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

Issue 56 - Evidence, August 23, 1999

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OTTAWA, Monday, August 23, 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 5:00 p.m. to give consideration to the bill.

Senator Michael Kirby (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we will convene. We are here to continue hearings on Bill C-78, the purpose of which is to establish the Public Sector Pension Investment Board and to amend a series of other acts that essentially impinge on the method by which public service pension funds are managed.

Some of you will recall that this committee dealt with this bill in the spring. The committee approved the bill unamended but made a number of serious observations. After debate in the chamber, the Senate decided to send the bill back to committee for further discussion. The meeting that is about to begin arises from that decision. Under an order of the Senate passed in June, the committee will report back to the Senate when it reconvenes on Tuesday, September 7.

We will hear from two sets of witnesses this evening, from the Treasury Board and from Canada Post. Tomorrow morning, beginning at 9:00 a.m., we will hear witnesses from various labour organizations and superannuate and pension organizations whose members are affected by this bill.

We welcome now the new President of the Treasury Board, after less than three weeks in the job.

Madam Robillard, please proceed.

[Translation]

Ms Lucienne Robillard, President of the Treasury Board and Minister responsible for Infrastructure: Mr. Chairman, I am very pleased to have this opportunity to address you today on a subject as important as Bill C-78.

[English]

I begin by thanking committee members for their thorough analysis of this proposed legislation. Given that I have only recently been appointed President of the Treasury Board, I have had to become a very quick study in the complex and challenging area of public sector pension plans and, as such, can begin to fully appreciate the quality of your work on Bill C-78.

[Translation]

I intend to devote most of my speaking time today to the Senate's efforts to successfully resolve the issue of joint management of Public Service pension plans. In its motion, the Senate had recommended that the Treasury Board resume its discussions with Public Service unions over the summer with respect to a joint management framework.

First of all, I want to say that this committee's efforts in that regard are very much appreciated by myself and very likely by plan participants and our union partners. I think it is important to restate that all the parties agree that the future of this plan lies in a joint management agreement. A great many other plans, both private and public, have benefitted from the successful implementation of such agreements, and there is no doubt that such an agreement would be in the interests of all parties.

[English]

I would very much like to be in a position to say today that we were able to return to discussions on a joint-management framework, but unfortunately, and with regret, I am here to say that we have been unable to do so. As you are probably aware, the discussions have not resumed to date. I would like to take the opportunity to explain why.

Shortly after the Senate passed a motion to refer the matter back to this committee, my predecessor wrote to our union partners to ask them to resume discussions on the joint-management framework for the public service pension plan. I have made available copies of those letters for your reference.

My predecessor received a reply from the National President of the Canadian Merchant Service Guild and Co-Chair of the National Joint Council, Captain Sjoquist, on behalf of his union colleagues stating that further discussions could not proceed without agreement to negotiate the existing plan surplus. Copies of that letter are available for your reference.

Sadly, this precondition made our union partners' position contrary to what I believe was the intent and spirit of what this committee hoped we would do. It is my understanding that the committee wanted us to resume discussions on joint management, not on the existing surplus.

It is indeed regrettable, honourable senators, that our union partners have taken this position, as I believe the time has come for us all to be forward-looking. The government's position has been clear on the issue of the current surplus. The government has been responsible for past deficits in the plan and therefore has a legal right to dispose of the existing surplus.

Our position has also been accepted by many independent experts in the pension field. More importantly, honourable senators, you yourselves, by majority of this committee, have also accepted this principle.

[Translation]

Captain Sjoquist's letter clearly shows that use of the pension account surplus was the only stumbling block during initial talks on pension reform. Although the position taken by the unions with respect with respect to the use of current surpluses would seem to prevent the immediate resumption of talks on joint management, I do not believe nor do I want that position to scuttle the possibility of establishing a joint management framework for Public Service pension plans.

Passage of Bill C-78 will be an important step in the process aimed at resuming talks. That is the ultimate goal for us all -- you, honourable senators, myself, as President of the Treasury Board, the Government of Canada and union representative -- one that we see as vital for the future of this plan.

[English]

I believe that with your support in passing Bill C-78 we will be able to turn a page on the past and allow the government and its union partners to work together on resuming joint management discussions. I am eager to resume those discussions. I believe that, despite diverging views on the current surplus, there is much common ground about which to be positive. This point is illustrated in Captain Sjoquist's letter of June 28, where he wrote:

all parties were in basic agreement on a joint management and risk sharing agreement for a new pension plan --

I can confirm that the main elements of a joint management framework with an appropriate risk- and cost-sharing arrangement are not in dispute between the parties. This was a significant achievement over the course of the consultative process, and I am very hopeful that, together with our union partners, we will be able to build on this achievement.

[Translation]

Once we are in a position to look towards the future -- and I believe that passing Bill C-78 will allow us to do that -- the next step in the development process will be a more technical analysis of the detailed provisions that must ultimately be set out in the legislation, including those highlighted in your report. For example, the relationship between the Management Board and the Investment Board, compliance with the Income Tax Act, accountability measures that are needed, and so forth. It is important to set clear parameters in the legislation so that the government's interests as an employer, and especially those of plan participants, are well served in the future.

There is, however, one issue that I believe would have been difficult to resolve even if discussions had resumed over the summer. Representatives of Canadian Forces superannuation and Royal Canadian Mounted Police superannuation plan participants did not take part in the initial consultation process with Public Service unions. Thus it is not clear whether these plan members are in favour of a joint management framework for their pension plan, as opposed to other solutions that might better suit their specific circumstances, including maintaining the current provisions of their plan. It goes without saying that our partners will be consulted further in that regard.

[English]

Honourable senators, while I am truly sorry that discussions did not take place this summer, I am hopeful that we can agree to a resumption of discussions as early as possible in September so that the consultative process can continue. I have written to this effect to our union partners, and I have sent a copy of this letter to the chair of this committee. I believe that we are at a crossroads. The issue of the current surplus has stopped us from working towards the future with our union partners. The government's position on the current surplus is strong and will be maintained, but that does not mean that we cannot work on the potential of future surplus sharing and, of course, risk sharing.

Passage of Bill C-78 will hopefully permit the resumption of discussions with plan members' representatives. Once passed, together the stakeholders can resume the consultative process towards final agreement on a joint management framework to the benefit of all plan members.

I want to be very clear in saying to our union partners, plan members, the public, and Members of Parliament that as soon as a final agreement is reached on a joint-management arrangement for the public service pension plan that is satisfactory to all parties I will seek an early opportunity to introduce the necessary legislation to implement it.

I hope that I have been able to satisfy honourable senators as to why we have not resumed our discussions. It is regrettable that the past seems to be holding up the future. In doing so, opportunities are being delayed for a more collaborative relationship with our union partners and our government's most valuable asset, that is, its former, current, and future public servants.

[Translation]

Your support for passage of Bill C-78 will, in my view, allow discussions between the Treasury Board and Public Service unions to resume. I have no doubt that this is a goal we all share. I am now available to answer your questions.

[English]

Senator Kelleher: Welcome, Madam Minister, to your first hearing before this committee, so soon after your appointment. If it is any consolation, I was appointed as Solicitor General on a Tuesday, and on Wednesday morning I had to appear before a Committee of the Whole of the Senate on a very contentious bill with respect to restricting parole for repeat sexual offenders. I can sympathize with you to a certain degree.

Ms Robillard: Thank you.

Senator Kelleher: I will not let my political instincts totally interfere with that.

The government, I must say, has been very consistent throughout, not that I am agreeing with them. They keep saying that they will not share the surplus with their employees or negotiate with them with respect to that because, under the plan that exists now, the government is liable for the deficiency and therefore is entitled to the surplus. I think that is correct, is it not?

Ms Robillard: Yes.

Senator Kelleher: The PBSA, the Pension Benefits Standards Act, which applies to federally regulated employers like banks, radio, television, things of that nature, is silent with respect to the surplus, and I would remind the minister that that is the case here. This plan is silent with respect to disposition of the surplus, and your predecessor has stated this in evidence. In those cases, the surplus cannot be taken by the employer without the consent of the employees. Many of those employers, at the time that act was passed, were in the same position you say you are in today. By that, I mean they were responsible under their plans for any deficiency and, therefore, were entitled to claim that, since they were responsible for the deficiency, they are entitled to the surplus.

With this bill, the government, quite frankly, ignored that. They said, "We do not care," and the bill was passed. They had the same claim you are making now. Notwithstanding that, we deprived them of that right where the plan was silent as to surplus disposition.

In my opinion, you are saying, "Sauce for the goose but not sauce for the gander," or "Do as I say but not as I do." I have a problem with that. Why should private-sector employers be obliged to do this? More important, why should government employees be treated in a manner different than private-sector employees? That is really what is happening here.

Can you give me a valid reason for doing this? Obviously the government has the legal right to do what it did; but morally is it fair to give rights to private-sector employees and not give those same rights to public-sector employees?

Ms Robillard: First, thank you for your understanding that I was only recently appointed to the position of President of the Treasury Board. I do appreciate your support in that.

Senator Kelleher: I must not go too far with my support.

Ms Robillard: I am sure you understand that this is a very complex issue. Pension plans are very complex matters, and it is very risky to compare pension plans because they are all different from each other. One cannot compare the private sector to the public sector; they are two different things. There is specific legislation for the public sector, and we must be in accord with that legislation. Perhaps the problem is that the legislation, which as you said is silent on surpluses but not on deficits, is not silent on the risk assumed by the government over the years.

That is the problem about which we had to speak to our union partners. It became clear to me when I looked at the file that we will never reach an agreement on the past with our union partners because we differ on the perspective and on the legislation before us. The private sector is subject to other legislation and has different systems.

I will ask my secretary to compare the two sectors more specifically.

Mr. Peter Harder, Secretary of the Treasury Board and Comptroller General of Canada: Senator, your statement suggests that the government is acting entirely legally in its position on the surplus. It is true that in some situations some private-sector plans would have to act differently, either because there is a trust or because there is some prior agreement on the disposition of the surplus.

