Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 56 - Evidence, August 24, 1999
OTTAWA, Tuesday, August 24, 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 9:00 a.m. to give consideration to the bill.
Senator Michael Kirby (Chairman) in the Chair.
[English]
The Chairman: Senators, our first witnesses this morning are from the Public Service Alliance of Canada.
Mr. Bean, would you proceed, please?
Mr. Daryl Bean, President, Public Service Alliance of Canada: Mr. Chairman, honourable senators, I am accompanied today by Mr. Jelly, Assistant to the Executive Committee.
On behalf of the more than 700,000 current government workers, employees and retirees who are or were contributors to the Public Service Superannuation Plan, I should like to take this opportunity to thank your committee for the hearing we received on June 9. I should also like to say that the observations and recommendations penned by your committee on June 15, 1999, and attached as an appendix to your report on Bill C-78, were, by and large, a reasoned approach to a complex and difficult set of issues.
The subsequent decision of the Senate to delay the final vote on Bill C-78 until early September provided the parties with an opportunity to open a new dialogue with a view to reaching agreement on some of the outstanding issues. Despite the best efforts of the alliance, no face-to-face discussions have taken place in two months since the vote in the Senate. Instead, all that has transpired has been an exchange of correspondence.
On June 18, I wrote the former President of the Treasury Board, Mr. Massé, and proposed that the consultative committee that had met until December 10, 1998 be reconvened and suggested that the observations and recommendations contained in your twenty-seventh report provided a useful framework for discussions.
On June 18, I wrote to your committee chairman and deputy chairman, suggesting that it would be appropriate for a member or members of your committee to either observe or participate in the discussion between the parties. By letter dated June 25, 1999, former Minister Massé responded to the alliance indicating that he had written to the chair of the National Joint Council and expressed the government's willingness, according to him, to reopen discussions on a joint-management framework.
On July 30, I wrote the former Minister Massé indicating my surprise that no meetings had been convened and stated that I believed it was incumbent upon us to meet, and to meet quickly. Such meetings should take place without pre-conditions and with all parties free to put any of the issues addressed in the Senate committee report on the table for discussion and, hopefully, resolution.
Within a hour of her appointment on August 3, I wrote the new President of the Treasury Board, Lucienne Robillard, congratulating her on her appointment and pointing out the urgency of a meeting to address the outstanding pension issues in advance of your committee's August 23 and 24 hearings.
On August 19, my office received a phone call in which I was invited to meet with the minister on September 1. I have no idea as to the agenda. However, in light of the minister's August 20, 1999 letter, I can only assume the pension issue will not be discussed.
On August 20, 1999, Minister Robillard replied to my August 3 letter indicating that Bill C-78 must pass before she will discuss joint management and other issues.
I wish to depart for a moment from the text of my remarks to say that I was here last night and listened to the minister. The minister said that she is willing to discuss joint management and risk sharing, after the legislation is passed. I have a message for the minister. I am not prepared to discuss risk sharing after the government has stolen $30 billion from the fund. If she wants to talk about joint management, yes, we can do that; but we certainly will not discuss risk sharing after $30 billion has been stolen.
On August 23, I wrote to the President of the Treasury Board suggesting that her approach to Bill C-78 is the wrong prescription, is an affront to good government and democracy itself, and an abuse of power.
This morning I wrote to the President of the Treasury Board, Lucienne Robillard, advising her of an Environics poll concerning the distribution of pension surplus and requesting that the pension issue and changes to Bill C-78 be the main items for discussion at our September 1, 1999 meeting. In my opinion, the government's response to the opportunity provided by the June 17 vote in the Senate has been utterly insufficient and, I might add, arrogant.
Within hours of the vote delaying passage of Bill C-78, my office was unofficially advised by senior government officials that Treasury Board had no intention of meeting and would wait the summer out in the expectation that a final vote would be held by a reconfigured Senate in early September, at which time the government's position would prevail. That was their only contact with my office.
While I am somewhat reluctant to accuse a minister of deliberately attempting to frustrate the will of the Senate, the former minister's failure to convene a meeting of the consultative committee makes it hard to conclude otherwise. In fact, all of the indications that we have been given suggest that the former minister would simply not discuss any of the outstanding issues unless and until the alliance and others were prepared to drop the surplus issue. In essence, he would appear to have taken the position that any attempt by plan members to pursue the surplus issue was justification for him to ignore the desire of the Senate that we meet. This was despite the fact that your report, Mr. Chairman, made no recommendation as to the surplus issue, suggesting instead that it remain open for discussion. Last night, the minister reinforced that position.
Moreover, if the current minister's August 20, 1999 correspondence is a final reflection of her intentions, then nothing has changed.
In the time that remains I should like to provide the committee with an overview of the public opinion on the surplus issues. I do this because the former minister, Mr. Massé, continuously talked about the taxpayers and what they wanted. While I would not advocate that government set policy according to poll results, public opinion is clearly a factor that should be taken into consideration. From my perspective, public policy should be guided by the principles of fairness, integrity and honesty. Sometimes, these principles will be at variance with public opinion. When principles important to the concept of good government are at variance with public opinion, the government may be right to discount public opinion.
When these principles and public opinion converge, public opinion should guide public policy more forcefully. The surplus is one of these issues. Fairness indicates that plan members should share in any pension surplus at least on the basis of their full direct and partial indirect contribution.
Integrity suggests that the government should use their legislative power with discretion and consult, negotiate or mediate in good faith. Honesty would suggest that, if the government were entitled to the full pension surplus as it argues, it would allow the question to be adjudicated through the courts rather than through pre-emptive legislation.
I can now report to you that the public opinion absolutely and fundamentally rejects the position on surplus being advanced by the government. According to the public opinion poll commissioned by the alliance and conducted by Environics Research Group as part of its Focus Canada omnibus poll; the government's position has the support of almost an insignificant 5 per cent of the population.
In contrast, at 51 per cent, more than 10 times the number of people surveyed support the proposition that the plan members, and not the government, receive the entire pension surplus. The survey of 2,018 Canadian, 18 years of age and over, was carried out in homes between July 2 and August 2, 1999 and are considered accurate to within plus or minus 2.2 per cent, 19 times out of 20.
Environics asked a specific question: "The federal government has introduced legislation that, if passed, would remove the $30 billion in accumulated surplus from the pension plan of federal government employees. Historically, however, federal employees have contributed 40 per cent of the pension funds and the government has contributed 60 per cent. Do you think the federal government is entitled to (a) all of the pensions surplus; (b) 60 per cent of the pensions surplus; or (c) none of the pensions surplus?"
Canadians answered. Five per cent of us believe that the government is entitled to all of the pension surplus as is indicated in Bill C-78. Twenty-nine per cent of us believe that the government is entitled to 60 per cent of the pension surplus, and 51 per cent of us believe the government is entitled to none of the pension surplus.
I say "of us" because it barely matters who respond to this question. The answer is almost identical according to age, gender, education level, religion, marriage status, language, home ownership, union membership, income level, occupation, region, community size, and, believe it or not, political preference. The poll results that have been distributed to you as an appendix to this statement assessed a more or less straight line of support for the three suggested surplus distributions across the demographic spectrum.
The Liberals amongst you should take note that only 5 per cent of the respondents identified as supporting the federal Liberal Party support the government's position, that it is entitled to all of the pension surplus, while 29 per cent of your likely supporters believe the government is entitled to 60 per cent of the pension surplus, and fully 48 per cent believe the government share should be zero.
The Progressive Conservatives amongst you will be interested to know that the level of support for the government's pension is the same 5 per cent among respondents identified as supporting the Progressive Conservative Party. The number of Conservative supporters endorsing a 60 per cent share for the government is higher at 43 per cent, while the number supporting a distribution that gives plan members 100 per cent of the surplus is the same, 48 per cent.
The difference in numbers between Liberal and Conservative Party supporters is explained by the fact that a higher percentage, 15 per cent versus 4 per cent of the Liberal Party supporters, either had no opinion or did not answer.
I should underscore that the 15 per cent of the respondents of the Environics question who either had no opinion or did not answer, is somewhat higher than one would expect. It is well within an accepted range and can be explained by the complexity of the issue rather than the complexity of the question itself.
If any of you were wondering where the NDP, Reform or Bloc Quebecois support stands on surplus distribution, you need not worry. In fact, this issue seems to have an unique ability to unite not only the right and left, but also the centre as well. The percentage of people who believe that the government is entitled to a 60 per cent or less share of the accumulated surplus ranges from 80 per cent for the Liberal Party supporters to 91 per cent for the Conservative Party supporters, with the NDP, Reform, and Bloc supporters falling in the middle at 84, 85 and 87 per cent respectively.
Later today, I will be writing to the leaders of the Bloc Quebecois, the Reform Party and the New Democratic Party outlining the poll results in anticipation that the House of Commons may be asked to revisit its position on Bill C-78. In light of the reasoned arguments on the surplus distribution that we presented to you in June, and in light of the implicit obligation for governments to act in a way that is, and is perceived to be, fair in light of a responsibility incumbent upon governments to act in a honest way, and in light of the public opinion poll, I would urge your committee and the entire Senate to vote the bill down.
I thank you very much for the opportunity to make this presentation.
Senator Stratton: Mr. Bean, I would like to go to the questions that were asked of the minister yesterday. It seems we were into a kind of he said/she said scenario whereby the minister stated that she was quite willing to meet and discuss issues. She is quite willing to meet and to discuss compromise once the bill is passed, but she also stated that no one from the union side was prepared to meet and discuss issues.
You have said that you have tried to set up a meeting, and that all issues could be on the table. You said you were completely open to discuss any and all issues, and that you did not have any success. The minister has stated, at least in my view if no one else's, that she was willing to meet but the unions were unwilling to meet because of the fact that they were immovable on the $30-billion surplus.
What is your interpretation of what I just said? I am having some difficulty with the he said/she said scenario.
Mr. Bean: Rather than talk about he said/she said, I would suggest that you look at the correspondence. On June 18, 1999, I wrote to Mr. Massé and proposed the consultative committee meet. On June 18, I also wrote to both your committee chairperson and deputy chair, suggesting it might be helpful if the Senate observed at the meetings or participated in them, that it did not matter to me. On June 30, 1999, I wrote to the minister at the time, suggesting we meet, and I did all this without any preconditions. I did not raise the issue that we had to get agreement on the surplus or that we would not meet without the surplus being on the table. On August 3, I wrote the new minister. However, perhaps her officials have not gotten around to giving her the letter yet. It contains no preconditions either.
Mr. Massé's response of June 25, gave a precondition -- and I believe the minister reaffirmed it last night -- that they would not meet if we would dare raise the question of surplus. We did not establish any precondition. Both Minister Massé and Madam Robillard have established a precondition.
