and sailors, all taxpayers. For example, the government could increase the benefits and easily fund the increase out of the present military pension fund surplus, including -- and I would suggest they look at these -- increasing the survivor benefits from 50 per cent; giving the most junior ranks a contribution holiday, thereby leaving more money in their pockets. This might allow privates and their families to avoid going to food banks.

Imagine privates in our Canadian military needing to use food banks. That turns my stomach.

They could remove the discrimination regarding the denial of survivor benefits to any Canadian forces retiree who marries after reaching the age of 60. They could actively explore ways to invite the Canadian merchant navy veterans, who were classed as the fourth arm of the service at a time when the military was more appreciated, to more inclusions.

Senators, we are talking about billions of dollars here. I cannot even comprehend that amount. I wish to bring it into more manageable terms. The Canadian forces members are not extremely well paid. Public sector blue-collar workers in Saint- Jean earn perhaps $30,000 to $32,000 per year. They will receive a pension of $9,400 a year. I must point out that survivors' benefits are only at 50 per cent -- $4,700. I can understand these numbers. We all can.

Another number that I can understand is written and printed in the Queen's Regulations and Orders for the Canadian Armed Forces on pay for officers and non-commissioned members. As of May 21, 1999, the entry-level soldier earns $1,906. If we take a 38.5-hour work week, that works out to $11.32 an hour. This is not a lot of money, particularly when one considers the commitment to duty that we demand from these young Canadian soldiers.

Today, Canada is in a position of dispatching 800 soldiers to the former Yugoslav Republic. I can well imagine what goes through their minds when they think of how their government shows its appreciation by removing their pension surplus.

I find the following a little embarrassing; however, it must be said. In my research for this particular brief, I phoned the Military Family Resource Centre at Canadian Forces Base Winnipeg to find out if they refer people to Winnipeg Harvest, which is a large food bank. It is common knowledge that privates on Canadian Forces Base Esquimalt use food banks, but I was curious about Winnipeg.

I was told that there was no reason for referrals to Winnipeg Harvest because there is a food bank at Canadian Forces Base Winnipeg. I then phoned CFB Shilo, which is just east of Brandon, Manitoba. I was told that they also have a food bank. I was too embarrassed to ask how well it was used. To me, that is not the point. The point is that there should not have to be a food bank on any Canadian forces base.

The military has food banks on their bases and yet every soldier must contribute 7.5 per cent of his or her pay into the Canadian Forces Superannuation Plan and CPP. For the young private earning $11.42 per hour, this is an annual hit of $1,715. I suggest that it is a lot of money for these members and their families. They would be well served with a contribution holiday from paying into this pension plan. The money would be better used in their pockets as a contribution to support their families rather than paid to the Receiver General's accounts of Canada.

In my service career, I have seen the military take body blow after body blow from many consecutive governments of the day. When I joined the Royal Canadian Air Force, it had 82,000 members. Today, the combined forces have just over 60,000 members. Yet, when there is a "flood of the century" in Manitoba or an ice storm in Ontario and Quebec, these professionals are the first to be called.

Morale is a problem that has been recognized for years by people both inside and outside the military. One touted remedy is the quality of life program. Information from the Department of National Defence Web site indicates that over the years there has been a significant amount of discussion about quality of life issues within the Canadian forces.

According to information from the Web site, it is no surprise that the real or perceived neglect of these important concerns has had a negative effect on the Canadian forces and has reduced morale.

On April 22, the Minister of National Defence and the Minister of Health opened up one quality of life program that was designed to boost morale, the Canadian Forces Member Assistance Program. I would suggest that removing the pension surplus has an opposite effect on morale.

I have visited the Canadian Peacekeepers Roll of Honour on the Department of National Defence Web site. I believe that all Canadians would benefit from a visit to this site in order to reflect on its meaning. There are 105 Canadian names on the roll. Looking through the roll, one name stuck: Sapper G. Desmarais, 2 Combat Engineer Regiment, Stabilization Force, Yugoslavia. He died on September 25, 1998.

This young engineer was from St. Claude, in southern Manitoba. One can only wonder what he would think if he knew what his government was doing to his comrades and his family.

Needless to say, my position is that the pension surplus should be put to the purposes for which it was designed, pension purposes. I believe that the government's job is to protect the people they serve. They should not scheme to do the opposite.

The Chairman: Senators, our last witness wishes to deal with one issue.

Mr. John Fitzpatrick is a former public servant with an interesting background in the sense that he participated 32 years ago in the pension review that was done at the time.

Mr. John Fitzpatrick, As an Individual: Honourable senators, I shall address the proposed removal of $30 billion from the superannuation accounts, which will further increase the risk of insolvency within these accounts.

As was mentioned, I was called as a witness before Senator Bourget's committee in 1967. That committee actually brought in most of the amendments that we now have to the Public Service Superannuation Act.

The concerns in 1967 are very much like the concerns now. I gave evidence on the economics side. Other witnesses who appeared included the Clarks, one Clark was head of the insurance program here; the other was Canada's actuarial expert. People like Stanley Knowles also appeared.

I mention these people to you because it has been stressed again and again that we must have the very best actuarial principles we can have in terms of how this particular program should be implemented.

We also encouraged building in a system of checks and balances. The checks and balances are subject to a three-year review, where an impartial body assesses the accounts. If the accounts were out of neutral, meaning that there were too many liabilities or too many gains, then the Treasury Board was so notified and action was taken.

It was felt at that time that the various options that would be available would be assessed from an actuarial point of view and laid out for people to see. Out of this, then, were to come the decisions that would bring this actuarial mass into a neutral position.

Imagine if this account that we are talking about right now were to have a $30-billion loss. One would say that it was going bankrupt, and it would be. It should never be allowed to do that; one must take action before that happens.

Conversely, this is not an investment program; it is a public pension program. A public pension program is to have sufficient moneys in the account to pay the pensions. That is the neutral position that it should be in. That was the neutral position we were in prior to 1990. It was not until approximately 1994 that these actuarial gains began to show their ugly heads.

At that time there were options. I will not go into the options, but there were options that the government could have taken. As an economist, I could add nothing to them. The actuaries had to take those options, put them into dollars and cents and say, "This is how it will affect your pension plans. What will you do about it?" What did the government do about it? What did Treasury Board do about it? Not a thing; they ignored it.

The next review took place three years later, in 1997. By that time, the whistles and the bells from an actuarial point of view were blowing all over the place. This whole account is out of whack. Some people called it mismanagement. It is time to bring it into play. Give us the options that you want; we will run the actuarial assessments on it and we will see what comes out.

The same thing is happening right now. It was embarrassing in 1997, but it is a fiasco in 1999 -- $30 billion.

I will ask you, have any actuarial assessments been done in terms of what are the various options? What should we be looking at? Is everything so dictatorial that you siphon off the money, you forget about the mismanagement, you get back to that zero position again? Even when you get back, what guarantee is there that there will be firm, strong actuarial procedures put in place? Gentlemen, I must tell you that there are none.

It concerns me as much about the future as it does about the $30 billion. We should have in front of us right now all the options that are open, including swiping the money.

Let us make a decision. Let us go through this process and do this reasonably. That is what actuaries are there for. That is their function. As an economist, I take my hat off to them. I could not do it.

The Chairman: Thank you for our final presentation.

The committee adjourned.