Having said that, the PBSA also provides for situations in which the employer is able to withdraw or otherwise use the surplus. The law does provide for the kind of scenario that the government is pursuing in this case.

Senator Kelleher: Why should government employees have less benefit than private-sector employees? The PBSA says that if it is set out in the plan that the surplus is to go to the employer, then it goes to the employer. If it is silent, the employees must be consulted.

If this plan stipulated that the surplus was to go to the employer -- that is, the government -- I would not be sitting here discussing this with you. I am a lawyer and I recognize that, if the agreement says it, you can do it. However, your agreement does not. You have forced private-sector employers to discuss it with their employees, yet you are not doing it here. With the greatest of respect, I do not think that you have answered my question.

Mr. Harder: Perhaps I could ask a lawyer to clarify to a lawyer the PBSA.

Mr. Ross Hornby, Senior General Counsel, Treasury Board of Canada: Under the Pension Benefits Standards Act, to which you have referred, senator, the employer is still able to establish an entitlement to a surplus, and there is a procedure set out for doing so. It is not the case that in all cases the consent of the employees would have to be obtained.

Senator Kelleher: There is the right under the act to establish an entitlement, but you must show that it is provided for in that agreement. However, that is not the case here. You do not have that right because it is not in your agreement. The agreement is silent.

Mr. Hornby: The legislation is silent on the disposition of the surplus right now. It only provides for payment of funds into the pension account. The minister referred to the difficulty of comparing a private scheme to a legislated public scheme. The principles that apply to the private scheme are quite different, as you know. No trust is created in the Public Service Superannuation Act. In private schemes, you may look to the terms of the agreement with the employees to see whether a trust is created. Also, the courts have indicated that you can look to see whether the employer has at any time promised the surplus or a sharing of the surplus with the employees. Also, you can resort to the common law to see whether a trust or some employee interest is created. Although there is no explicit provision in the plan, you can look for indices and find certain indications. Some of those would be, for example, who is responsible for the deficit and whether the employer has exercised an extensive amending power over the pension plan in the past, which would indicate that the surplus would likely go to the employer.

The Pension Benefits Standards Act actually does not deal with the entitlement to a surplus. That is done elsewhere, either on the terms of the plan or under the common law. It does provide for a procedure for distribution once entitlement is established elsewhere and then provides the mechanism whereby the Superintendent of Financial Institutions can approve that distribution.

Senator Kelleher: If the government believes that it is so right in its position that it can take the surplus, would not a very simple, quick, and efficient way out of this problem be to bring an application to the superintendent to distribute the surplus and see what happens? Could we not agree to that?

Mr. Hornby: We would not be able to do that without legislative authority.

Senator Kelleher: Let us get some legislative authority, then. The bottom line is that government employees do not have the same rights as private-sector employees. I will leave it at that.

Mr. Harder: That is not a position that the government accepts. The government view is that the rights of employees are similar to those which would be enjoyed were the PSSA a private plan. Because of the conditions our counsel has referred to, that is, acceptance of the deficit and the broad amending power, there was no prior trust established that stated that we would be entitled to the surplus.

I think your question is misleading, senator, in the sense that the government is acting outside the normal principles that are at play. It is true that this is a legislated pension plan; therefore, it is quite different from other private-sector pensions.

Senator Kelleher: The bottom line is that our employees are being shortchanged.

Mr. Harder: Senator, it is difficult to accept that they are being shortchanged when the benefits are defined and have been accorded and when the legislation itself enhances benefits to our employees. Both this piece of legislation and the one with respect to the budget provided increases to the pension plans by moving from the best six years to the best five years, a dental plan for our superannuates, death benefits, and the like. Public service pensioners are better off with this legislation and the concomitant budget legislation than they would have been without them.

Senator Kelleher: That does not take away from the fact that, through legislation, the government has forced all public-sector employers to involve their employees in the distribution of any surplus funds unless their particular plan exempts them. However, you are not doing it for yourself. That is my problem.

Ms Robillard: That is not my understanding of the bill, senator. Let me give you an example of what is going on. I read in this vein about the CMHC, which is a Crown corporation. The CMHC has a trust document. There was no question of surpluses, if I remember correctly. Thus, the employer has discussed with its employees how to share surpluses. That formed part of the trust document. It was a completely different regime, which is why I said at the beginning that it is difficult to compare the two.

Senator Kelleher: I am making a comparison. That is my argument.

[Translation]

Senator Hervieux-Payette: My first question has to do with the percentage contributed by employees, as opposed to the employer, something the public does not seem to be clear on. These are technical questions that Mr. Harder may be better able to answer, because they really have to do with accounting and it is important that we understand the mechanics.

What we are talking about here is the method of accounting for the surplus -- the 30 billion we have heard so much about. What is the amount of the contribution that would have been made had there been a fund and the interest on amounts that would have been contributed? If the 30 billion actually exists, I would like to know where it is, because there would ordinarily be rules for investing that money and someone would be responsible for administering it. At the present time, it seems the $30 billion is only a figure in the Public Accounts.

Finally, as regards the $30 billion surplus -- it may not be 30, but you can tell us how much it actually is -- what would the government's options be if it were decided, by way of amendment, to redistribute the $30 billion surplus. Would that require cuts to existing programs or a special tax? Does the government's budget currently provide for the $30 billion to be paid back?

Ms Robillard: In order to answer your questions with respect to the employer's and employees' percentage of contribution, it is important to understand that under the current system, the employees' pension plan is part of the Canada Pension Plan, so that the employee contributes to both plans at the same time. We have set a ceiling of 7.5 per cent for the employee's contribution. In the past, employees contributed 40 per cent, and the employer, 60 per cent, but because the contribution has increased for the Canada Pension Plan, the contribution to the employees' pension plan has dropped; the result is that at this time, the employer is contributing 70 per cent, and the employee, 30 per cent.

If we leave the current system in place, whereby the two plans are fully integrated as far as contribution rates are concerned, in a few years, the split will be 80 per cent for the employer and 20 per cent for the employee. That is why it is absolutely essential to separate the two contributions. In any case, they are two completely different plans. But the current contribution rates are 70 per cent and 30 per cent for the employer and employee respectively.

Now what does this amount -- the $30 billion -- actually represent? Does it really exist? It seems pretty clear to me -- and Mr. Harder can provide further clarification on this -- that the current surplus represents the difference between the government's liabilities, as determined by the chief actuary of the plan, and amounts paid into the pension account. In terms of accounting entries, we have already started to bring that amount down as regards actual figures, but the legislation must be clarified in order for the government to remove that actuarial liability from its books.

[English]

Mr. Harder: Concerning percentages, it is important to remind honourable senators and everyone interested in this bill that up until now, because of the integrated nature of employee contributions, public servants have been immune from the increases that Parliament made to the Canada Pension Plan a couple of years ago. This bill provides a transition arrangement in which the employees of Canada will participate, as all Canadians do, in those increases. It is important to remind ourselves of the issue of equity between public servants and non-public servants with respect to the Canada Pension Plan.

On the issue of the surplus, we are not really dealing with a surplus. In that sense, it does not exist. It is an overstatement of our actuarial liability. At the direction of the Auditor General, the government has been reducing our actuarial liability on an annual basis to accord with an appropriate and adequate statement of our liabilities concerning the pension plan. On an annual basis, that gives the public accounts a more honest reflection of our actual liabilities.

Having said that, we do not have a mechanism, other than the one provided in this bill, to reduce the pension accounts. Thus, we are left with the conundrum of more appropriately assigning actuarial liability to the liability that the government actually has and a pension account that overstates in numbers the resources that would be required for us to exercise our liabilities.

The final point I would like to make is one about which every Canadian should feel some pride. We are among a small group of countries that actually provides in their public accounts a provision for public-sector pensions. That is not the case in Europe. There is a major issue of sustainability of public-sector pensions in European jurisdictions.

As you know, about $100 billion of our net national debt is on the books to provide for the pensions of public servants. I believe that it is important to underscore that point because it shows that we are being very transparent and that we are being financially responsible in ensuring all Canadians that we have adequately provided for these pensions.

[Translation]

Senator Hervieux-Payette: Last year, I made representations to our government regarding the need to immediately implement employment equity and to end the current inequity. The government heard the representations made by a great many women, and starting on a specific date, that inequity was corrected. In that spirit, this legislation refers to a decision of the Supreme Court. Benefits are to be given to same sex partners. I believe we will be creating another kind of inequity for people whose relationship is one of mutual dependency and who are basically committed to reciprocal assistance and support -- a mother who cares for her handicapped daughter, a brother who supports a sister, two long-time friends who live together but have no particular emotional relationship, other than one based on mutual support. In other words, to rephrase the old saying, you could say that I am not my brother's keeper. Some people are their brother's and sister's keepers and bear the financial responsibility for that support. I must admit that is something innovative. It is time that our society thought about changing the wording, giving further consideration to this concept and looking at it with actual figures. We all know that if we do not look after our brother or sister, the government will. Some people have become eligible for welfare because the government took on the responsibility of supporting them, rather than their friend, brother or a more distant relative.

I am simply asking the minister to consider giving this further consideration in the short term and reporting the results of that investigation to our committee. It is not my impression that this is, as the expression goes, "a can of worms." It is a vision of society for the next millenium; in other words, rather than always depending on the government, we should make people more responsible and provide them with the appropriate benefits. If I take responsibility for an individual, I will have both obligations and benefits. If my sister is dependent on me and I die, she could receive my pension. So, I am asking the minister if she would agree to take a close look at this possibility, and I can assure her she will have my support.