Initially, Mr. Sjoquist wrote to them saying that there was no point in meeting because of Mr. Massé's precondition. Subsequently, on August 4, he wrote to the new minister and suggested we meet but that there be no precondition of any sort.
I can only tell you that at no time did I ever establish a precondition and at no time have we refused to meet.
I also heard the minister say last night that they called someone's office, somewhere. I can assure you that the only call we have ever had from her office was regarding a meeting on September 1. They did not tell us what issues were to be discussed. At no time has any Treasury Board official or the minister's office called us asking us to meet on this question.
Senator Stratton: If that is the short history since we voted for the amendment in June, and since the minister stated yesterday that, once the bill has been passed, she is quite willing to sit down and compromise and discuss, it strikes me that, even with their unwillingness to compromise, or to even sit down and discuss all the issues, whether or not they are movable, on the $30-billion surplus, I would expect and hope that you can still discuss other issues. You would think a new minister would want to do that. At least my perception would be that she would want to meet with you, face to face, to at least find out what your positions were on the other issues. However, to your knowledge, she did not offer to do that. You have nothing on record to indicate she wanted to do that.
In view of what has transpired since June 17, do you believe that there would be any compromise on their part on any other issue? In my view there would not.
Mr. Bean: Going by the letter Madam Robillard sent me, it would appear that there is no compromise on their part on any issue. They are prepared to sit down and discuss joint union management, which would bring us closer to complying with the Pension Benefits Standards Act, but there is the condition that we must agree to 50-50 risk sharing. We have made it clear throughout our consultative meetings that we will accept joint union management, and 50-50 risk sharing, however, not after they steal $30 billion out of the surplus. The reality is that, if I pick your pocket, and then say that I want to give you back your wallet, I am sorry but, after you pick my pocket, my wallet may not mean much to me.
Senator Stratton: Do you see any room for compromise, for give and take?
After I heard the discussions last night, I thought that perhaps we could serve by pushing to that end before we report the bill back to the Senate. However, I see no point in that now. I only see that, because of the intransigence on the part of the Treasury Board and the minister, what we are doing right now is wasting the taxpayers' money and people's time in going through this exercise.
Mr. Bean: I share your concerns, although I wish to emphasize that I will not refuse to meet. I have not refused all along, and I am not prepared to refuse now. However, should we meet, we would raise -- and I know this is a bugaboo for both ministers now -- the question of surplus money. I cannot say that I will go to a meeting and, because it will upset you, say that I will not raise an issue. I will raise the question of surplus money. I will raise the question of risk sharing after they have stolen the money. If it is a precondition that I can meet but I cannot talk about those issues, I will still go and meet, however, I will raise them. I do not accept anyone telling me that I cannot raise the issues that are important to our membership.
Senator De Bané: Mr. Bean, you have used an outrageous term. You have referred to stealing.
I should like to go back to the essentials of this very complex issue. Do you agree that, first, we are dealing here with a pension plan where the benefits that accrue to employees are defined?
Mr. Bean: Yes.
Senator De Bané: Irrespective of the return of the fund, the pensioner knows that he is entitled to X, Y or Z amount of dollars when he retires.
Mr. Bean: Normally that is the case, but there have been exceptions. I will raise them later.
Senator De Bané: I understand that an employee who has worked for the federal government for so many years is entitled to a certain pension, irrespective of the return that the fund has accrued over the years. He knows the amount to which he and his widow and children are entitled. This is what is called a "defined benefit."
Second, both the employees and their employer contribute to the fund that finances this pension scheme.
Third, in retrospect today, the government has realized that it has entered into the books liabilities that exceed what is necessary to honour those liabilities. As Mr. Harder said yesterday, very few governments in the western world do enter those liabilities in their financial statements, however, we do that.
I also learned yesterday that, over the years, particularly the last two, the share of the unions in the funding of that pension scheme has decreased. My conclusion, in hindsight, is that, if the government had not miscalculated the situation by entering in the books a larger liability than was needed, no one would have complained. That surplus would not exist and the benefits, of course, would remain the same.
With all of that in mind, Mr. Bean, why have you used such outrageous words?
Mr. Bean: I use such outrageous words because I described a fact.
In normal situations, your description of defined benefits would be correct. However, the Liberal government passed legislation in 1982 that reneged on those defined benefits. They took away indexing in 1982 and capped it at 6.5 per cent and 5.5 per cent for pensioners.
As to your second point, yes, there has traditionally been a 60-40 contribution rate. I have clear documentation which we will use in our court battle showing that the government has accepted two things: first, it has accepted that the 60-40 figure referred to deferred wages, that is, the whole pension plan; and, second, the reason for the 60-40 figure is that, traditionally, public service workers have had a lower pay scale than the private sector because they have had a better pension plan. I have documents produced by Treasury Board to this effect which I will use in the court case.
Obviously, along with the 40 per cent average contribution that each and every employee has made, there was interest earned on that money. That, by itself, would suggest that the employees have some interest in the surplus. They contributed 40 per cent to the plan. The interest earned on the money is not government money. It is interest on the plan members' money. Thus, there is some interest and some propriety, I would suggest to you, in the surplus money.
As to liabilities, Mr. Harder had a wonderful way of confusing the issue by talking about accounting principles. The fact that some other country does not show a liability in their accounting principles has nothing to do with this matter. Canada did not do it for many years. It was the Auditor General who told the government of the day that they had to show this as a liability. That has not much to do with the legislation itself. That was an accounting principle which the Auditor General told the government it should use to illustrate to Canadians the total debt that Canada owes. Whether another country shows the deficit or not is immaterial.
The reason there is such a major surplus in this plan is that for six years public service workers had their wages frozen. While actuarial projections showed wage increases were in the 6 per cent range, public service workers received nothing.
There has been talk about the share of the union going down. It is true the 60-40 formula has been changed to a 69-31 formula. We recognized that in our consultation meetings and agreed that we would go back to the 60-40 ration. We stated that the reason for this is because the CPP is integrated into the superannuation plan. We also raised at the same time that the CPP means nothing for public service workers because, when they reach the age of 65 and they receive $600 from CPP, then $600 is taken off their superannuation. If we were not covered by CPP, we would still receive the same amount when we retire at age 65. We agreed to increase our contribution rate. However, we think it should be considered that, when a public service worker reaches the age of 65, he or she should receive something from the Canada Pension Plan. Nothing happened with regard to that matter.
I will not talk about the amount of money which the government had to contribute in the 1980s when they paid $8 billion into the plan. That was contributed because the government of the day decided that they would make indexing retroactive to 1960. That is the reason for the increase and why the government had to contribute $8 billion.
I happen to be one of those public service workers who, for 10 years, from 1960 through to 1970, did not contribute to cover indexing because it did not exist. However, the government of the day must have known that it would be creating a liability by taking into account those 10 years of service. That is why they had to make up the deficit.
In 1970, public service workers contributed an extra .5 per cent to the plan. Their contribution rate went from 6.5 per cent to 7 per cent. In either 1970 or 1974, we contributed an extra .5 per cent because it was realized that indexing the .5 per cent might not cover all of the shortfall.
We have had increases. We have not objected to them. We do not object to the one for the Canada Pension Plan even though, technically, at age 65 it does not do us any good.
Senator De Bané: Mr. Bean, do you agree that what we have in essence is a government that has overestimated its potential liability and today it realizes that there has been such an overestimation of its liability?
Do you agree, to put it mildly, that it is unfair that a pensioner is entitled to a defined benefit irrespective of the return of the fund? On the one hand, he does not share in any risks because he has a defined benefit and, on the other hand, he wants to share in the upside. Do you not see an imbalance in that?
Mr. Bean: It was not the government that made the overestimation but the actuarial people. One would have thought that, if people recognized that it was an overestimation, then there should have been a lower contribution rate for both the government and the employees. However, that did not happen.
I should like to return to the question of risk and the government's liability. When the government can control the plan and change the benefits, as it did in 1982, and when it can increase the contribution rates, as it did in 1970 and 1974, there was not much of a risk. That is because of what was set out in the actuarial assessment. If the government needs to increase the contribution rate, then, by legislation, it can simply increase the contribution rate. Traditionally, that is what it has done.
I do not argue with that. I acknowledge that it is a defined benefit. If an actuarial assessment is done, as the government has done on at least two or three occasions, and it concludes that it needs to increase the contribution rate, we have never -- and I emphasize "never" -- objected to those contribution rates being increased. We sure as hell would not have objected to them decreasing, had they come back to us and said, "We are running a surplus. We think we have enough of a surplus for a rainy day, so we want to decease the rates." We would have gone along with that too.
Today, the difference between the government's position and our position is that the government wants to take the surplus money out while we, the unions, are saying that the surplus money should be left in the fund for the rainy day which we know is coming. The demographics of the public service clearly tell us that there will be a rainy day and that there will not be a surplus in that fund. We want to leave the money in the fund. We do not want to take it out.
Senator Meighen: I want to ensure sure that the possibility of leaving the surplus on the table as a shock absorber against more difficult times is a position that you are prepared to discuss. In fact, I think I heard you say that it is a position you endorse.
Mr. Bean: Absolutely, it is a position we endorse.
We know we have an older public service. We know that more people will be retiring. It does not take a genius to figure out that, with the reduced size of the public service and taking organizations like Canada Post out of the this plan -- which was never discussed with any of us -- that there will be a rainy day and this plan will be in a deficit position again. That is exactly why we want to leave the surplus money there.
Senator Meighen: Do you have any information as to what the rates are likely to rise to over the next 10 years.
Mr. Bean: No, I do not at this time.
Senator Oliver: As part of your response to Senator De Bané's first question, you said, in part at least, "I have clear documentation which we will use in our court battle." What court case are you talking about? Is it a court case about a surplus? Is it a court case about this bill? Is it a court case about pensions? What is the court case about, and what effect will your court case have if this bill passes third reading and is given Royal Assent?
Mr. Bean: This is a court case we will be initiating alleging that the government had no right to take the surplus money.
Senator Oliver: Has it been commenced as yet?
Mr. Bean: No. Legal counsel has guaranteed that he believes we have a good case to take before the courts, because I can show that the government's own documents say it is "deferred wages." I can show that the government's own documents say that public service workers have received less in pay because of the pension benefits. He believes that is similar to other cases where it was demonstrated that there was a trust relationship. Thus he believes that we have a good court case.
If this bill passes, we will commence the legal case as quickly as possible.
Senator Angus: Mr. Bean, I want to try to cover some of the same ground but in another way, just to be sure the facts are clear. Before I do, I would comment on some of the language that is being used. Senator De Bané, in describing this $30-billion figure suggested that it was a fictitious number. I understand that it is real money. Could you comment on that? You seem to have missed an opportunity.
Mr. Bean: It is hard to keep track of everything.
Senator Angus: You are doing a fine job.
The Chairman: Mr. Bean never misses opportunity.
Mr. Bean: I thank you for raising the question. Yes, it is real money. Yes, it is shown on the government's books.
Mr. Harder was right about one thing last night, he missed a lot of things, but he was right about one thing. There is no pot of money that has $30 billion in it and you dip into it every day to pay pensioners. It is in the government's books, and it is a liability to the government. The Auditor General requires them to report on it, so it is real money. The only real money, though, that has truly been contributed, was contributed by public service workers. Every pay day, money is deducted from our pay cheques. That is real money. The government does it by way of a paper figure. We, public service workers, actually pay real money into the fund.
I might add that Mr. Harder was also wrong about the Canada Pension Plan. If he would like to look at my cheque stubs, or at any public service worker's cheque stubs, he will see that we pay the full amount into the Canada Pension Plan. I would be quite glad to show him my cheque stubs. He would see that, since 1970, when the Canada Pension Plan came in, I have been paying real money, at the full amount, into the Canada Pension Plan.
Senator Angus: To conclude this subject of real dollars, you were here yesterday when I and some of my colleagues, particularly Senator Tkachuk, referred to this $30 billion. If I understand clearly, if this bill passes as drafted, government accounts for the year will be $30 billion more to the good than otherwise would be the case. In other words, if in the normal operation of the public business they had a $15-billion surplus without this bill, and this thing goes through, it would become a $45-billion surplus. Is that correct? Have I got it right, sir?
Mr. Bean: The total debt will be reduced by $30 billion. I understood that, according to the legislation, they are going to reduce it over 15 years, so I do not think it will quite work out that way. However, one would guess that they will take $2 billion a year and claim what a good job they have done by reducing the debt by $2 billion when in fact they have just stolen the money. I do want to emphasize that I think it is theft. I think it is stealing, so you can fully understand the position I am coming from.
Senator Angus: It is fairly clear to me.
Mr. Bean: I want the other side to know that I have not changed my mind.
Senator Angus: My colleague Senator Oliver touched on the legal aspects of this matter which is an area in which I am very interested. I understand that in other pension funds, where there is the surplus, it is shared according to a formula. The rationale for that, whether or not it is a fixed benefit plan, is that the contributions of the workers, under those arrangements, are deemed to be part of the global remuneration package. In this case, in order to justify taking the full surplus, I understand the government is taking the position -- and I may be wrong -- that the contributions by the government and employees was not part of the remuneration package. What is your comment on that?
Mr. Bean: As I say, that would appear to be the argument today. It certainly has never been the argument at the bargaining table.
Senator Angus: In terms of your compensation package, is it your position that in the mind-set of the workers, this is part of a global package.
Mr. Bean: Yes.
Senator Angus: Therefore that is your legal justification for your having at least a piece of the action in terms of that surplus; is that right?
Mr. Bean: Yes. As I say, we have documentation that clearly shows that the government has always considered it part of the total wage package, total "comparability" package, as they call it. They have clearly considered it to be deferred wages and clearly said that, in fact, public service workers have taken less pay because of the pension.
That was, of course, when the government of that time wanted to defend indexing. Their views have switched, today, dramatically from where they were in the 1970s and all along at the negotiating table.
Senator Angus: Just to be fair, if there is fairness for one side there must be fairness to the other side, and that is why it is important. There is a lot of rhetoric here.
Mr. Bean: Not from me, of course.
Senator Angus: No, just common sense.
Recently we have been reading about the surplus that CMHC has in their pension plan. It was reported that each pensioner would get a cheque for $10,000 as his or her share of the surplus. In this regard, the minister and Mr. Harder told us that trying to compare that situation to your situation was like comparing apples to oranges. Is it your position it is the same thing?
If it is, then there is a great inconsistency. The government is acting in one way vis-à-vis you folks and in quite another way with CMHC or indeed with the military and the police.
Mr. Bean: The government is treating the military and the RCMP in the same way as they are treating us. They are stealing their money too.
The Canada Mortgage and Housing Corporation plan is a defined contribution plan. It is the same as the federal government plan. In fact, it is the same plan.
Senator Angus: Is it actually the same plan?
Mr. Bean: It certainly is. They just do not call it the Public Service Superannuation Act.
Senator Meighen: For the record, Mr. Bean, I believe you said "defined contribution plan." Did you mean "defined benefit?"
Mr. Bean: Defined benefit plan, yes, you are right, it is a defined benefit plan. Canada Mortgage and Housing has had to make up a deficit on occasion, and now that they have a surplus they have decided to share the surplus with the employees.
Senator Angus: Does that follow other industry, private sector practice?
Mr. Bean: I suspect they may have considered successful legal cases from the past. Where there is any type of trust relationship, the courts have traditionally held that they cannot take the surplus. They might even be trying to comply with the Pension Benefits Standards Act, which the government, in this instance, does not believe is necessary.
Senator Angus: That is their position respecting the past, but in the future they agree that they will comply.
Why are they doing this? It is so blatant? They have made so many people unhappy. We are dealing with the Government of Canada, a government which was elected by the people, and I want to know why they would want to take action which would cause such a burr under the saddle, so to speak, as this would appear to be causing. I want to know why. It is our duty as members of the Senate to try to find that information.
You will recall a discussion about the legality of this in one of our committee meetings in the spring of this year. At that time you and some of your colleagues told us that, if this bill is passed, your legal rights will be pre-empted and the merits of your case will be substantially watered down, if not rendered nugatory. Today I believe you are telling us that, whether or not this bill passes, you do not believe your legal rights to sue are being taken away?
Mr. Bean: Not with regard to Bill C-78, however, the other actions that have been started, referred to as the "Krause" cases, have become rather moot to say the least. However, they may be successful. We have always had doubts about the merits of the first case, but in the second case they are saying that the government had no legal authority to take the $2 billion out, and that is what they have done over the past couple of years. We think they are right on that, and they may win that case. If they win it, the courts would require that the $2 billion be put back in and then the government, instead of taking $30 billion, can take $32 billion. It would not surprise me if the courts decided not to hear it at all, because it is meaningless.
Senator Angus: Is that because of this bill?
Mr. Bean: That is right.
Senator Angus: They will make their decision. We do not want to get in the way of the courts.
At an earlier appearance before this committee, did you testify that early on in the discussions the government said they were considering letting the employees have a portion of the existing surplus? Alternatively, has it always been a stonewall since day one?
Mr. Bean: No. I have documents to prove that.
Senator Angus: What sort of documents?
Mr. Bean: Minutes of meetings.
Senator Angus: Was it on the table?
Mr. Bean: Yes, it was. I sent that information to Senator Kirby. For example, on May 31, 1996, there was a letter from Mr. Massé to the advisory committee which stated that, while he could not agree at that point that the existing surplus in the pension account belonged to the members, he would be willing to listen to arguments as to why some of the surplus should be shared in some manner.
Senator Angus: That is what I thought. In other words, it is this position that now seems to be so intractable. It is a stalemate, and that is sad. Why do you believe they have changed their approach; and why are they doing this?
Mr. Bean: All I can determine is that they wish to take the $30 billion to write down the deficit. That is the only logical answer. It certainly was not what was happening during the discussions. It was only at the end of the consultation, when we had reached the stage where the last item for discussion was the surplus, where we learned that the only way we would get joint management was to agree give up the surplus.
By the way, this bill does not comply with the Pension Benefits Standards Act, nor does it comply with the Income Tax Act.
Senator Angus: What compromise would satisfy you?
Mr. Bean: I should like to go back and discuss with them, at least, a sharing of the surplus.
Senator Angus: Can you give me a reasonable ballpark number based on all your expert advice?
Mr. Bean: It is difficult to talk about possible negotiations in this Senate committee. Let me put it this way: The employees have contributed 40 per cent, and interest has been earned on that 40 per cent. Of course, it has been earned on 100 per cent. Perhaps there may be an agreement on that basis. That may get to 50-50. It may come out to 48-52.
Senator Kroft: I must rely on my own interpretation of what you have said this morning because I do not have a press release from Senator Tkachuk to tell me what you said.
Senator Tkachuk: You must admit, I was accurate.
Senator Kroft: My first intervention is in the form of an observation. I found your remarks on the survey that was conducted most interesting until even you admitted that it is completely invalid in all respects. Even if I put myself in your shoes I would recognize that there would be room for discussion on a 60-40 or a 70-30 split. If 51 per cent of those polled had said that the government is entitled to nothing, then we would have to look to the presentation of the question, or the framing of the survey that would render it horrendously inadequate. Therefore, I must characterize much of what remains in here in the same way.
Senator Tkachuk: What do the Canadian people know anyway?
Senator Kroft: Only what you tell them, Senator Tkachuk.
From the beginning, we have dealt with the concept of a defined benefit plan, a contractual arrangement. There is no question that this has been a contractual arrangement, although you may have a couple of qualifiers to add to that. The plan has been consistent with a defined benefit plan.
For the clarity of the record of this committee hearing, I wish to understand something you said. I believe you told us that you have no intention of seeking to remove any of these surplus funds from the plan. On one hand, you anticipate concerns down the road, and you want to ensure that the plan is well funded and well protected. On the other hand, the superannuation fund has always been a guaranteed fund. The benefits have always been paid. I should like to understand why the concept of joint management, joint risk is so attractive to you. It is important that we understand where you are coming from in that regard. What has led to this line of thinking?
Mr. Bean: I do not want to leave the first part of your question. You are entitled to your opinion.
Senator Tkachuk: I knew you wouldn't be able to resist responding to my remarks.
Mr. Bean: If you have concerns about the question in the poll, perhaps this committee should invite representatives of Environics to appear before you. I am not a polling expert.
Senator Kroft: I do not want to debate that.
Mr. Bean: You raised the question. If you think the poll question is not legitimate, then I believe you have an obligation to call representatives of Environics before this committee to address that issue. I did not formulate the question, and I did not conduct the poll. You should call on them for that information.
Let me talk about the contractual arrangement. I am not going to argue that this is not a defined benefit plan. It obviously is. There has been a contractual arrangement and, based on information and estimations, premiums have been increased when necessary.
Let me pose, senator, a question that has not been asked but which I know is in your minds. You might ask: If we were in a deficit position, would you want joint management? I have heard that argument. We have wanted joint management since 1967 when this union was formed. In fact, that has been the case since 1966.
Supposedly, at various times there has been a deficit, so why did we want joint management? We contribute half of the money, and we believe we should have a say in the management of the plan, not leave it to the whim of the government of the day to decide what they will and will not legislate.
In addition, we are prepared to take a joint risk. In reality we have taken a joint risk all along. When the government needed more money -- and that happened on two occasions in my working life that I know of -- the government increased the contribution rates, and we did not disagree. Therefore, we have had joint risk all along. However, officially, we are not included.