Ms Robillard: I looked carefully at your committee's report and I noted one recommendation suggesting that the government take a closer look at the concept of economic dependency. The fact is that this is something the government is already looking at. Certainly, the legislation currently before you is an attempt in the short term to respond to the court's decision, and at the very least honour our obligations and recognize that benefits should be given to same sex partners. As you say, within our society there is an ever increasing number of lifestyles or ways of organizing family life that are very different from the concept of the traditional family. The government is already looking at this issue, which I assure you is a complex one. We are at the very beginning of that process and I think there will be a need for not only for serious consideration of the issue but also a public debate. We will have to engage Canadians in a debate because this is a very innovative concept: how far do we go and how should we define it, and in some ways, it is directly related to our identity. So, there will certainly be a need to have a public debate in Canada on this whole issue. But I want you to know the government is already taking a close look at it.

[English]

Senator Tkachuk: Mr. Harder, did I hear you correctly? There is really no surplus but rather an overstatement of actuarial liability? Is that what you said?

Mr. Harder: Yes.

Senator Tkachuk: So would a deficit be an understatement of actuarial surplus?

Mr. Harder: That is an innovative approach.

Senator Tkachuk: It goes to the heart of your argument.

Mr. Harder: Let us be clear. We have a regime in which we are accounting for our liability and in which the Auditor General has directed that the public accounts reflect a depreciation of this overstatement over a period of years. We will take an annual reduction of about $2.5 billion to amortize that difference.

Because of legal requirements, we had to put more money into the public accounts than we needed for our actual liability. To that extent, the accounts of the plan overstate the actuarial liability for which the government is on the hook. We are seeking now to more closely align the plan itself with the actual liability. In that sense, there will be greater clarity for Canadians about the financial situation of the Government of Canada as opposed to the present forced overstatement in the pension accounts.

Senator Tkachuk: The former minister said that the understatement of the actuarial surplus is $13 billion and that the surplus, which you say is an overstatement, is $30 billion. That is quite a return on investment, is it not?

Can you help me out with that? What happened to the $13 billion deficit that he claimed was real? Why is the surplus not real, too?

Mr. Harder: I do not want to get into who said what.

Senator Tkachuk: That is what the minister told us here and in the House of Commons.

Mr. Harder: The reality is that the existing legislation requires a certain level of contribution from the employer into the pension accounts. The actuarial liability for which the government is on the hook is less than that which is provided in those accounts. The Auditor General has, for the last number of years, directed us to reduce over a specified and agreed period of 12 or 13 years, by about $2.5 billion a year, that actuarial overstatement in the public accounts.

What remains, of course, are the accounts themselves. Those accounts reflect more contributions than the actual liability of the government. That will be reconciled by this bill. There is no vault somewhere containing that money.

Senator Tkachuk: That should clarify this matter completely.

[Translation]

Senator Prud'homme: During the debate in the Senate, that issue was raised when one senator talked about same sex benefits. Some said that the debate encompasses much more than that. You told us you have just begun to look at this. Your officials, both in the Privy Council and the Treasury Board, will tell you that a study has already been conducted. I saw it. That study says that same sex benefits are inevitable. So, they will be upon us at some point. But be careful, because another issue will also be raised as part of that debate with respect to benefits for other kinds of relationships -- for example, someone who has always looked after his mother or his sister. In the reports that I read, it said that if that question was raised, there would be no satisfactory answer. It is pretty obvious that if you open the door to one group of people -- and I have nothing against the idea -- other groups will become very important. We are talking about redefining the responsibilities of two persons who live together.

[English]

I will risk one, because Senator Hervieux-Payettte said she was going to work with it. It is any two persons who care for each other and who can prove that they live with each other. They do not need to go to bed, as someone said in the Senate, in order to prove the case.

[Translation]

I want to emphasize that such a study does exist. The debate will inevitably be reopened. I do not think that consideration of this legislation is necessarily the appropriate time to do that. We do not simply want to be told that this will be looked at; an active effort is required. I expect that very soon, some people will use the common law precedent to focus on the recent decision that is causing the government to take action with respect to same sex benefits. Eventually, someone will have to go before the courts. But perhaps we can find a solution before they have to do that.

Ms Robillard: As regards same sex partners, the courts are now forcing governments to act. I personally believe that we have no choice in that regard -- that we have to act. When you talk about broadening the concept to include the whole notion of economic dependency, as I was saying, that is a much larger debate and we have a duty to hold such a debate within society as a whole.

Senator Prud'homme: Before the courts?

Ms Robillard: Yes, but I also think that Canadians have to get involved in the debate. As far as I am concerned, that debate has not yet taken place publicly. We have a duty to get Canadians involved in such a debate, because we are talking about a completely different definition of our responsibilities and obligations. That is why I am saying that there may be a need to conduct studies with respect to the costs involved or the problem of defining such a concept, because it is certainly no secret that when you get down to the details, it is pretty complex. We may want to follow the lead of other countries who have studied this issue. That is why I said that this goes beyond the scope of the pension bill, because it encompasses everything the government does in all its legislation. And it is in that spirit that the government is looking very seriously at this issue, although there is no doubt that it will have to debate these issues publicly with all Canadians.

[English]

Senator Stratton: Welcome, Madam Minister. I should like to follow up very briefly on Senator Tkachuk's comments about the $30-billion surplus. It is on paper, meaning that it has been spent by the government. It was real, but, in essence, it was spent. Would you not be more fearful of the fact that, if you had to share in that surplus, you would have to come up with real dollars so that it could be put into a separate account under this new bill for investment for the pensioners?

Mr. Harder: Senator, it has been spent to the extent that we have amortized the pension liability; in that sense, it reflects itself in the public accounts. However, it is not as though the government took $30 billion out of the pension fund and spent it on some particular program or the like. The pension account is very rigid. In fact, that is the problem with the legislation. It is very rigid in requiring the government to put into the pension account a certain amount of money based on the formula.

We are stuck with the reality today that we have in that account an overstatement of the actuarial liability. That has not always been the case, and I believe the $13 billion to which the minister referred is the amount of money the government has, in the past, had to put into the plan because of shortfalls. That is over and above the so-called pension surplus of the day.

Senator Stratton: The perception you have out there is a thing called fairness, and I should like to follow up with a question that is related to fairness.

Your past and current employees are suing the government over pension withdrawals that have been made to date. If you have solid legal arguments, then you have nothing to fear and can withdraw the surplus without this bill. We were told in June that the effect of this bill would be to render moot existing legislation regarding the surplus.

At that time, our chair, Senator Kirby, summarized a question that was troubling senators on both sides of the table. He asked if it was fair that a participant in a court case who happens to have the right to change the rules of the game should change the rules of the game in the middle of the court case.

Your predecessor, Madam Minister, did not respond to this, so again I raise the question. Is it fair that a participant in a court case who happens to have the right to change the rules of the game should change the rules of the game in the middle of the court case?

Ms Robillard: According to my understanding, anyone who wants to contest keeps the right to go to court, even with that legislation. No one loses a right here. If someone thinks that the government is wrong, that person can go to court and ask the opinion of the court.

Senator Stratton: I am not trying to put words in your mouth, but I must ask for clarification. If there are any court cases currently under way, can and will those court cases continue, or will they die and have to be brought back as new cases without prejudice?

Mr. Hornby: There are currently two existing cases, both known by the name of Krause. They both deal with the amortization of the surplus in the existing plan. They do not deal with the disposition of the surplus, which this bill will deal with if enacted. I believe that the previous minister or officials said to the committee in the spring that those cases would be rendered moot. That would be the position that the Department of Justice would likely take in that litigation. The amortization issue becomes irrelevant once you have disposed of the surplus, which is what this bill will do. That opens the door to someone challenging the disposition of the surplus in this legislation, as Mr. Harder or the minister has indicated. The existing litigation could continue. There is nothing in this bill that will extinguish that litigation. It would be up to the Attorney General of Canada to argue and the court to decide whether or not the issue is moot and therefore should not proceed.

The legislation before you does not terminate that litigation. I hope that answers your question.

Senator Stratton: In response to a question by Senator Oliver, Minister Massé, when he appeared before this committee, replied that his advisers told him that in their view the rights are being extinguished. That is a contradiction between the former minister and yourself, sir.

Mr. Harder: No. That may be what the Department of Justice would argue, but it would be for the courts to determine. The basis of that is that if this bill were enacted the issue of the disposition of the surplus would have been determined. The issue before the courts is the adjustments that we have been making under the direction of the Auditor General and the view that that should be contested in law.

Senator Stratton: Who pays the court costs for the pensioners?

Mr. Harder: That would be for the courts to determine. In some cases, the courts have determined that.

Senator Stratton: That smacks of a typical government ploy to string it out so that the people who are suing cannot afford to continue the suit. Where is the fairness?

Mr. Harder: Senator, there is nothing in the conduct of the government's case in Krause that suggests that we are delaying it.

Senator Stratton: Of course, you would not admit to that.

I will follow up with a letter dated August 4 to the new minister from Captain Sjoquist. On page 2, in the second sentence of the third paragraph, he writes:

Therefore, I would respectfully urge you to convene a meeting of the Public Service Pension Consultative Committee without pre-conditions so as all parties are free to address any issues considered outstanding. This should be done with a view to the Senate introducing agreed upon amendments to Bill C-78 acceptable to the Government, Federal Public Servants and Retirees. It is, therefore, urgent that such a meeting take place prior to the next sitting of the Senate Committee.

How would you respond to that request? Without any preconditions on their part they were willing to meet. Why would you not be willing to meet with them?

Ms Robillard: It was very clear to us that the words "without pre-condition" refer to the existing surplus. Captain Sjoquist wrote a letter on June 28 wherein he said that unfortunately he could not come to the table because we would not accept the condition to discuss the existing surplus. I believe that that refers to the same subject. I am very sorry about that because it is clear to me that we cannot agree with our union partners on the past because of the surplus issue.

However, why is that a barrier to speaking about the future? Although we cannot agree on the past, we could agree on the future because all parties believe that joint management of the system is the way to go. However, because of the precondition of speaking about the past and the existing surplus, we were not able to resume negotiations. This is the problem we have.