Senator Kroft: You are confusing my issue a little bit because you are talking about risk, the management of contribution levels, and the administration of the plan. What preoccupies me is the issue of joint management and joint risk on the investment side when the outlay of the fund is guaranteed in that it is defined by the terms of the plan. How is your position enhanced? Where do you see benefit to you in joining in that risk, and presumably, giving up the assurance of the payment levels that you are receiving under the plan?
Mr. Bean: If you go back, and we have, and look at what has, traditionally, been the rate of return, or interest if you would like to call it that, on the pension plan, you will see that, except for the last number of years, the rate of return has been lower than every other pension plan that I know of.
We are involved with joint administration of other pension plans, and we take the risk. That is the way it is, and that is fine. We know, as does the government, that had this money been invested, had it been real money -- real money that they were putting in and real money that was being invested in the market-place -- there would have been a far higher rate of return. In fact, we would have been dealing with a surplus that much exceeded $30 billion.
In 1985, we looked back at what had occurred over the last 20 years. Then, when we were looking at moving towards joint management, the government was not prepared to invest in the market-place, but they did agree that we should select 10 of the 40 biggest plans in Canada and their numbers would determine the rate of return. Had we done that in 1985, when the surplus was not near the amount of money it is now, the surplus would have been better than double. I suspect that the same is true today.
Even the government's own documents suggest that, had this money been invested in the market-place, it would have yielded a better rate of return. That is why we are interested in joint management, joint risk taking, and joint investment.
Senator Kroft: The matter of management of the fund with the investment of the fund in the market-place, as a principle, even precedes the issue of who manages it. There is a series of principles here.
Mr. Bean: Yes.
Senator Kroft: First, it is a matter of investing the funds in a true fund investment, and then there is the issue of participating in the management, that is your preoccupation. As you have said several times, we should not misunderstand you, you are fully prepared, now and into the future, to deal with rises and falls in the performance of that fund.
Mr. Bean: Absolutely. Since 1966, when this union was formed, we have had that policy.
Senator Kroft: Thank you very much.
The Chairman: Mr. Bean, on behalf of the committee I would thank you and your colleagues for assisting us this morning.
The next set of witnesses is a panel consisting of Mr. Dale Clark, National President, Canadian Union of Postal Workers; Mr. Steve Hindle, President, Professional Institute of the Public Service; Mr. Kevin MacDougall from the Divisional Staff Relations Committee, RCMP; and Mr. Gaetan Delisle, President, RCMP Association. I would ask you to make no more than a five-minute opening statement, and then we can ask questions of you collectively since you all more or less take the same position on this matter.
Mr. Dale Clark, National President, Canadian Union of Postal Workers: As National President of the Canadian Union of Postal Workers, I represent the approximately 40,000 postal workers who are participants in the current plan and who will be participants in any future plans that are set up.
I apologize for being unable to attend your previous meeting, but I had previous commitments. However, I will touch on some of the points that were made.
I agree with Daryl Bean that there is theft involved. We are not exactly sure how much of our money has been stolen, but I completely agree with the Public Service Alliance's position on that.
I should like to thank the committee for the work it has done in connection with this bill, and especially for its commitment to monitor the progress of our discussions on the future of our pensions.
I am pleased to be here to provide you with an update of how this is affecting postal workers. Unfortunately, I cannot say that I am happy with what I have to report.
There have been no moves by Canada Post to start any negotiations on our pensions with the union. We had hoped that Canada Post would agree with this committee's observation that there is no justifiable reason why Canada Post and the unions representing its employees cannot begin to negotiate the provisions of their pension plans immediately. Canada Post has chosen to ignore this observation. We have had one meeting with Canada Post on this issue since the announcement of the legislation, and that was in May. I understand there were indications by Canada Post representatives yesterday that there had been meetings. I can assure you that those meetings have not taken place with my union, which is the largest union at Canada Post.
I am here today to request that this committee do what it can to ensure that negotiations start. Ideally, we would like the bill amended to provide for immediate negotiations but, failing that, we would like consideration of defeating the bill.
I know that this committee's report on Bill C-78 suggested that it may not be necessary to amend the proposed legislation as pension negotiations could occur through a separate agreement or through the reopening of a collective agreement after it has been signed. As you may know, Daryl Bean has raised this matter with legal counsel and has been informed that a reopener clause would not constitute a notice to bargain under section 49 of the code. By the same token, a separate agreement would not constitute notice to bargain. We concur with that legal opinion, and have taken the same position.
We are concerned that the wording of the current legislation will interfere with our attempt to negotiate with Canada Post and, as you know, over the years, negotiations between our union and Canada Post have been difficult. We are currently doing our part to prepare for negotiations. The national executive of the union has been meeting to develop our position on the structure and number of plans, the composition of the management board, and issues relating to administration, transition, et cetera. We have discussed similar issues with the Canadian Postmasters and Assistants Association and the Union of Postal and Communication Employees, a component of the alliance. We met in July to discuss the possible formation of a common front to negotiate pension plans.
On August 4, the national presidents of these three unions sent a joint letter to André Ouellet in an attempt to kick-start negotiations. That letter noted our determination to ensure that our pensions be negotiated from the outset. It requested that Canada Post contact the government with a view to changing Bill C-78 to provide for immediate negotiations. We also requested meetings to discuss these issues.
Unfortunately, it looks like there will not be a meeting until mid-September but, as indicated, we have not been given any indication from Canada Post corporation that it intends to negotiate with us before October 1, 2001.
Our current collective agreement will expire at the end of July 2000 based on the legislation that ended the last labour dispute. Canada Post may likely want an agreement that is longer than a year and-a-half following that in order to bring some stability to the post office. We are seriously looking at that. However, we cannot do that if it means that our pensions are not settled and still controlled by Canada Post corporation. We believe that we have the right to determine our future and to determine how the money that we have invested and the money that in negotiations is considered as part of labour costs is handled.
That completes my report. Once again I should like to thank the committee for its work and for the opportunity appear before you.
Mr. Steve Hindle, President, Professional Institute of the Public Service of Canada: Thank you for the opportunity to appear before you again and talk about events which transpired over the summer. I will try to concentrate on that in my opening remarks.
While our union colleagues were exchanging letters and using a more formal process to get Treasury Board to return to the table and to encourage the minister to come to the table and discuss with the unions and pensioners the issue of the surplus and the future management of the plan, the institute was working in the background, on a far less formal route, with Treasury Board officials to try to encourage them, in their provision of advice to the minister and her representatives, to encourage her to come to the table with no preconditions. As you are undoubtedly aware, that was unsuccessful. Both the formal and informal routes have shown that this government and Treasury Board officials have an inability to deal with very contentious issues in a fair manner. The government is very reluctant to sit at a table at which it does not have full control of the agenda.
That is truly unfortunate because the government is not the only interested party in the superannuation plan. Hundreds of thousands of Canadians will be affected by what they will do and hundreds of thousands of Canadians outside of the superannuation plan could easily be affected by what the government is able to do through legislation.
It is important to note that the relationship between Treasury Board officials and the unions has been very strained by what has occurred over the summer and, more specifically, by the government's insistence that Bill C-78 pass as it currently stands before it will entertain discussions on co-management of the plan. Any such discussions require an atmosphere of cooperation and trust, which atmosphere does not exist because of the Treasury Board's inability to deal with the issues, including those raised by this committee.
While we remain hopeful that it is possible to have discussions on the management of the plan, we are very disappointed and frustrated with the activities of the Treasury Board over the summer.
Mr. Kevin MacDougall, Divisional Staff Relations Committee, Royal Canadian Mounted Police: We would also like to thank the Senate committee for permitting us to appear here today to express our views on behalf of all members of the RCMP. I am here in my capacity as chairman of the National Pay Committee representing 18,000 members. It is important to the Senate committee to have a very basic understanding of the divisional staff relations program. I should like to ask Staff Sergeant Morrison to briefly explain the program before I make my opening statement.
Mr. Bruce Morrisson, Divisional Staff Relations Committee, Royal Canadian Mounted Police: We wish to outline our program because it is different from the programs of many of the other organizations that are appearing here. While we do not enjoy collective bargaining rights within the force, we are an organized labour movement within the RCMP, and we are the official representation of the nearly 18,000 regular and civilian members of the force.
Parliament has seen fit to entrench our program in section 96 of the Royal Canadian Mounted Police Act regulations where the divisional staff relations program is outlined. Presently 29 divisional staff relations representatives from across the country are duly elected by the members across Canada.
The strength of our program is consultation at all levels as opposed to confrontation. That is, consultation not only with the senior management of the force but also consultation with their employer, Treasury Board. Our program is broken down into committees and Staff Sergeant MacDougall and myself are here today representing the National Pay Committee.
The Chairman: Are all the members of your group RCMP members below a certain rank?
Mr. Morrisson: We are RCMP members at all ranks below the rank of inspector.
The Chairman: So it is all except for the very senior-level officers?
Mr. Morrisson: Are you asking about those who are the representatives?
The Chairman: Who is included in the group you represent? Is there a cut-off point? You used the word "management" and I am trying to understand whether there is some rank within the RCMP which is classified as management and therefore not a part of your group.
Mr. MacDougall: For pay and benefits we only negotiate up to the rank of chief superintendent, but any member can run and be elected to the "Div Rep" program.
The Chairman: For pay and benefits there is a cut-off point.
Mr. MacDougall: That is correct.
Mr. Chairman, as you heard yesterday, the RCMP is prohibited from unionizing. In exchange for that, the government has seen fit to provide us with a legislated system of representation called the "Div Rep" system. It has been in place for approximately 25 years, and we believe that it is a fairly sophisticated system of representation.
Mr. Morrisson and I also belong to our pension advisory committee. That is a committee struck by the Solicitor General of Canada. It was put in place to give him or her advice on pension matters. We have been on that committee since roughly 1992 and, since then, we have been planning for the pension reform initiative. This has been signalled by various governments over the years, as you know, and we were told as late as last November that negotiations were ongoing with the public service on pension reform. We were quite alarmed to find out that this was happening, but we were assured by our employer, the Treasury Board, that this would have no impact on the RCMP and that, once discussions were finalized with the public service, we would be given every opportunity to consult with the Treasury Board on our particular plan.
As you know, we have an unique bill that provides for coverage for RCMP members, and we believed our employer when we were told that we would be given an opportunity to consult. That was in, as I said, November. In December we understood that talks broke down with the public service. We, at that time or shortly thereafter, wrote to Mr. Massé asking for an opportunity to consult. That was on February 8. We have not received a response to that letter.
The bill was tabled without any input whatsoever from the "Div Rep" program. Our management has written to us, the chair of the pension advisory committee, and deputy commissioner Zaccardelli says that no meaningful consultation has taken place with our senior management. In actual fact, we have had no consultation with Treasury Board on this critical issue and, as you may well expect, pensions is a very important issue to police officers.
We have written and corrected the record where Mr. Massé said there was consultation. In fact, Mr. Massé must have been misinformed because there has been none. We sit before you today to emphasize that what you have heard and what you have learned from various officials at Treasury Board simply is not accurate.
There are various issues which our members have waited for years to resolve relative to their pensions. Some of those issues are outlined in the briefing note that we provided to senators.
We would like to comment on the surplus issue. When we asked to meet with our friends at Treasury Board, we did not attach any provisos whatsoever. We were willing to go and meet and not discuss the surplus. Our position on the surplus is that it is our employees'. We agree with Mr. Bean and the Public Service Alliance on this, however, we do feel it will be resolved either through legislation or in the, courts, and we are willing to wait for that.
Just to repeat, we did not attach a proviso, all we wanted to do was meet and, as late as June 29, we wrote to Mr. MacAulay, our minister, and Mr. Massé, again pleading for a meeting, bearing in mind that the Senate had delayed passage of the bill, and we still have not received word from either minister on whether or not they are willing to meet with us. Time is of the essence, since we understand that you must report back by September 7.
Had we been given the chance to meet, we would have argued certain points, or recommended certain changes to the bill. For instance, our civilian members work side by side with our regular members. They pay the same premiums into the pension plan as the regular members, however, they do not have early retirement provisions. We may not have been able to resolve that, but we felt we should have been given the chance.
Another issue relates to acting pay. Mr. Massé, in his letter to the Senate committee, indicated that that was one of the issues that could be resolved with the RCMP down the road. In fact, if you look at the RCMP Superannuation Act, you will see that "pay" is defined, and it does not provide for acting pay. In fact, it is prohibited. Therefore, if Mr. Massé attempts to try to resolve this through the regulatory process, it will simply be impossible, unless the Senate amends the definition of pay, or recommends that it be amended and provide for acting pay similar to what the public service has in their bill.
Another issue is the conflict issue. We understand, through reading the Debates of the Senate, that this was raised by various senators. This is a very real problem, or potential problem, for members of the RCMP. We cited the Bre-X case at the House of Commons committee. Had we been called upon to provide a neutral investigation in Bre-X, and had we, by investing our monies in the open market, had moneys invested in Bre-X, someone would probably have called foul.
The other situation that we cited related to the fact that we are often called upon to provide peace and good order at the picket lines, particularly when companies take the unusual step of bringing in replacement workers. Our members are there to provide security for those replacement workers, but how would the other employees who are on a legitimate strike feel if they knew we had investments in that particular company? We must remain neutral. We believe the government has not seriously considered this.
In closing, again, we would like to thank you for this opportunity to appear before you. On behalf of all members of the RCMP, we ask that the Senate recommend that this bill be delayed until we have had a chance to have legitimate consultation on all our issues.
Mr. Gaetan Delisle, President, RCMP Association: I wish to refer you to our original brief. It is similar to what Mr. MacDougall has talked about regarding certain aspects, except that we take exception to the Bre-X comparison because the same would situation would apply respecting the Airbus investigation. Therefore, which one will we put our money into? I do not believe we are on the same wavelength in that regard.
I am a divisional staff relation representative within the internal system of the RCMP. I was required to face a Federal Court injunction -- and there was the threat that they could expel me -- because of my conviction that we should approach Treasury Board as an organization. Div Reps, by the nature of the system, is directly under the supervision and guidance of the commissioner of the RCMP. I believe the ex-solicitor general, Mr. Kelleher, will conclude that, because it is sponsored by the RCMP, freedom of speech is and can be somewhat diluted. However, I will let it go that route.
Under the guidance of our organization, after Div Reps was founded, we founded the association, which represents the members. We have done that on our own time since 1977 and 1978. This was done mainly because the Div Rep system was inadequate. It was not doing its job properly. To that effect we have kept up the pace and now we represent different groups in Quebec, Ontario, and B.C.
Bill C-78, as it is now, raises two different issues. The first portion of the bill, deals with the administration of the fund, and second part deals with the representation of members, such as the RCMP, in different plans.
In my remarks today, I must also mention a group that has not been talked about here. I am referring to the members of the CSIS. As you know, they do not have the right to appear before you and address their concerns. Under the guidance of the RCMP, a committee will be formed. Two seats on that committee will be given to people who represent other persons who contribute to the RCMP fund. Those seats should be available to members of the CSIS. They contribute, so those seats should be theirs. Close to 500 of our security intelligence people contribute to the RCMP fund. To pass Bill C-78 as is worded right now will cause tremendous problems.
[Translation]
This will really hurt these people because there is no guarantee that they will have a hearing before the committee that will be reporting to the Solicitor General. On that score, I would like to see at least an amendment to reflect this.
Another amendment would be in terms of support from the Association for this type of committee. In the Association, we are always on the lookout for the interests of our people because we are still a going concern. We do this on our working hours. The Association should be recognized because it is a system that is independent from the Commissioner.
I have distributed a number of documents that indicate that the divisional representatives are not very happy about the way the commissioner treats them in certain areas. So, if you say they have full confidence, then I beg to differ, and you have documents that demonstrate otherwise. In this regard, I would like to add that there should be some points that recognize our independent status in all activities.
I heard several interventions, one by the Honourable Senator De Bané on joint plans in which the employer would contribute a larger portion. This was up to the government, because it was a majority. It would be responsible for any risks under the plan. Hence the surplus should be left for this purpose. I do not agree with this for one simple reason, and that is because I have been paying into this plan for 30 years. The money was deducted from my salary every two weeks -- previously it had been twice a month -- and this money constitutes my contribution under the plan.
You heard my colleague, Mr. MacDougall, who explained to you that in terms of pay, we have been compared to other police departments such as the police departments in Montreal, Toronto, etc. I have with me the annual report from the Montreal Police Benevolent and Pension Society, with whom we have been compared. Unfortunately, I do not have enough copies for everyone, but those who wish may consult it. The Montreal Police Benevolent and Pension Society only gave me five copies, so I am sorry. In this report, you will see that the Society administers its own pension fund. The contributions were 60/40, and both, the employer and employees, benefited from the surplus. This is an example that could be followed, and I believe that I understand that the message coming from all the intervenors is exactly the same in this regard. Namely that if there is a portion that is attributable to the employee, then it ought to be set aside so that the employees and the employer can reach a partnership with respect to these amounts of money.
[English]
We have in our organization officers of the RCMP, which are named, promoted and paid and paid bonuses by Governor in Council. We should have a shared system to deal with the money that will be contributed. By having certain people in there, it makes a mockery of dealing responsibly with the money that is in the plan. As senators, I understand you moved to remove certain senators who were not attending sittings of the Senate. In our organization the same thing is happening. At the higher echelon in the RCMP there are people who, unfortunately, do not show up for work for long periods of time, but who can collect bonuses for that period prior to their leaving. It comes off our bottom line, and it is not fair.
Senator Meighen: My questions are designed to try to define the one or two overriding problems that affect you all, notwithstanding that you have particular interests and concerns which are difficult for us to deal with, you will appreciate, at a hearing such as this.
Turning to the military and the RCMP, we had hoped, obviously, as we had hoped with respect to other people affected by this bill, that there would have been meaningful consultations over the summer. Mr. MacDougall, you dealt with this question. You said that you would like us to delay the passage of this bill in order that these consultations could take place.
My understanding is that the former minister wrote to our chairman June 25, 1999 indicating that he would be writing to the Minister of National Defence and the Solicitor General asking for consultations to begin. My information is that nothing has happened.
You said today that you have not in any way, shape or form, indicated that the issue of the pension surplus is a precondition to any discussions. You are prepared to talk today on all subjects.
What makes you think that, if we were to delay the bill, progress would be made when it has not been over the past few months? What has changed?
Mr. MacDougall: Not much. We were hoping that the Senate could exercise its influence in forcing the government to at least sit down with us by delaying passage of the bill. If that is not possible, then we would ask that any reference to the RCMP in this bill be removed. That would give us the opportunity to go back to consult.
Senator Meighen: Is there any reason of which you can think, given that you have not established any precondition to discussions, that the military and the RCMP cannot be negotiated separately from others?
Mr. MacDougall: There is no reason, I believe, that we cannot negotiate separately. I believe that there is unwillingness on the part of the government, Treasury Board, to deal with us.
We do not understand that. We have tried to figure it out. It may be based on the numbers. We are only 18,000 strong. We believe we are important. We believe we do a good job for the country and all that nice stuff. We can only assume it is based on sheer numbers. The public service has 150,000 or more employees and maybe they concentrate more readily on them.
They fail to recognize that our act is dramatically different, and that we have different needs and wants from those of the public service.
[Translation]
Senator Meighen: Mr. Delisle alluded to certain demands or problems with respect to our members. These problems are in the Bill before us.
[English]
I think it was Senator Tkachuk who, yesterday, in questioning the minister asked the minister if she was saying that, as soon as we pass this bill she would want to renegotiate the first 29 pages. Does it give you any comfort that she is prepared to renegotiate many of the clauses of the bill that appear to cause you problems once the bill is passed?
Mr. Delisle: It does cause me much concern. That is the reason that I circulated a piece of proposed legislation that was passed in Quebec -- while Madam Robillard was sitting in that assembly by the way -- which promoted an administration of the fund which would be completely open for discussion regarding anything that happened with the pension, including any surplus. You have a copy of that which clearly states it is an open format for negotiation and discussion.
Yes, I reaffirm that I am really concerned when someone says, "Let's pass the bill and after that we will come back to discuss it." The bill would be passed. Nothing forces the government whatsoever to do what the Senator Tkachuk alluded to yesterday.
Senator Meighen: Without tongue in cheek in any fashion, can any of you fathom why there is such a rush to pass this bill?
Mr. MacDougall: I believe that was discussed yesterday. I listened very intently to the testimony. The only reason I can see is the surplus of $30 billion.
As I have said, we have been waiting for years to incorporate into legislation some of the changes that our members want. This is the first opportunity we have had to incorporate them in the bill, and we have been ignored. Frankly, I am not optimistic that in the near future the bill will be reopened and we will be given an opportunity to address the concerns of our employees.
Senator Meighen: Mr. Clark, accepting that the RCMP and the military are slightly special cases, it seems that your members are caught in the principle of no talk unless everyone signs off on the pension surplus. If you are not engaged in meaningful discussions because the government refuses to do so until you acknowledge that you have no right to the existing surplus, can you suggest any way out of the impasse? Could you and your members accept binding arbitration on the disposition of the surplus, or are you standing on a firmer position with regard to ownership of the surplus?