That is why I said in my opening statement that I hope that if the bill is passed we will be able to attain the objective of a joint-management system, which is the way to proceed.

Senator Stratton: In the business world, when you read a paragraph such as this one in the August 4 letter, you would think that perhaps there has been a change of position, and that perhaps they are now willing to sit down without precondition to discuss the whole issue, and that someone would pick up the phone and call them. Did someone do that?

Ms Robillard: Yes, someone in my office called. I think it was clear that the existing surplus would still be on the table on the part of the union.

Senator Stratton: Is that for certain?

Ms Robillard: Yes.

Senator Kenny: Welcome, minister. I should like to come back to the question of the surplus. A number of people have expressed to me some concern about the surplus. I have been fairly comfortable with the concept that if the government were bearing the risk it should take the surplus. However, the question that is asked is how the contributions were determined. I realize that there are probably several answers to that, but were the contribution levels determined fairly and in an open negotiation, or were they imposed by the government?

Ms Robillard: You must remember that in the current system the contribution is integrated with the CPP, and there is a cap on the contribution of 7.5 per cent. That means, as Mr. Harder has said, that because CPP contributions have increased over the years due to that cap civil servants paid less into their own pension plan. Right now they are integrated and there is a cap. We want to change that through this legislation.

Mr. Harder: Senator, that cap of 7.5 per cent maximum employee contribution is legislated. The employer is left with the gap between the cost of the pension benefit and the integration of the CPP. That has led to a growing disparity between what had historically been a 50-50 or a 60-40 sharing of the cost to 70-30. If you extrapolated the present CPP increases, that could lead to the government paying 17 per cent of payroll.

This proposed legislation is seeking to give employees some assurance of what the transition arrangements will be. Let us remind ourselves of what those are: They are that there will be no increase before 2003; that at no time in or after 2004, should there be a requirement to increase the contribution for pension, would there be a single annual increase greater than .4 per cent; and that at no time can this plan get higher than a 60-40 split. That is, by standards of pension plans, quite generous.

In respect of implementing CPP increases, which, as I have said, the normal Canadian employee has had to pay, there will be no adjustments in the next year and those increases will be phased in in subsequent years.

I believe that the bill is quite transparent and generous in providing what those transition arrangements would be. We would only be returning to the historic ratio of 60-40.

Senator Kenny: I think I have understood your answer, but would you care to answer my question now?

Mr. Harder: The 7.5 per cent figure is in the bill.

Senator Kenny: My question was: Historically, did the employee have a free hand in determining the level of contribution?

Mr. Harder: No. It was prescribed by Parliament.

Senator Kenny: The amount employees were to pay was prescribed by Parliament, and a surplus accrued over time. If employees did not have a choice about how much they were to pay into the plan, then, perhaps, the surplus with which you are left at the end of the day ought to be up for grabs.

Mr. Harder: I do not follow the logic, senator.

Senator Kenny: The proviso is: only if they agreed to it.

Ms Robillard: I also have a problem understanding the logic. As you know, senator, the legislation prescribed the benefits. We had no choice about giving the benefits to the employees.

Senator Kenny: Were the contributions also prescribed?

Mr. Harder: They are prescribed in law at 7.5 per cent.

Senator Kenny: If both contributions are prescribed and result in a surplus, then where should the surplus go?

Mr. Harder: The employer's contribution is not prescribed. There is a prescription as to what we have to put in on an annual basis. However, the employer has had to bear, disproportionately, the costs of the plan, as CPP has been folded in. Today, we are at variance with the existing historic ratios of employer-employee contributions.

Senator Kenny: I understand and accept that. Was the amount of the contribution imposed on the employees?

Mr. Harder: Yes.

Senator Kenny: Were the benefits also imposed?

Mr. Harder: It is a defined benefit plan.

Senator Kenny: If surpluses arise therefrom, is it not reasonable for the employee to say, "Perhaps my contributions were set too high"?

Mr. Harder: It would be, senator, if the share of the employer-employee costs of the benefits were 50-50 or 60-40. However, they are substantially less than 40 per cent for the employees.

Senator Kenny: Are you saying that, while they were imposed, the fact that the ratio is better than the norm should be sufficient and, had they been the norm, then that surplus would not have accrued?

Mr. Harder: We would still be faced with the dilemma of how to take surpluses out of the pension accounts should they accrue.

Senator Taylor: It is worthwhile to point out that, perhaps, they overcontributed, thus there is a larger surplus than there should be. However, you answered that by saying that the figure of 7.5 per cent was set by Parliament. Are you saying that if Parliament had set a figure of 6.5 per cent then we would not have as big a surplus and that, perhaps, Parliament made the mistake?

The Chairman: In theory, the government could have set the contribution rate sufficiently high such that the fund would be guaranteed to generate a surplus. Under those circumstances, then, one could have made an argument, as some of my Liberal colleagues have suggested, that the surplus belongs to the employees. They say that because, in a sense, they overcontributed, almost deliberately, as a matter of public policy. The question that is being asked is: To what extent is the surplus driven by an excessively high overcontribution rate on the part of employees?

Mr. Harder: Mr. Chairman, I think I have the import of the question. The bill prescribes the benefits just as it prescribes the maximum contribution rate for an integrated plan. If there is a surplus and it is a co-managed, co-risked plan, which this is not, then one could contemplate contribution holidays for one or both parties. However, that is not the nature of this plan. It is the nature of the CMHC plan, for example. It is, potentially, what could happen in the future were we to achieve a co-managed, co-risk shared plan. However, we are subject to the existing legislation which prescribes the obligations of both the employees and the employer, which is to deliver a defined benefit.

Historically, when there has been a deficit in the plan, the employer has had to contribute rather significantly to cover those shortfalls. As I said earlier, the existing so-called surplus is the result of an overstatement of the actuarial liability that the employer has to deliver the defined benefit which is prescribed by law.

Senator Taylor: Any way you slice it, you took more money out of their pockets than you had to.

Senator De Bané: Or they contributed too much.

Mr. Harder: One could also argue that the government has contributed too much. To answer that question, one would have to ask: What is fair in terms of responsible ratios for an employer and its employees. When you compare the public service pension plan with other pension plans, you will see that it contains a rather generous statement of responsibilities for the costs of the plan. It is a rather generous plan in terms of the benefits it provides.

Senator Kroft: Senator Kelleher stated earlier on that the government's legal right to do what it is doing is not in question. I am interested in knowing certain facts, and my colleague across the way indicated by way of a press release before the hearings that he knows what they are.

Prior to there being a surplus, did union representatives ever raise the issue of capping the payment by the government of deficits, or the government guarantee? Have these issues ever been questioned specifically as they relate to fairness, or has the issue of fairness only arisen since the surplus appeared?

Mr. Harder: I was not around in 1991 when there was a deficit. However, I do not imagine that there was a discussion as to how the employees could increase their contributions.

Senator Kroft: Are you saying that the mechanics of this was never challenged on moral grounds?

Mr. Harder: The employer had a moral obligation and, indeed, a legal requirement to provide a defined level of benefit. That is what the employer has done.

Senator Kenny: Minister, I should like to reiterate what Senator Hervieux-Payette spoke to you about. I believe Senator Prud'homme also spoke to this issue. It is a question of taking sex out of government, if you will.

I understand that you are relying on a court ruling respecting this particular piece of legislation, which is a reasonable thing to do. You talked about it being a complicated issue. You also mentioned how important it is that there be a public debate on this issue. Do you plan to lead this public debate? If so, have you given any thought to what should be the principal issues that you want to see addressed in this debate?

Ms Robillard: I made it clear that this is addressed in more than the pension bill. It covers many different fields that the government has addressed in other legislation. I believe that would be the responsibility of the Minister of Justice. The first obligation of the Minister of Justice is to respond to the decision of the court relating to same sex partners. She is looking at all government legislation. At the same time, the concept of economic dependency is more and more on the table, as we have seen here. The government as a whole started to examine that question. However, we need to find a way to include Canadians in that debate because it has never been publicly debated. The decision as to how and when that will be done has not yet been made. We are prepared to consider the recommendation in your report. The government will more seriously examine that question.

Senator Prud'homme: And the Liberal Party. There is a good resolution here.

Senator Oliver: I have some questions dealing with the principles of corporate governance. Minister, in your opening remarks to the Senate committee today you said that you had read the report of the committee, and you congratulated the committee on the hard work it has done in raising issues of importance to you and to your department.

In our report on Bill C-78, as you will recall, we recommended that employees and retirees be provided with a comprehensive range of information about the operation of their plan that would provide an assurance that discretionary powers would be exercised in an appropriate manner. Can you advise us as to the extent to which this recommendation has been incorporated in the planning that is surely now under way for the implementation of this bill?

Ms Robillard: In the bill itself, there are many obligations on the part of the government and also the board to give information to the employees. You are referring to that, if I understand correctly.

Senator Oliver: Yes.

Ms Robillard: Under the bill, the government is obliged to give the right information to employees. Perhaps Mr. Harder can add to that.

Mr. Harder: Senator, the bill, as you know, has some specific reporting requirements. The Senate report, as I understood, spoke to governance issues that go further than that. Those are among the issues that we would have to discuss with our partners in the plan. We certainly are anxious to take into account the views of the Senate when those discussions are able to move forward.

As you know, while there had been general agreement on the framework for a co-managed, co-risk, shared plan, a number of details remained, and issues around corporate governance was one of them -- the relationship between the investment instrument and the advisory committee, the investment board and the advisory committee, and other issues of governance.

We certainly take your comments as helpful guidance for those discussions when we are able to get to that stage of discussions with our union partners and superannuate representatives.

Ms Robillard: I think it is clear that the government is committed to having a very transparent regime here. It has some obligations under the bill. If our partners wish to have more information, I would hope that, through the advisory committee, they will tell us exactly what they want. We are open to that.