Mr. Clark: I think it is better that the parties come to some agreement. I am concerned about the prospect of that happening, but I still hold out some hope for the collective bargaining process, whether it is on surplus, benefits, or how the plans will be managed. That is the position we have put to Canada Post. We want to go into negotiations without preconditions. We want only to sit down to talk. Right now our major focus is on governance and how investment will be done.
We do not have a lot of faith in Canada Post's ability to handle our money, especially with the investment rules that have been loosened up for how Canada Post sets up this plan. We believe we should be negotiating with it, but it takes more than one side to want to negotiate.
Therefore, we are hoping this body can put some pressure on Canada Post and the government to sit down with the parties to reach a solution acceptable to everyone.
Senator Meighen: Have you any suggestions on how that pressure might be applied?
Mr. Clark: As it relates to Canada Post, I was hoping that your report would do that. It did not. I believe that there should be a push for amendment to the bill so that we can start negotiating our pension and our future as soon as possible. Failing that, we are urging that the bill be defeated.
Mr. Hindle: We believe that it is appropriate for the government to split this plan and allow the various components of it, such as Canada Post and the RCMP, to deal with their issues separately. They should be treated as separate employers, and they should have separate pension plans so that the terms and conditions of the pension plan can accurately reflect the concerns of the members. Concerns of the RCMP have been mentioned. We do not share those concerns.
It is totally appropriate to split the plan, but it is totally inappropriate to do it in the method that it is being done and to force it upon people without giving the employer and the representatives of the employees ample opportunity to discuss the pension plan. This should have been done when Canada Post became a Crown corporation in 1981.
Senator Meighen: Do you think that the past surplus should be split and handled differently with respect to the various organizations?
Mr. Hindle: The current surplus in the plan could be split along employer lines. That would not pose a difficulty for us. Then we could have a discussion with Treasury Board about the portion of the surplus that applies to the public service that we represent.
Senator Meighen: What do you mean by split along employer lines? Do you mean in the proportion of the contribution?
Mr. Hindle: Presumably the contributions have been tracked and they have an idea of the liabilities within the plan. That is another method of doing it. If liabilities are apportioned according to the employees for current employers, all assets of the plan must be apportioned in the same percentage. If Canada Post makes up 15 per cent of the liability in the plan, they take 15 per cent of the assets with them, including that portion of the surplus.
[Translation]
Senator Hervieux-Payette: Mr. Delisle, you are asking that the committee recognize the representativeness of certain government employees who have a different status, including employees of the Canadian Security Intelligence Service. Are they not represented by your Association?
Mr. Delisle: Now, yes. In reality, the Association as such is not a government agency which makes direct contributions to the RCMP commissioner. Thus technically, no they are not. There is at the moment a case before the Supreme Court which should be ruled upon soon, concerning the right of RCMP members to unionize. These people have status as a distinct employer directly subject to the Canadian Security Intelligence Service Act. They are subject to this standard. That, moreover, is the reason why I said that this Act prevents them from public recognition within the Service. Unfortunately, all those people, who used to be with the RCMP before the change was made in 1986, still receive the same benefits under the RCMP Superannuation Regulations. Bill C-78, particularly section 25(1), describes the special nature of the pension board. They are not included in this Bill. It is understood that they will be.
Senator Hervieux-Payette: Do you agree in full with the point of view of Mr. Bean and his Association with respect to the matter of risk sharing? Under the earlier plan, benefits were guaranteed whether or not there were enough funds. Your predecessor says that under the new Act they have agreed to share the risks. If the performance of the forthcoming fund is not good -- and here again we are dealing with actuaries who will be establishing fund performance -- what would be the advantage for your members in getting involved in the risk? Under the previous plan, you had guaranteed benefits without any increase in contributions. I am trying to understand how a union member would feel better protected. Once the union is on the board responsible for managing the new fund, you have no guaranteed pension level because the fund might not perform as anticipated if there were major world economic problems. Why would you choose this model, and say that you feel more comfortable with it, and at the same time ask us for an insurance policy and an injection of $30 billion into the fund? On the one hand, you say you are prepared to share the risks, but on the other, if there were problems with the fund, you would want the government to put $30 billion into it. It seems to me that we have a dichotomy here. Wouldn't the $30 billion be your insurance policy in the event, if risks were shared, you would be obliged to request higher contributions from members of your union?
Mr. Delisle: First of all, we are speaking of $2.4 billion for the surplus in the RCMP pension fund. That is what you are alluding to. You cannot say we are trying to take the surplus under the Public Service of Canada Act. Your question can only refer to the RCMP.
Senator Hervieux-Payette: If your calculations are $2.4 billion, and assuming that the government authorities reach the same figure, I am not disputing the amount, it is rather the concept that I wish to discuss with you.
Mr. Delisle: As for the concept, we agree with the explanations given by the other intervenors this morning with respect to the portions of the funds administered previously. I have seen unilateral increases in member contributions under the Act, because at certain times the fund was in a deficit position.
Also, as an employee of the RCMP, I saw the new system that indexed the superannuation fund at one half of a per cent, which then increased to 1 per cent. We were inclined to agree with this because it was a contribution to our fund and it was thought to be a good idea.
Now, you are asking me how this fund came about? I believe that we need to go to the root of the issue. I explained earlier that we were being compared in terms of overall pay to other police departments. Our salaries at the RCMP are not the highest in Canada, as you know. The reason for this is that our employer contributes 60 per cent to the fund and the employee contributes 40 per cent. Thus my salary has suffered from this over the past 30 years because, supposedly, in terms of overall pay, the employer was making a higher contribution. In doing so, I lost the modest sum of approximately $2,000 per year. Thus the government reduced the salary it was to pay me and this contributed to the amounts of money in the plan.
The philosophy of Bill C-78 is to establish a board that will be able to manage the plan. What you have before you -- and I hope that you have been able to receive a copy -- are all the models for pension fund management, whatever they may be. Provided that the fund has an employee and employer portion, a mutual decision will have to be reached. That is what I understood from all the intervenors. This mutual understanding is necessary.
You have a mutual report on the employee and employer portions. For your information, the Montreal police officers pay only 7.8 per cent of contributions and the city pays 20 per cent. The same philosophy, which is often raised by your observations, applies to both equally, and yet they are governed by a tried and true system. It works because the employer and the employee both contribute. In passing, there was a surplus of more than $640 million last year.
[English]
Senator Callbeck: With regard to Mr. Clark's comments expressing concern about Canada Post investing your contributions, I believe it was said here before that you felt that restrictions should be placed on the type of investments. The PSSA, of course, as we know, has restrictions. Would these restrictions be adequate for you, or would you like other restrictions to apply?
Mr. Clark: Right now, the bill says that in the public service pension plan they are to adopt a path of domestic equity strategy. That is missing from the part of the bill which deals with Canada Post. We would like to have that as part of the legislation. What are they planning on doing with the money? We have some real concerns in general about where surpluses of Canada Post are going, and how they are being dealt with. This rang some alarm bells, given that we know Canada Post invests in other countries in respect of machinery. Canada Post is selling its consultative services overseas. We have not had an explanation of why that has been taken out from Canada Post or from the government.
The Chairman: Thank you, gentlemen, for taking the time to be with us today.
Senators, our final set of witnesses today will now come forward to assist us.
Mr. Guy thank you very much for coming here today. I know you were unable to be with us in June. I trust your health is good. You have appeared before this committee before, and we are delighted to have you here again.
Mr. Rex G. Guy, National President, Supperannuates National Association: Thank you, Mr. Chairman, for you kind remarks. I am recovering very well. Thank you.
Since your committee was tasked to evaluate the state of the negotiations among the employer, the pensioners' representative and the unions, and because of the testimony from the minister and the Treasury Board officials yesterday, I will limit my remarks to ensuring that there is no misunderstanding of certain matters that concern us. This is important, since the committee must consider all the facts in the important decisions it has to make.
There was mention of the dental plan for pensioners yesterday. It should be noted that had this dental plan is not -- and this bears repeating -- part of pension reform and is not a factor to consider in these deliberations. The Treasury Board officials will confirm that the dental plan is not linked to pension reform.
In the matter of the surplus, the government has not made its case as it relates to the risks it took and in relation to past deficits. Yesterday, you were advised that there was a past deficit of some $13 billion. However, $8 billion of this deficit was the result of a conscious decision by the government to introduce full indexation to the plans as part of the employees' total compensation package. What was not mentioned was that an increase in employees' contributions to cover the costs was also introduced.
In relation to the other $5 billion, a thorough analysis of how much was covered by interest on the contributions will probably show that the deficit was significantly lower. In other words, we ask again: What risks and what deficit? Our position has not changed. The pension plans were built on a partnership, and the government is unilaterally deciding on the break-up of this partnership. An equitable distribution of the surplus, among all stakeholders, is a moral obligation.
There was an indication that, once Bill C-78 is passed, there will be consultation with the RCMP and the Canadian Forces. Mr. Alan McLellan, the pensioner's representative on the Canadian Forces Pension Advisory Committee, provided his views in a paper addressed to all senators. There was no consultation. Discussion after a decision has been taken is not our definition of consultation.
On the platter of pensioners' representation on the negotiation and consultations, one senator asked about the number of pensioners' representatives. The answer given by Treasury Board officials is that there was only one pensioners' representative but that unions also represented the interests of pensioners.
Although we often count on the support of our union colleagues, there are often conflicts of interest between the employees' needs and demands and those of pensioners. Only pensioners' organization can adequately represent pensioners and therefore pensioners' representation is critical to meaningful negotiations on pension reform.
Although the former president of the Treasury Board made a commitment to review the unjust penalty to many pensioners that resulted from the 1982 Public Sector Compensation Restraint Act, better known as the six-and-five legislation, there was no mention of this in yesterday's testimony. This penalty can only be remedied through legislation.
The perception is that Bill C-78 must be passed if the additional benefits contained in it, such as increases to the supplementary death benefit, are to be implemented. These changes can be made through changes to legislation and are unlikely to meet with any resistance.
It was mentioned yesterday that there had been consultations with unions and pensioners over seven-year periods on pension reform. It is important to note that what is being referred to here is the deliberations of the advisory committee on the Public Service Superannuation Act. The terms of reference were not to negotiate pension reform but to advise the President of the Treasury Board.
It met periodically over this period of time and produced two reports. There was more than two years of waiting for a response to the first report. The second report, submitted in 1998, did lead to the negotiation and consultations on pension reform that lasted until December 1998.
Mr. Chairman, FSNA has been very active during the summer and most of its branches -- of which there are 82, with over 100,000 members -- either met with or wrote to their representative senators and members of Parliament. The message we gave to all is that Bill C-78 misses the thrust of real pension reform by not establishing a pension management board and that the government has a moral and ethical obligation to equitably share the surplus.
By taking this action, pensioners demonstrated a restored but cautious confidence in the parliamentary process. They are expressing some confidence that the Senate will not only make recommendations but introduce much needed amendments to Bill C-78.
This committee has reported on many flaws in Bill C-78, yet it has not recommended amendments. The minister indicated yesterday that amendments would be introduced almost as soon as it is given Royal Assent. In our view, this makes no sense and the Senate's role is really to prevent, to quote Sir John A. Macdonald, "...any hasty or ill-considered legislation."
Mr. Chairman, Bill C-78 does not contain the real thrust of pension reform. There is too much haste and changes are required.
Thank you for considering our views.
Mr. E.W. Halayko, National Chairman, Armed Forces Pensioners'/Annuitants' Association of Canada: Thank you for welcoming us to appear before your committee. It appears the last time we were spinning our wheels because, in my opinion, Parliament or the Government of Canada treated your recommendations with contempt because there has been no consultation. There have been no negotiations with anyone.
To go back in history, when the Canada Pension Plan was initiated, and it was combined with the Canadian Forces Superannuation Act, we were never consulted. We were told that the reason the two were combined was that we could not afford to pay for both of them separately. That has been raised as an issue regarding those people in the forces who are receiving the Canada Pension Plan. If we wait long enough, no one in the Canadian Forces will benefit from the CPP because the two payments will cancel each other out. From the year 2014, no one will receive any real benefit from the Canada Pension Plan.
What concerns us most that there was no consultation. It was decided that those of us in the military were too busy and not knowledgeable enough about our investments to participate in any negotiation. Our so-called "leaders" did that for us.
What is interesting about Bill C-78 is that the President of the Treasury Board is responsible for the Canadian Forces Superannuation Act, not the Minister of National Defence. The Minister of National Defence should be the one negotiating with us, not anyone else. He has never done that. At the same time, he is the one who should, if needs be, be singled out, as we have singled out our Mounties. He should be fighting for us. That is our money.
I have with me Ms Fiona Campbell, our legal counsel. She is involved in the two court cases which were mentioned. The first one involves, and I will use the word, "theft" of $4.6 billion out of our account. The second case deals with the way in which the interest has been applied to the money. She is here to answer any questions in that regard.
Also with me is Mrs. Helen Rapp who is chairman for Military Widows. She will answer any questions on that point, if need be.
The supplementary death benefit was mentioned. It is not part and parcel of the Canadian Forces superannuation account. It is separate. They would not dare touch that because that would affect every life insurance plan in the country. That is not an issue. It is not even a promise -- or a carrot.
We also heard mention of the dental plan. That has nothing to do with this bill. As a matter of fact, we have received information that the dental plan, in all probability, will be initiated next year, regardless of what happens to Bill C-78.
We heard the minister encouraging you to pass Bill C-78 and then saying that they would negotiate later. I am sure you have heard the line: "Trust me, I am from the government. I am here to help you." This is exactly what this sounds like to me. There has been no negotiations. We have not been consulted. Even up to today, we have not had an opportunity to meet with the minister. When we did meet with ministers in the past things did happen.
We were supposed to be on a certain advisory committee. Those details are contained in my brief so I will not repeat what is in there, except to say that we were not acceptable to the bureaucracy to represent the CF retirees. They considered us to be too confrontational and they did not want us. They want pussycats. One memo with a happy face on it, had the notation: "That should fix them." Those are the bureaucrats who are supposed to be working for us. We are not properly represented on anything to do with any negotiations on any of these bills.
In our opinion, this bill should be dropped, or sent back and rehashed.
Let us do it properly the first time. This was kept a major secret. As a matter of fact, both the Minister of National Defence and the President of the Treasury Board corresponded with us, telling us what they were going to do, but the bill had already been passed by the House of Commons. To me, that is not consultation; not is it democratic.
Senator Tkachuk: I have a question about the letter of August 4 from Captain Sjoquist to which the minister referred. She referred to the original letter which was sent to Minister Massé at the end of June with regard to why there were no meetings whatsoever between the government and any affected group. Thereafter the letter of August 4 was mentioned. On page 2, dealing with pension reform, the letter states:
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.
What does "without pre-condition" mean to you?
Mr. Halayko: To me, "pre-condition" means that they have decided what they will do and, although we can talk, when it is all over and done with, they will do as they please.
I believe you told the President of the Treasury Board to go back and talk to these people. I do not remember any reference to preconditions or what to talk about. I understood that it was to be the entirety of Bill C-78. We do not have a pension, we have a superannuation, and it is not a surplus but deferred pay. It has been stated several times that it is deferred pay or retirement savings. It is not a surplus. It is our money.
In the last report of the Minister of National Defence on the status of the Superannuation Act, which was about nine months late, he shows a surplus by contributors of something like $4.6 billion. That is our surplus now, not the surplus of the taxpayers, as the government likes to say, and the military and the RCMP are involved as well. However, we seem to be ignored.
"Pre-condition" means that, although we can talk, they will not listen to us.
Mr. Jean-Guy Soulière, Executive Director, Superannuates National Association: Our understanding of "pre-condition" is that the government will not have the matter of the surplus on the table. Daryl Bean said clearly this morning that he is willing to meet and discuss but that he would bring up the matter of the surplus. That message has been relayed to Treasury Board officials. I believe that "pre-condition" relates strictly to the surplus.
Senator Tkachuk: Minister Massé sent a letter to our chairman Senator Kirby and a motion was passed in the Senate based on it. I would like to hear the comments of all of you on this letter.
The fourth paragraph of the letter states:
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. Work has already begun on the first step in this process, the establishment of the new and strengthened Advisory Committee.
What does that mean to you? I know what it means to me but I have difficulty convincing government members of what it means.
Mr. Soulière: The new advisory committee is described in Bill C-78. It is sort of a strengthened committee.
Senator Tkachuk: What do you think his intentions were when he wrote that paragraph?
Mr. Soulière: I think he is describing strengthening of the advisory committee in the proposed legislation.
Senator Tkachuk: What does it mean to you when he says "whatever measures are necessary"?
Mr. Soulière: To undertake the discussions?
Senator Tkachuk: Yes. If you said that, what would you mean by it?
Mr. Soulière: To me that would mean that they would establish an agenda and call for a meeting. As I said, the message that we are getting is that the government is willing to start negotiations on establishment of a pension management board but will not discuss the matter of the surplus.
Mr. Halayko: To me it means that everything is on the table.
Senator Tkachuk: That is what it means to me too.
Mr. Halayko: I am only a simple engineer, not a linguist, but to me it means that everything is on the table, and nothing happened. There is something wrong when I receive a letter two days after he is no longer the responsible minister telling me what he is going to do by way of legislation. Perhaps he was not advised, he did not realize what he was signing, or he did not even see the letter, although his signature is on it. It means that everything is on the table.
Mr. Soulière: There is a sequence to these letters. Are you referring to the August letter?
Senator Tkachuk: No, I am referring to the letter of June 14 which he wrote to the committee, which is why we acted in the Senate.
I wanted to know what you think "whatever measures are necessary" means. To me it means everything I can do to make it happen in the summer and, as far as I can tell, nothing happened in the summer.
Mr. Halayko: Although I am no longer contributing, they already have my money, and they are going to steal it.
With regard to an advisory committee, I can advise you to do all sorts of things but you do not have to listen to me. We want to be part of the management. I certainly would not want to start investing our share of $12 billion. I cannot even count that high. However, we would hire the best brains in the world to do the investing for us at arm's length, subject to audits, the Auditor General's scrutiny, and everything else. I can see none of this in Bill C-78. I believe that this legislation is a cover-up for the theft of $30 billion.
[Translation]
Senator Hervieux-Payette: My question concerns Mr. Guy's presentation, which I have only in English. You spoke of $13 billion, which represented a deficit in the retirement fund in which today it is claimed there is a surplus. However, you attribute this to the indexing introduced in pension benefits being paid. Am I to understand from this statement that Canadian government superannuation benefits are fully indexed?
Mr. Soulière: Yes fully indexed.
Senator Hervieux-Payette: Is it a general rule in Canadian corporations for private pension funds to be indexed, or is this an exception?
Mr. Soulière: It is not the norm. It should be noted that indexing is not free; we pay for it. Benefits are drawn on the basis of all public servants paying a contribution of 1 per cent of their salary to cover indexing. It is thus a benefit in the same sense as various other benefits can be attached to pension plans, but for the Public Service and the two retirement pension funds, they are indexed, because we pay for it.
Senator Hervieux-Payette: If we are making comparisons, because we are speaking of public funds here, what, in private pension plans, is the usual contribution breakdown, 50/50, 70/30 or 40/60?
[English]
Mr. Keith Patterson, Deputy Executive Director, Superannuates National Association: The answer to this question is basically that you get what you pay for. Most pension plans in the private sector have much lower contribution rates than the Public Service or Canadian Forces or RCMP pension plans. As a result, they receive lower benefits. Part of those lower benefits is less indexation. The cost of that indexation has been taken out of employees' paycheques or as part of lower wages, as Mr. Bean explained to you earlier. We have paid for that. It is not a gift from the government, or anything of that nature.
[Translation]
Senator Hervieux-Payette: I understand that the portion covered by employees is not a gift, but the fact nevertheless remains that the employer, depending on the period in question, contributed from the federal government's total budget, which was between 30 and 40 per cent for employees and between 60 and 70 per cent for the employer.
For me, in the company where I worked, a company that was doing $500 million worth of business, there was no pension plan. It did not cost the employer much because the employer was not making a contribution. This is not a rule, except for corporations that have been in operation for many years. In the private sector, employer contributions are much higher. The workers therefore give less and receive less.
Have I understood you to say that in the future, you are in agreement with the philosophy of 50/50 contributions, as well as with sharing the risk involved in this formula?
Mr. Soulière: We need to point out that we are representing people who are already retired. Questions concerning contributions to retirement plans are primarily of concern to future retirees, and not to people who are already retired. It is up to the unions to make the necessary interventions and representations with respect to immediate contributions. For us, our concern is primarily benefits to retirees.
What concerns us, for example, is that retirees have contributed a great deal to the existing surplus because of their earlier contributions. Many are suffering because of the infamous 6 and 5 legislation that has been mentioned a number of times today, and that the President of the Treasury Board, Mr. Massé, said that he would review. He has not yet done so, and we are noting this in our presentation.
Senator Hervieux-Payette: I know that the people you represent are already retired, but there is a risk in any event for existing retirees for a pension fund in which the proportion would be 50/50. There are two options: either people receive less or they contribute more. It is current public servants who will have to offset the deficit, because your own members might also be at risk if, for whatever reason, there were to be a deficit in the pension fund.