Senator Oliver: You indicate that you are pleased with the work of this parliamentary committee and some of the recommendations we have made but can you explain why there is no requirement in this legislation for a mandatory review by Parliament?

Ms Robillard: There will be an annual report. We will be obliged to table a report in Parliament. A parliamentary committee or Senate committee could decide to study that report.

Senator Oliver: Why is it not mandatory?

Ms Robillard: There is a mandatory examination of the regime at least every six years, as we have done in the CPP regime. You have the annual report, and every six years you have a mandatory examination. Therefore, parliamentarians will be in a position to examine the new regime.

Senator Oliver: Can the minister explain why the bill does not require the board to ever meet with the plan's actuary, something that is vital to understand the nature of the plan's liabilities? Is that not a good principle of corporate governance?

Mr. Harder: Senator, I would ask the specialists speak to that. The issues that you raise are important elements of detail which would be part of the discussions that will take place with our partners on achieving a co-managed, co-risk, shared plan. The role of the chief actuary continues to be vitally important.

Senator Oliver: I must say that we are shocked to hear today that there have been no meetings. Nothing has been done. Several months have passed, and there have been no meetings and no real efforts to have meetings. I question whether I should have come here today because I have learned nothing except that nothing much has transpired. The Senate dealt with this, and our committee was asked to reconvene with the expectation that we would hear that the government, in good faith, had sat down and negotiated. However, nothing has happened respecting these important governance principles. Why are we here?

Ms Robillard: I said earlier that we were sorry that we were unable to resume negotiations with our union partners. You know the reason for that. I have already explained it is because of the precondition to put on the table the existing surplus. The government is not ready to do that. All parties agreed that we must work together on a joint-management system here. I believe the wish of the senators was that, during the summer, we would be able to achieve a more detailed, joint management system.

Senator Oliver: Nothing has transpired.

Ms Robillard: That is true, and it is regrettable. As I said, our union partners do not want to do it if we do not put the past on the table, but only the future.

I believe you quite correctly recommended that we have more consultation with the RCMP and the Canadian Armed Forces respecting the joint-management system. We will do that.

Senator Oliver: What have you done in that regard with the RCMP in the last three months?

Ms Robillard: This raises the same problem. We have tried to deal with the past and the future. I understand that it is very difficult for the union partners to say that they will renounce that question of surplus. That is why we are put in a corner where we are unable to go back to the negotiation stage. That is regrettable because we must have that joint-management system for the future. I am hoping that, if the bill is passed, we will be able to resume the negotiations.

I have made the commitment in front of you that, at the earliest opportunity, when all parties agree, including the RCMP and the Canadian Forces, I will bring forward some amendments to the bill to implement the system that is agreed to by everyone.

Senator Meighen: Welcome, Madam Minister. Perhaps I missed it in your answer to Senator Oliver, but my question relates to the fact that two months has gone by without any seeming progress on either side. That is disturbing to all senators. If my recollection is correct, I think your predecessor wrote to Senator Kirby, our chairman, at the end of June indicating that he was going to write to the Minister of Defence and the Solicitor General to ask them to proceed with the consultative process on pension matters with respect to the RCMP and the military. In your statement, you say that representatives for plan members covered by the Canadian Forces and the RCMP pension plan were not part of the original consultative process, and that it is not clear that members of these plans are interested in pursuing a joint management for their pension plan or whether they prefer some other arrangement. You also say that this is something which must involve further consultation. What happened to the consultation since the letter from Mr. Massé in June?

Ms Robillard: Mr. Massé, my predecessor, wrote, if I remember well, on June 25.

Senator Meighen: That is also my information.

Ms Robillard: We received an answer on June 28 saying that our union partners will not come back to the table.

Senator Meighen: From the Minister of Defence and from the Solicitor General?

Ms Robillard: No, from Captain Sjoquist.

Senator Meighen: But not from the ministers or from the representatives of the Canadian Forces or the RCMP. My understanding is they do not bargain with the public service employees. Am I correct, Mr. Harder?

Mr. Harder: That is correct.

Senator Meighen: Nevertheless, as you will recall, they came appeared before our committee and were particularly concerned that they should be part and parcel of the whole process. I left here in June under the impression that the minister was going to go ahead on that, and now I read in your statement that, notwithstanding his letter of June 25, nothing has happened. Are you telling me nothing has happened because the RCMP and the Canadian Forces replied to the minister's letter saying they were not interested in talking?

Mr. Harder: If I could, senator, the then President of the Treasury Board wrote to the ministers responsible for those institutions, the Solicitor General and the Minister of National Defence, on June 28 and referred to the response that we had received that day from Mr. Sjoquist. Notwithstanding Mr. Sjoquist's response, which is in respect of the public service pension plan, where he advised that he was not willing to reconvene consultations, the president wrote to the ministers on July 28, urging the creation of consultative mechanisms with those organizations to deal with issues surrounding what kind of plan we could look to for those organizations, recognizing that this bill will provide certain financial requirements or adjustments to the pensions for RCMP and Canadian Forces personnel.

We will want to pursue those parallel with the discussions with the public service unions, so that the amendments that the minister has pledged to come forward with, should we reach those kinds of agreements, will be in respect of all three plans, that is to say the public service plan, the RCMP plan, and the plan for the Canadian Forces. That mechanism has been initiated by a letter of the president of July 28 to those respective ministers.

Senator Meighen: Mr. Harder, unless I am missing something here, it seems to me that the RCMP and the Canadian Forces, who are, through nobody's fault, not direct bargainers with you, are paying for this dispute which you have with the public service employees with respect to the disposition of the existing surplus.

I do not understand why the negotiations with the RCMP and the Canadian Forces should not be able to proceed, notwithstanding your ongoing dispute with public service employees.

Mr. Harder: You are right, senator, that the issues surrounding the surplus have not been part of the consultation committee agenda, and that the discussions with the RCMP and Canadian Forces that we envisaged -- and the president's letter launched -- would be in respect of the design of the plan. What we will have to come back to, of course, is where those discussions come out.

Senator Meighen: Have those discussions begun?

Mr. Harder: They have not begun as yet. The president and the ministers have launched an interdepartmental process to lead to those discussions. Having said that, Bill C-78 provides for some enhanced assurance of the degree and the mechanisms of consultation for those two organizations, where the advisory committee is provided for in law, and the advice of the responsible ministers is required.

Senator Meighen: Two months is a long time.

Mr. Harder: The legislation itself, once passed, will oblige the employer to provide a higher standard of consultation.

Senator Callbeck: Welcome, Madam Minister.

Last week, I met with some pensioners who represented a branch of the association. They raised several concerns, one being the surplus. According to their understanding, the government is saying that, because it has assumed the deficit and taken the risks, the surplus belongs to government. They went on to tell me that, when they challenged government to show that it has been the risk taker, they could not get information in that regard. In other words, they want to know how much in extra contributions the government put into the pension plan and when that was put in. I would like to get that information, if I could.

Ms Robillard: I think that answer was already given by my predecessor when he appeared before your committee. It was $13 billion.

Mr. Harder: That began in the 1950s and happened as recently as 1991.

Senator Callbeck: How often were extra contributions made?

Mr. Harder: Senators will remember Mr. Peacock from his appearances earlier.

Mr. Bryce Peacock, Director, Financial Analysis, Pensions Division, Treasury Board of Canada: Between 1974 and 1991, over $8 billion in indexing payments were charged to general revenues rather than the accounts. That was for the three plans in total. The other $5 billion has been contributed in various years since the 1950s. I believe the last credit was in the early 1980s.

Senator Callbeck: It has cost the government $13 billion in risk?

Mr. Peacock: Yes.

Senator Callbeck: The pensioners raised a couple of other areas of concern. One related to the representation of pensioners on the advisory committees. They feel they are underrepresented. My understanding is that they have one representative on these committees, even though the number of pensioners is higher than the number of public servants. They want to know how that mix was arrived at. Why is their representation so low?

Mr. Harder: Senator, the representation of union partners, I think it is fair to say, is the group that is most active.

It was the view of the government and, in the process, of the advisory committee that it would be appropriate to have a superannuates' representative. The number of representatives agreed to at that time was one.

It is also fair to say to all the people involved that they have not taken a narrow view of the interests they represent. I certainly think that Mr. Bean and others who have been part of this process have been diligent in representing the views and interests of superannuates as well as present employees of the Government of Canada.

Senator Callbeck: In other words, the pensioners took part in the decision that there be one person on the advisory board?

Mr. Harder: They certainly were not unhappy to be there; however, I am sure they would have been delighted to have had more representation. It is a question of balance and representation.

Senator Callbeck: Mr. Harder, what is the status of the dental plan at the moment, as far as pensioners are concerned?

Mr. Peacock: My understanding is that that matter is being handled by another division in our branch. There have been several meetings with representatives of the pensioners' association. The responsible division is proceeding as fast as possible in developing the specifications of that plan. Meetings are ongoing. It is my belief that the target date to establish that plan is the middle of next year.

Mr. Harder: The government has authorized us to enter into those discussions. They are not being held in abeyance pending the passage of this bill.

Senator Angus: Madam Minister, you are doing a terrific job this afternoon in maintaining the position that was explained to us earlier by your predecessor. You keep saying, and it has been said to us before, that the government cannot and will not alter its position with respect to the existing surplus.

Look at all the people around you. I have been a member of this committee for six years. Until the introduction of this legislation, I have never received so much mail or seen so much interest in our committee. We have had several well-attended meetings on this matter. Grave concerns were expressed at those meetings. As a result, it became obvious to me that relations between the employer and the employees were not exactly at their best. That has been our impression in recent years. Some of the things you have said, minister, indicate that one of your goals as the new minister is to improve the climate and to start to address some of these thorny questions that are, obviously, causing unrest.