Mr. Soulière: That is not really the case, because we are speaking of a new plan and the previous plan. The existing Act and benefits, even if Bill C-78 is passed, would definitely not affect current retirees. When the federal government announced the Bill, they clearly stated that benefits would not be affected negatively by the passing of the Act.
Senator Hervieux-Payette: Then representations are being made strictly on the basis of a superannuation fund that does not exist, but the $30 billion are considered part of the amount that was contributed to Canada's public accounts, and you say they could be used to improve the current situation?
Mr. Soulière: For example, conditions could be improved for widows or survivors who, on average, receive a pension of $9,000. When we say there is a surplus of $30 billion, it is very difficult for these people to accept the fact that all they are getting is $9,000. The $30 billion is like money that was placed in the bank, and there is a surplus, and interest was earned. We are entitled to the interest.
Senator Hervieux-Payette: If an injustice was done, as you said, when did it happen?
Mr. Soulière: The six and five injustice was in 1982.
Senator Hervieux-Payette: Has legal action been taken?
Mr. Soulière: Action was taken by employees at one point. Immediately after the Act was passed, one of the unions sued the government, claiming that it could not apply the Act to benefits.
When the government saw that it might lose its case in court, it decided to improve the benefit to all employees to compensate for what they took away from them under six and five. This same mentality was not applied to those who worked for the government during those years and who should have received the same benefits. This is the injustice that we say has existed since that time.
[English]
Mr. Halayko: Mention was made of other schemes. There is the Ontario Municipal Employees Retirement System, OMERS, which is probably the third biggest pension plan in the country. It is indexed and capped at 6 per cent but, if and when the cost of living increases 6 per cent, they continue receiving that 6 per cent until they have caught up. We, on the other hand, with six and five, lost out completely. OMERS is the same kind of system we have, however, it is managed outside by contributors and the government. They had a surplus. What did they do? Everyone took a contribution holiday and the recipients received a bonus.
In our case, we have $12 billion in the Armed Forces superannuation account still left over after $4.6 billion has already been stolen, and they want to take all of that and then, starting in the year 2003, they will say that we have no money and we will need to pay more. In the meantime, yes, we have been promised that we will continue to receive what we are receiving now. However, when you look at the record of all the various governments over the years, they have tried to de-index our superannuation. That took a massive fight. They have tried to make all sorts of changes without any consultation.
Frankly -- and I go back to the comment I made about trust -- no, we do not trust. There is no guarantee that three years down the line another insensitive government -- because we ran into this under the Old Age Security, as those involved in the debate will remember -- will come along and say that they will claw it back, that we did not pay for it. We know it was paid for. It does not matter which government did it; it was done by a government. We cannot trust anyone.
The Chairman: Thank you for that comment. I suppose it is appropriate that we turn now to a former minister of that insensitive government and ask Senator Kelleher to proceed with his questions.
Mr. Guy: I should like to make one comment before we do that. The mention of a contribution holiday strikes terror in our hearts because pensioners do not benefit in any way from a contribution holiday.
Senator Kelleher: I will ignore the chair's previous remarks. I know that he was not serious.
Mr. Halayko made reference in his comments to Ms Campbell having something to do with court actions that have been commenced. Thus, I want to address my questions to her.
The Chairman: Are these the two cases someone referred to last night by the name of Krause?
Ms Fiona Campbell, Legal Counsel, Armed Forces Pensioners/Annuitants Association of Canada: That is right, Mr. Chairman.
Senator Kelleher: In your opinion, what effect, if any, would the passage of this bill in its present form have on the two court actions which have been commenced?
Ms Campbell: Legally speaking, the actions could still succeed. Unfortunately, from our perspective, the result would probably be just what Mr. Bean was describing earlier. If we succeed and the money is put back into the funds, then the government could turn around and take it out again. Unless there were a successful challenge to Bill C-78, for most purposes, the actions probably would not be very useful from a practical perspective.
Senator Kelleher: Could you express an opinion on the morality of this government in passing this bill if that is the effect it will have on court actions that have already been commenced?
Ms Campbell: Obviously, we think it is completely improper and prejudicial to the court actions and that, perhaps, this is not the proper forum in which to be fighting this battle.
Senator Kelleher: I believe you were here this morning when Mr. Bean was answering questions. He mentioned a court action that they would hope to take if Bill C-78 is passed. That is to say, an action against Bill C-78. What effect would the passage of this bill have on such a court action?
Ms Campbell: I believe he was talking about an action to challenge, somehow, Bill C-78 as far as it deals with the surplus. I believe that, if the action is successful, it would cause all or part of Bill C-78 to be ruled invalid.
I do not know the exact details of how he plans to bring that action, but I assume that is what would happen.
The Chairman: Thank you, gentlemen and ladies. We appreciate the time you took to be with us.
Senators, we have with us in the audience this morning Dr. John Fitzpatrick who I have known for a long time. Even though he is not on our list of witnesses, I should like to hear him on the background of the matter before us. He was an economist with PIPS, the Professional Institute of the Public Service of Canada, at the time the special joint committee of the house and the Senate in 1967 launched the creation of the public service pension plan. I should like him to address a couple of historical references that were made this morning.
Mr. Fitzpatrick, could you come forward to set the historical context in light of all the other comments that we have heard? From your perspective as someone who was in on the beginning of both collective bargaining and, ultimately, the escalation clause in public service pensions, would you make a comment or two?
Mr. John M. Fitzpatrick, Individual: Mr. Chairman, next to the work of this committee, the joint House of Commons and Senate committee of 1967 probably dealt with one of the most important pieces of work related to public service pension plans.
Basically, both measures were introduced as a result of the findings of that committee. One what was we now call "indexing," or the escalation clauses. The other is what we know as "collective bargaining."
When it came to the question of indexing, as reported at page 1467 of the proceedings, it was stated:
-- this committee was formed at this late date to look into the problem of those who have been retired at the present time and who are receiving pensions which are considered, in some cases at least, not sufficient --
There was no indexing prior to 1967. In effect, in 1967, the public service accounts were in severe deficit. Yet, the committee went ahead and recommended a system of collective bargaining and a system in which pensions would be indexed.
The reason I bring this to your attention, honourable senators, is that risk bearing and Treasury Board policy is interrelated. It is hard to define one without having some knowledge of the other.
Prior to 1967, Treasury Board policy on interest rates was to follow a so-called "actuarial" rate of interest. As far as the market is concerned, it is a fictitious rate but it does have a basis. The rate of interest applied to the account was 1 per cent per quarter, or 4 per cent per year. When that interest rate was applied consecutively over years, it proved to be too low and deficits occurred.
Following recommendations to the Bourget-Richard committee, Treasury Board changed its policy. It changed its policy in relation to the proceedings and evidence given at that particular time. I was instrumental in that. The proposal I made, which was supported by others, was that we move away from the actuarial rate of interest, which was not working, and that we move to another basis. The basis that was proposed at that time was to move to the long-term bond interest rate. That was a significant difference. Even in those days, the actuarial rate was 4 per cent and the long-term government bond interest rate was in the order of 12 per cent. Compound 12 per cent versus compounding 4 per cent, and you get an idea of what can happen.
However, there was a decision taken by Treasury Board which is important to this committee. They decided to pay 1.5 per cent per quarter, that is, 6 per cent per year, into the current accounts to pay the pension plan. The remainder, that is, the difference between the 6 per cent and the 12 per cent, would be used to pay back the deficit.
This came into place in or about 1967-68. By the year 1990, all the deficit had been paid back and compounding, then, at the long-term interest rate, within a 10-year period, brought the account from zero to a $30 billion surplus.
The point I am making here is risk bearing is directly related to Treasury Board policy. When Treasury Board policy was set so that interest rates were at the actuarial rate of 4 per cent, and there was a deficit in the account, Treasury Board says that there is a deficit. However, Treasury Board is the one that establishes and sets interest rates. When they went to the long-term bond interest rates, at the request of the Maurice Bourget and Jean Richard committee, the whole situation changed.
Ask yourself this question, senators: What are we talking about? Are we actually talking about risk? Or are we talking about the results of policy decisions? Prior to 1967, the policy decision was to pay at the lowest rate possible. Following that, it was to pay interest at the rate of long-term bonds. The compounding of the two is what made all the difference in the world. Was this risk or was this, in the first place, questionable Treasury Board policy and, perhaps, in the second place, paying an interest rate higher than what the account actually deserved?
The Chairman: I understand Senator Tkachuk will proceed with a motion.
Senator Tkachuk: We have some difficulty as to how we should proceed from here. From the evidence, there is not much to report, even though we had been asked to oversee any particular negotiations between the government and interested parties.
The Chairman: That is because there were no negotiations.
Senator Tkachuk: That is right. The difficulty is that because members of our caucus are of the view that the motion was made and succeeded in the Senate in June because of the minister's letter to us in which he noted that he would undertake "whatever measures are necessary." According to the minister's evidence last night, there is some disagreement as to what that means. To me it is clear. Thus, our intention is that we not report the bill. We would like a recorded vote in our opposition to the bill.
The Chairman: There is no motion on the floor. Do you want to make a comment or move a motion?
Senator Kenny: I move adoption of the bill. Senator Tkachuk has described his position clearly. I think those on this side would like to see the bill reported and returned to the Senate the first day we return. I move a motion to that effect, Mr. Chairman.
Senator De Bané: I second the motion.
The Chairman: Are there any other comments before we vote? I want to make a comment.
Before we vote on the motion, am I correct in assuming that, if that motion passes then nevertheless, as this committee has done frequently, there would be a set of observations or comments on the bill? If that were the case, as again has been the history of this committee, would those be left to the chairman and vice-chairman to work out?
Senator De Bané: That is Senator Tkachuk and yourself.
Senator Tkachuk: That is what we would like to do. As long as it is clear, Mr. Chairman, we do have our point of view on what is happening here. If things fall apart, we will have a minority report.
The Chairman: I have said that is perfectly fair. I have said to Senator Tkachuk that he and I would be very "small-l-liberal" in our observations, and we would work out a set of observations or comments, fully recognizing that, in the end, we would not use a three-two split but work it out jointly. If, in the end, you were not happy, there would be a minority report. I have no objection to that whatsoever.
Senator Kenny: There are observations from this side, as well, which we would want included.
The Chairman: On behalf of this side, I will attempt to negotiate a set of observations that Senator Tkachuk and I believe reflect both views. If that is not possible, there will be two sets of observations and both will be included.
Senator Tkachuk: This is a procedural question. We are all agreed that our earlier report will be part of it, with further instruction to the Senate.
The Chairman: On that basis, is it your pleasure to adopt Senator Kenny's motion, which is that Bill C-78 be adopted and reported to the Senate without amendment but with observations?
I count six senators in favour and five opposed. The motion is carried.
The committee adjourned.