I do not understand the rush to pass this bill. I did not understand it in June. Frankly, I do not understand why the government says that it will not come to the table to discuss the existing surplus. The government can compromise. I think Senator Kelleher and one or two others have made the point, each in their own way, that government policy, generally, as reflected in the CMHC pension plan and other plans, as well as the Pension Benefits Standards Act, is to have a joint consultation process in regard to existing surpluses. Obviously, that has not been happening here. What we have are hearing over and over again is this: "We hear you, but we are not changing. We will not come to the table. We will not compromise."

I have read in the paper, as has everyone around this table, that the real reason the government is doing this is so that it can add $30 billion to the public accounts on the surplus side. It is said that that money has already been allocated on the books, that it must go through. The reason is really a political one.

I am having trouble listening to the technical arguments. I am a lawyer; I have practised for 40 years. I can read the law. Why are we sitting here on August 23, when it is 90 degrees in the shade, dealing with the same issues we dealt with on June 15, when it was 89 degrees in the shade? This is a public relations disaster for the government.

I cannot tell you folks on the Liberal side how to run your government. All you need to do is look around. I can show you our mail. Every one of us on this side were given briefing books containing hundreds of letters stating that this is a fundamental, key issue to employees and retirees. They are really upset.

Please tell me what the rush is and why the government will not compromise on the issue?

The Chairman: I think, Madam Minister, that was his one question. Given the preamble, I would hate for him to ask a second one.

Ms Robillard: When I first looked at the file, I discovered that negotiations have been ongoing for many years. We are not in a rush; we started to speak about this subject in 1992. It is now 1999 and the problem has not been solved. It is true that there were intensive consultations in 1998; however, consultations started before that.

At the same time, we talk about the past and the future. When you negotiate a certain point, you must recognize that we cannot come to an agreement on the subject. Let both parties recognize that we cannot agree on this subject.

Senator Angus: If one person takes the extreme position and says, "We will not even talk about it," then it is impossible to negotiate.

Ms Robillard: It is clear to me that we cannot agree on the past, something that includes the existing surplus. I will not repeat what has been said over the course of the last two hours. Recognizing that, can we not work on the future? In the future, employees will be included in a co-management system, something that has been done in the private sector for years. Let us go there together.

As a new minister, let me say that I am as disappointed as you are that we did not succeed in reaching that point with our employees. However, let me be clear: While there will be no compromise on the existing surplus, there will be a great deal of compromise on the new joint-management system. That is why I am asking you to pass this bill, senators.

Senator Angus: Madam Minister, you are my member of Parliament. You are doing a terrific job. I had high hopes that you would not come here to try to stonewall, as your predecessor did. The Prime Minister put you where you are because he has confidence in your ability. The people also have confidence in you. Please make a bit of a compromise so that we can solve this issue by September 10.

Ms Robillard: I had also hoped that the unions would not make any preconditions prior to meeting with me. As I have said to Mr. Bean, with whom I met just before this meeting and with whom I will meet next week, I hope that the unions will not preclude anything from the next set of negotiations. I would like to have a more modernized relationship with our employees. This is the way to go.

These people are the ones who provide services to Canadians. We rely on them. I hope that we will be able to build a future together.

Senator Angus: We want them to be happy employees. We want public service work to attract other bright Canadians, which I understand is a big problem precisely because of this draconian way of dealing with public service employees.

Senator Tkachuk: Madam Minister, I do not agree that the government has a right to the surplus. I am in the minority here. I have received a stack of letters on this issue, as have other honourable senators.

When you were briefed on this bill, did you think it was a good bill?

Ms Robillard: I was disappointed that we were not able to table a joint-management and risk-sharing system for everyone. I have read everything about what has happened with this bill. I am optimistic for the future; however, I am realistic, and the reality is that we do not agree and will not agree on the past.

Senator Tkachuk: I want to get to that reality. It has been a difficult thing to get to, especially over the last couple of months.

From page 1 to page 28, Bill C-78 deals with setting up an administration for the governance of future pensions. In your statement, you said that as early as September you want to get together with everyone to change the first 29 pages of this bill. It seems odd that you want us to pass a bill on which you plan to begin immediate negotiations and discussions to change it because you think this part of the bill is no good.

Ms Robillard: It is not odd, when you consider that it will bring our union partners back to the table.

Senator Tkachuk: The condition is the $30 billion?

Ms Robillard: The condition is to close the door to the past and to look together to the future.

Senator Tkachuk: That is what I am trying to do. I cannot get the past figured out, let alone the future.

First, you say the present -- which is this bill -- is no good because in September you will begin negotiations to amend it. The reason you want this bill passed is the $30 billion. It has nothing to do with how the future will be organized, because you already, by your statement, are saying that this is no good. You want to change pages 1 to 28.

I agree with you there, as does every military and RCMP union and association. We all agree that this part of the bill is no good. If it is no good, why are we rushing to pass it now?

Ms Robillard: I repeat that we are not rushing. We are in discussions, as we have been for years. I strongly believe that if we delay the bill we will not come to a conclusion because we are not able to agree on the existing surplus.

I encourage you to look at the positive side of the bill also, its benefits for some employees. Some employees will be happy with those parts of the bill.

Senator Tkachuk: I am sure they will. I did not say that all of it is bad, although I disagree with the $30 billion.

A resolution has been passed. There is a part of this bill about which you admit you do not agree. All the unions want to discuss it, yet you want it passed. All senators will remember the legislation Minister Martin wanted passed on the CPP. He wanted a board set up in order not to miss opportunities. I am not sure whether that board is set up yet.

You want to pass into law a bill to set up the administration and mechanism for something that you wish to begin destroying in September. You will make amendments to change it all.

Why go through all of that hassle and expense? Why do we just not bother?

Ms Robillard: Senator Tkachuk, I think you are exaggerating a little bit.

Senator Tkachuk: I do not think so. I think that you do not want this bill amended and sent back to the House of Commons because it would be inconvenient to you and the government because of the Speech from the Throne that is scheduled for October. This has nothing to do with the $30 billion. It has to do with a false agenda set up by the government. That is a terrible way to treat the people who are concerned about what is happening here. This is a pile of crap, and so is the fact that all summer no one took the time to meet.

The Chairman: Order, order!

Senator Tkachuk: I can make a statement as well as anyone else.

The Chairman: Madam Minister, you have to take Senator Tkachuk's comment in light of the fact that before the meeting today he issued a press release commenting on your testimony before this committee before you had given it and before any of us had heard it.

Senator Tkachuk, I would be happy to have you ask a question, if that is where you are going.

Senator Tkachuk: I think this matter is inconvenient for the government. We have not yet heard a good explanation for why the government did not meet this summer.

Ms Robillard: You are worrying in advance that we want to destroy this bill. We do not want to destroy it. We would like to improve it with our union partners after the bill is passed. The Speech from the Throne has nothing to do with this. As I have said, for seven years we have been looking at the system with our union partners, trying to find a solution. We did not find one, and we are sorry and frustrated by it; however, we must look to the future. We must bring the benefits to the employees that are contained in Bill C-78 and we must resume negotiations for the joint-management system. That is why we are here this evening.

Senator Tkachuk: Would you agree to withhold Royal Assent on the part of the bill that sets up the administration and which you wish to change?

The Chairman: I am not sure you mean Royal Assent. I assume you mean proclamation.

Ms Robillard: No. We need that board.

Senator Tkachuk: Why do you need the board? It is not the board you want. The board you want is the one you will negotiate in September.

Ms Robillard: It is the board I would like to have, and we all agree on that.

It is not only a joint-management system; it is also a risk-sharing system. The government will not impose that new board in the bill. That is why we must work with the bill that is in front of you.

Having said that, I repeat that we are ready to work with our union partners in a new system. We already agree on the general system, as you know, so now we need to work on the details to be able to bring some amendments in front of you in the near future.

Senator Tkachuk: On June 14, Minister Massé wrote to this committee, and that letter was the reason Senator Stratton undertook to move an amendment to the bill in the Senate and to give the government a little extra time to negotiate on this bill. In that letter, he said:

I hope that you will convey to the Committee the government's sincere intention to undertake whatever measures are necessary to ensure that discussions with employee and pensioner representatives are re-established as soon as possible with a view to achieving a joint management arrangement in the future.

What measures has the government taken since that letter? Understand, minister, that when he wrote that letter, he did not know that that resolution would pass in the Senate.

Ms Robillard: The letter is dated June 14, and the motion was passed by the Senate on June 17. On June 25, there is another letter from Mr. Massé.

Senator Tkachuk: I am more interested in him saying:

I hope that you will convey to the Committee the government's sincere intention to undertake whatever measures are necessary to ensure that discussions with employee and pensioner representatives are re-established as soon as possible with a view to achieving a joint management arrangement in the future.

I want to know what measures the government has undertaken.

Ms Robillard: My predecessor wrote to our union partners on June 25 to resume negotiation on a joint-management system. In that letter, my predecessor was clear about the fact that we will not discuss the existing surplus but will discuss joint-management system.

As I recall your motion in the Senate, I think the sense was that you wanted us to work with the union partners.

Senator Tkachuk: That is exactly it. In a June 25 letter to this committee, Mr. Massé wrote:

I have advised Mr. Bean that the government's position on the disposition of the existing surplus remains unchanged.

Given that letter, and given his letter to Mr. Bean of same date, why did he say on June 14 that he would take whatever measures are necessary? Why did he not make it very clear on June 14 to the Senate Banking Committee that he was not going to do anything unless the condition of the surplus was disposed of?

Ms Robillard: On June 14, when he wrote to Senator Kirby, my predecessor said that he had noted the committee's interests in issues such as the disposition of future surpluses. I think it was clear that he was thinking about future surpluses and not the existing surpluses.

Senator Tkachuk: No, it is not clear.

Ms Robillard: Yes, it is clear. It is written, "future surpluses." What about the committee report?

Senator Tkachuk: He said on June 14 that he will take whatever measures are necessary. On June 25, he wrote to Mr. Bean, advising him that the government's position on the disposition of the existing surplus remains unchanged. I am asking why he said to us he would undertake "whatever measures are necessary." It was on that basis that we acted to move an amendment in the Senate; to ask the government to resume some negotiation with the interested parties affected by the pension surplus.

Ms Robillard: In your motion, you referred to the letter of June 14.

Senator Tkachuk: Yes, exactly.

Ms Robillard: In the letter of June 14, we were speaking about future surpluses.

Senator Tkachuk: Yes, that is true. What does that have to do with the past surpluses and not negotiations? He says, "whatever measures are necessary."

Ms Robillard: I have a little problem in following you, Senator Tkachuk. I am saying here that, on June 14, Marcel Massé was referring to the interests of the committee in the disposition of the future surpluses and the establishment of contribution rates through a joint-management framework and to the fact that he was willing to resume negotiations on these subjects. You passed a motion on that letter.

Senator Tkachuk: Yes, we did, on the letter of June 14.

Ms Robillard: So what is the problem?

Senator Tkachuk: The problem is that nothing has happened. He referred to "whatever measures are necessary," and that is not what he told Mr. Bean in the letter of June 25. We acted on the letter of June 14. I am trying to get at what the minister was trying to say to us, and whether he was giving evidence that was not quite exactly what he meant.

Ms Robillard: As I read the letter of June 14, it is clear it was about the future surpluses. When he wrote to the union partners on June 25, he received an official answer to that. I quoted the letter. I would repeat the quotation from the letter of June 28, by Captain Sjorquist who said:

In consideration of this I must state with emphasis that the existing surplus was the only reason for the breakdown of the original discussion on pension reform. As all parties were in basic agreement on a joint management and risk assuring agreement for a new pension plan, it is obvious to me that further talks cannot proceed without your agreement to negotiate the existing plan surplus.

The last sentence is very important. The captain was saying: Regrettably, with this in mind, on behalf of my union colleagues, I must advise you that we are not willing to reconvene the consultation committee unless the disposition of the existing surplus is on the table. Is that clear?

Senator Tkachuk: Yes. At the end of July, he writes another letter, to which Senator Stratton referred. That did not give you or the government any reason whatsoever to begin negotiation. When we report back to the Senate on September 7, which we are obligated to do, we will report that you will begin renegotiating the first 28 pages of this bill in September, as you have said, with all the affected parties, which will mean it will all have to be amended.

I do not get it. I do not understand why we would have to pass a bill with which you yourself do not agree.

Ms Robillard: I hate to repeat myself, but I will, Mr. Chairman.

Senator Tkachuk: Please let her repeat herself so it is clear, Mr. Chairman.

Ms Robillard: We are in a situation right now where we cannot resume negotiations with our union partners because -- and I respect their opinion -- they want to discuss the disposition of the existing surplus. The position of the government is that we will not discuss that. We are not able to resume negotiations at the table to come to a point of having a joint-management system to agree on that.

As we said, we also want to have consultations with the RCMP and the Canadian Forces. I am asking you, honourable senators, to pass the legislation so that we will be able to do that job afterwards.

Senator Taylor: The Supreme Court has defined what "conjugal nature" means. Your bill specifies that a person must establish that he or she was cohabiting in a relationship of a conjugal nature. The Supreme Court then went ahead and defined that in terms of sharing shelter, sexual and personal behaviour, services, social activities, economic support and children, as well as the societal perception of the two as a couple.

Obviously, the Supreme Court confines it to only heterosexual and homosexual couples, and discriminates against other types of couples who are living together and who are interdependent. They are excluded.

Senator Cools and I discussed this issue in June. My research assistants have researched this matter and tell me that, over 10 years ago, the same problem existed in New South Wales, Australia. Amendments which would eliminate the discriminatory definition could be made. This could be called a "domestic relationship," and it could be defined in the same way as it is defined in New South Wales and in other Commonwealth areas. It would eliminate the sexual context entirely. It would be a domestic relationship.

I have prepared approximately ten amendments to accommodate that change.

Senator Tkachuk: Perhaps we should vote on them now.

Senator Taylor: I want to know if you will examine these amendments, and shake up your legal department and invite them to join the new millennium.

The Chairman: I think that was more of a statement than a question. Perhaps Senator Taylor would give that material to Mr. Hornby. I am sure all of us would be delighted at the prospect of any lawyer being brought into this century, let alone the next one.

Senator De Bané: Madam Minister, I was pleased to hear of your appointment as President of the Treasury Board.

Having listened to you, your officials, and to the members of the opposition, please tell me if I understand the situation correctly. Essentially, those who are entitled to a pension are guaranteed a pension by law. The amount of that pension is defined. With passage of this bill, benefits will increase. Over the years, employee contributions have been capped; but employer contributions have not. We now realize, in retrospect, that the government over-subscribed to that plan. If the government had not over-subscribed, we would not have a surplus today. The government alone shouldered the risk while the benefits were beyond any dispute or uncertainty. If all of this is so, then I fail to see why people would complain about a bill that would improve their situation and which would result in both parties sharing in the funding.

Do I correctly understand the spirit of the bill?

Ms Robillard: Yes. It is clear that anybody who will take his pension tomorrow will have the benefits he is supposed to receive according to the legislation. That means that we will respect our commitment in the sense that employees will receive full pensions.

Senator De Bané: Had the government not over-subscribed, there would be no surplus to discuss.

Ms Robillard: There is always some risk in a system like that. The basic principle here is that, if we share the risk, we can share any surpluses or any shortfalls or deficits in the system. The notion of risk sharing is very important. In the present system, there is no risk sharing with our union partners. We would like to have that in the future. For the unions, it will be an advantage to have a say in the management of the system. That is why, in my view, a co-management committee is the future.

You are completely right in what you say.

The Chairman: Madam Minister, on behalf of the committee, I would thank you very much for coming. I am sure you have enjoyed appearing before the committee so much that you look forward to assisting us again.

Ms Robillard: I will come back.

The Chairman: I would also thank the officials for providing us with a comprehensive briefing.

Honourable senators, our other witness this evening is Mr. Sheldon Bell, Chief Financial Officer, Canada Post.

Some of you will recall that, at our hearings in June, we were advised that one part of the bill that deals specifically with the Post Office. Members of the committee felt it was important to hear from Mr. Bell.

Welcome, Mr. Bell, and please proceed.

Mr. Sheldon Bell, Senior Vice-President and Chief Financial Officer, Canada Post: Mr. Chairman, I have with me Mr. Patrick Tardif who is our corporate manager responsible for the development of the pension plan within the corporation.

The Chairman: Does Mr. Tardif report to you, sir?

Mr. Bell: Yes, he does. I chair a steering committee to which Mr. Tardif reports.

It is a great honour to be here to talk to you about Bill C-78 and the establishment of the proposed Canada Post pension plan.

As honourable senators may know, Canada Post became a Crown corporation in 1981. Since then, we have assumed full responsibility for all our employee benefit programs with one notable exception, namely, pensions. The current pension reform initiative offers the corporation a significant opportunity to correct this anomaly and to create a separate Canada Post pension plan.

Our mandate under Bill C-78 is to put in place, by October 1, 2000, pension coverage for our employees that mirrors the reformed PSSA. In other words, our employees must receive the same benefits at the same employee contribution rates as they would if they remained under the PSSA.

The legislation will also require that we treat all service prior to October 1, 2000, exactly as it is treated now under the existing PSSA. To that end, the government will transfer to Canada Post approximately $6 billion in assets to ensure the level of future benefits.

In fact, Bill C-78 provides further protection for plan members by requiring the establishment of a supplementary plan to include arrangements for pensions above the income tax maximum, and that Treasury Board ministers be satisfied that the benefits are equal between the old and the new plans. For our employees, then, there will be no difference between the Canada Post and the PSSA plans when the former comes into being.

For Canada Post, however, the change will be tremendous. We have approximately 13 months to develop a governance regime, to draft plan documents, to develop the administrative capability, to solicit the views and interests of employees and their representatives, and to implement an investment strategy for the plan assets. All of this must stand the scrutiny of ministers, government regulators, our employees and their bargaining units.

Indeed, honourable senators, no group is more important in this process than our employees. That is why we have undertaken an extensive employee information program since the government first announced its plans for pension reform. This has included writing directly to each employee to provide a full explanation of the proposed legislation and the process for setting up the plan. We have established a feedback mechanism within Canada Post that enables employees to raise questions or concerns about the changes and to have these concerns answered. We have met on several occasions with bargaining agents, and will continue to do so. Ultimately, of course, the plan will be negotiable within the normal collective bargaining process, something to which we as a corporation look forward.

After all, a key part of the corporation's business case for a separate plan is the ability to deal with pension issues as part of a total collective agreement. However, as I have said, we must first get the plan, as envisioned by Bill C-78, up and running smoothly. This represents a significant challenge, and will take some time and the full attention of the corporation.

Currently, we are assembling the resources and expertise that will enable us to meet the needs of a pension plan that will be one of the largest in Canada. We must give everyone time to get used to that new environment before we contemplate further changes through negotiation. That is why Canada Post believes the period between October 1, 2000 and October 1, 2001 is essential for both the corporation and the employees. It will give all of us time to become totally familiar with the operations of the plan before making it subject to collective bargaining and the possibility of changes.

In the meantime, our employees have the same benefits at the same rates of contribution as if they remained in the reformed PSSA. Those benefits are protected by the requirements of this very bill, as well as by a very tight regulatory framework and the provisions of the Pension Benefits Standards Act. At the end of the day, our employees will have the assurance that Canada Post as the plan sponsor and administrator will assume the risks associated with the plan.

Honourable senators, you can be certain that, for the first time, our employees will have the opportunity to make their views known and, after October 1, 2001, to have their say in the pension plan through collective bargaining. This is an important and exciting step for Canada Post and its employees. We are committed to doing it right.

Thank you, Mr. Chairman.

Senator Stratton: Mr. Bell, my question has to do with the latter part of your statement. It is my understanding that a recent information notice issued by Canada Post to its employees stated that, after October 1, 2000, if the pension bill is approved by the Senate, they could can only elect to buy back former service with Canada Post or its predecessor, the Post Office, if it was eligible under the PSSA. How did Canada Post come to this conclusion, since there is no such restriction of this nature in Bill C-78?

Mr. Bell: That refers, essentially, to the continuation of all benefits employees were entitled to under the previous PSSA. The comment clearly states that other liabilities have not been considered as part of these changes.

However, there is no question that all liabilities for active employees -- and I think that is important -- for past service will be fully covered by Canada Post in the future.

Senator Stratton: Treasury Board has always claimed that the federal government has been subsidizing the participation of separate employers in the federal superannuation plan due to the stipulations of the PSSA. What is the estimated increase in annual operational costs to Canada Post as a result of having to assume the entire responsibility for the provision of retirement benefits for employers?

Mr. Bell: That question, senator, is rather complex. There are a couple of key elements. There is no question that, under the current plan, the payments contributed by the employees and by Canada Post were less than the cost of covering the plan. As a result, we have reached an agreement with Treasury Board that there will be a transition period during which Canada Post will have the opportunity of, potentially, restructuring in order to recover those incremental costs.

The transition payments will ensure that there are no incremental costs to either Canada Post or to the employees until at least 2004. After that time, the cost to Canada Post may increase if, in fact, there is a deficiency between the forecast liability and the amount that is being paid into the pension fund. However, with an effective investment program, that may, decline significantly from the current subsidy because that is based on certain investment assumptions that effectively restrict the investment of funds to fixed instruments such as Government of Canada bonds. Canada Post will have a broader range of investment opportunities as administered under the Pension Benefits Standards Act. We believe that will give us significantly more opportunity to increase the earnings of the fund and, therefore, keep the costs of the fund, to both the corporation and the employees, to a minimal amount.

Senator Stratton: I understand from your annual report that the costs are estimated to be $106 million annually.

Mr. Bell: Yes, in that range.

Senator Stratton: Is there a transition agreement through which you will get help from the government with respect to that annual cost?

Mr. Bell: Yes, that is correct.

Senator Stratton: Will the government take the entire $106 million annually, or will it take a portion of it?

Mr. Bell: As you know, the government has reached an agreement to phase in the increases with its own employees. The agreement that the government has reached with Canada Post, and therefore the employees of Canada Post, is quite similar to the agreement that the government reached with its own employees. A transition agreement has been established which phases in the increased costs over a period of about 10 years.

Senator Stratton: Thereafter you assume the total costs for that plan?

Mr. Bell: It is important to understand that we incur total liability for that plan effective October 2000. However, for a period not exceeding 10 years, the government will make a transition payment to us to help us fulfil that liability.

Senator Stratton: I assume that the transition payment diminishes each year.

Mr. Bell: That is correct.

Senator Stratton: What is it the first year?

Mr. Patrick Tardif, Corporate Manager, Pension Plan, Canada Post: It is along the same lines as the transition payment for the employees. On the employee side, the transition agreement is that there will be no premium increase until 2004. Then the employee contribution will move from 30 per cent, where it is today, to a maximum of 40 per cent. That is estimated to take six or seven years, depending on the projection you look at.

The transition support to Canada Post will be along the same lines, so the additional costs that Canada Post will incur are covered until the end of 2003, gradually decreasing to zero.

Senator Stratton: Am I correct that the government is contributing approximately $106 million, plus the operational costs annually until 2004, and then it diminishes over the next six years?

Mr. Bell: Yes.

The Chairman: We have jumped to the solution without talking about the essential problem. Although Canada Post became a Crown corporation in 1981 and therefore has been responsible for all the benefits for its employees since that time, other than the pension plan, I understand that the problem is that, since 1991, Canada Post has matched employee contributions into the plan but, just as in the government plan, the employer's contribution has gone from 60 to 70 per cent over the last little while. Similarly, the employer's portion in the same plan would have had to have been 60 to 70 per cent. You were only putting in 30 to 40 per cent to match the 30 to 40 per cent from the employees. Therefore, the balance has come from the government. In other words, since 1981 the government has been subsidizing the employer's portion of the Canada Post pension plan. Is that correct?

Mr. Bell: That is essentially right.

The Chairman: Therefore, if you are going to take over responsibility and become a genuine Crown corporation rather than a subsidized one, which you have been up until now, you want a transition period to have that subsidy phased down. Is that what we are dealing with?

Mr. Bell: That is correct. It is important to understand that the provisions within the Canada Post pension plan were that Canada Post would match the contributions of the employee.

The Chairman: Yes. Therefore, it is a transition period designed to help the corporation. It has nothing to do with the employees; only with the employer's portion. The employees will contribute as if they had stayed under the PSSA. The government will step in and phase down the level of subsidy it has been giving you since 1981.

Mr. Bell: That is correct.

The Chairman: In your opening statement you mentioned two dates. One was October 1, 2000, and the other was October 1, 2001. What is the significance of either date, and how does either date link with when your major union contracts expire?

Mr. Bell: The significance of October 1, 2000 is that Canada Post must be in a position to fully take over the liabilities of pensions for active employees as of that date. On November 1, 2000, when an employee retires, Canada Post will be fully responsible for the payment of pension to that individual. It is a demarcation date when responsibility for pension payments will move from the government to Canada Post.

The Chairman: To be clear, "fully responsible" means you will pay them out of the employees' money and the government's money because the government will still be subsidizing Canada Post. It simply means that you will issue the cheque.

Mr. Bell: It means that we must have all the administrative capabilities in place.

The Chairman: Was that date arbitrarily chosen?

Mr. Bell: It was established in the legislation, yes.

The Chairman: There is no magic in the date. Does it relate to anything else?

Mr. Bell: There is no magic in the date per se, but that date forms a hard deadline by which we must comply with the legislation, so it is very important that we put in place all of the mechanisms to administer and sponsor this by that date.

The Chairman: What is the significance of October 1, 2000?

Mr. Bell: The key significance is that the government and the corporation, as well as the employees, need a period of time to understand the implications of the pension plan to the corporation. As you know, we do not have a single union but, rather, four bargaining units, plus a management unit that will be part of this pension plan. As a result, the settling in period of one year is the significance of the dates.

The Chairman: I understand why management would want it but in a defined plan I do not know why employees would care what the impact on the corporation was because, from their view, it is a defined benefits plan. Why do employees need a transition period?

Mr. Bell: Employees would potentially be interested because, after October 1, 2001, the pension plan will be fully bargainable in subsequent union negotiations. Therefore, a clear understanding of the implication of the pensions, the costs et cetera, are very important to the employees.

The Chairman: You are saying that the real significance of October 1, 2001 is that, after that date, it becomes fully bargainable.

Mr. Bell: That is correct.

The Chairman: When do the major union contracts expire?

Mr. Bell: We are currently in arbitration with CUPW.

The Chairman: When does the contract expire?

Mr. Bell: There is a new notice for bargaining in July 2000.

The Chairman: What does "a new notice for bargaining" mean?

Mr. Bell: The contract which was due in 1997 is still before arbitration, so when that arbitration ruling is made, new contracts will be required in 2000.

The Chairman: In essence, until October 1, 2001 the existing pension plan, with effectively the same benefits as exist under the PSSA, stays in force?

Mr. Bell: That is correct.

The Chairman: Am I correct that, beginning on October 1, 2001 the pension plan becomes fully bargainable?

Mr. Bell: That is correct.

The Chairman: Suppose that a three-year contract were signed next month, therefore taking you past October 1, 2001. On October 1, 2001, however, it would be clearly in the employees' interests to either reopen the contract -- because they want to discuss pensions on the first day they are able to do so -- or to enter into a separate agreement to allow them to do that.

Mr. Bell: It may be. That is somewhat of a hypothetical question.

The Chairman: I should not ask if it is in their interests because that is self-evident. Is there anything that would prevent that from happening?

Mr. Bell: I do not think there is anything to prevent that from happening, but I cannot answer with certainty. Canada Post is working hard to establish a longer-term agreement with its bargaining units. In order to do that, the corporation is prepared to evaluate various alternatives. Senior management is quite committed to doing that. As to whether there is the legal ability to in fact open the contract, I am not a lawyer and I cannot answer that question right now.

However, I can tell you that the intent is to ensure that the employees are adequately protected to ensure that their combined benefits will not deteriorate in any way. Therefore, while they will have the ability to bargain after 2001, they will have a contract in place but, at the absolute minimum, they will have the ability to bargain when a new contract comes up.

The Chairman: I am not asking you whether you would agree to this, but clearly you could agree to a clause that, effective October 1, 20001, this issue is open, and everything else in the contract keeps going. As part of a contract you sign before 2001 you could include a reopening provision on that one clause. I am not saying you that you would, but you could.

Mr. Bell: You are quite right, senator. We certainly could do that. If I am not mistaken, I believe that our contracts already have a clause that allows for the contracts to be reopened, with mutual agreement of both parties.

Senator Meighen: As we heard in evidence in June, the two areas of concern were the transition period and whether there was some assurance that the level of benefits and rights would not be diminished with the transfer out from under the Public Service Superannuation Act. Have you had any discussions, other than those concerning the arbitration, if that is applicable, with the unions since the end of June of this year?

Mr. Bell: Yes, we have. We have an extensive communication process going on with our employees. My colleague, the senior vice-president of human resources, has established an ongoing communications program which includes direct mail-outs to every employee's home explaining the situation and explaining the transition process. We have had a number of meetings with the various bargaining units, and we are continuing to have information sessions with our employees.

Senator Meighen: That is encouraging to hear. You seem to be making more progress than is being made in other areas we heard about earlier this evening. Congratulations.

The Chairman: I would thank our witnesses from Canada Post. We will resume at 9 o'clock tomorrow morning.

The committee adjourned.

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