Law Times

PAGE 10 FOCUS Unions ready to fight government changes Jointly sponsored pensions BY MICHAEL McKIERNAN Law Times U nions are gearing up for a fight as the pro- vincial jointly sponsored pension plans. In his report to the province turns up the heat on government earlier this year, economist Don Drummond highlighted pen- sions as an area rife with poten- tial for government savings. The government followed up on his recommendations by announc- ing a consultation on the future of jointly sponsored pension plans. Employer sponsors and mem- ber representatives participated in decisions on benefit levels and contributions under jointly sponsored plans. They already apply to some of the largest pen- sion funds in the country. The Ontario Teachers' Pension Plan, the Healthcare of Ontario Pen- sion Plan, the Ontario Municipal Employees Retirement System, the Colleges of Applied Arts and Technology Pension Plan, and the OPSEU Pension Trust are all jointly sponsored. dent of the Ontario Public Service Employees Union, has warned the government off legislating changes to the plans, a message he says he delivered in person when he met officials as part of the consultation pro- cess. "It really isn't consultation; it's a dictation," he says. "They're But Warren Thomas, presi- telling us what they want to do. We warned them that if they're coming aſter our plans, they have a big war on their hands." At the Ontario Bar Associa- tion's 10th annual Pensions and Benefits Hot Spots session on May 15, Freya Kristjanson of Cavalluzzo Hayes Shilton Mc- Intyre & Cornish LLP, a firm that oſten acts for unions, said all of the signs are there that "jointly sponsored plans will be at the forefront of government cost- containment strategies." When he delivered his report Canada's jointly sponsored pension plans have been earning solid returns, says Hugh O'Reilly. plans in recent years." "These rates are now high rela- tive to past experience and to those in the private sector, to the provincial government in February, Drummond raised concerns about contribution rates, something he said had been "trending upward in public-sector the provincial government should stop boosting contributions every time unfunded liabilities open up. "The government should shiſt its focus from contribution rate In the future, said Drummond, " he added. 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Price subject to change without notice and subject to applicable taxes. CANADA LAW BOOK® www.lawtimesnews.com pension plans during the consul- tations. "The government holds the she said. "So if you're in a part- nership with someone who' legislative tools, which may man- date certain changes to be made, " a much bigger stick, it can some- times make for an uneasy partner- ship." In its March budget, the prov- ince solidified Drummond's s got recommendations when it an- nounced plans for legislation that would cap government funding at 50 per cent. Of the major plans, however, only the health-care plan currently receives more than half of its funding from the govern- ment. The provincial government tion could increase the tension between the government and its union partners in the joint governance in the plans could pose a problem for the govern- ment in convincing members to agree to benefit cuts, Drum- mond acknowledged. As a re- sult, he suggested the govern- ment "may need to consider legislative options should the parties be unable to reach agree- ments to address these issues." At the OBA event, Kristjan- son said the threat of legisla- increases to changes in future benefit levels when faced with future shortfalls," he wrote. "Measures should be taken to reduce prospective benefits to limit the need for further con- tribution rate increases." The collaborative nature of tempered that by making clear that "any benefit reductions would involve future benefits only, not those that have already been ac- crued." According to Kristjanson, that ductions in future benefits would come before any more contribu- tion increases. However, the government promise may not be enough to avoid increased litigation with unions over disputes. "I just argued a case at the FST [Financial Services Tribunal] regarding the meaning of an ac- crued benefit and I think we'll be seeing more of that if the govern- ment brings this in," she said. In an interview, Kristjanson' at Cavalluzzo Hayes, colleague s Hugh O'Reilly, says the govern- ment' tribution rates has been over- blown. The health-care plan "has had s concern about rising con- no increase in many years and other plans have had contribution increases recently, but it' many years of stable rates," he says. In any case, he says Canada' jointly sponsored pension plans have a good reputation around the world and argues that any move that affects them negatively would be unwise. "I'm confident they're going to s only aſter s come up with solutions . . . and not get caught up in the hysteria," he says. "The plans have earned good also signaled its intention to halt rising contribution rates that are currently in the range of 11 to 13 per cent with some slated to rise even further. The province blamed a provision in the Pension Benefits Act that defaults to con- tribution increases to fix funding gaps if the parties can't agree on benefit reductions. Under the new legislative framework, that default position would reverse so that re- augusT 20, 2012 • Law Times returns. Teachers has had over 11 per cent and HOOP over 12 per cent. I think the province realizes they are world-class institutions and I don't think they're going to do anything that would upset that." more colourful language. "We've been saying if you can Thomas agrees but in slightly demonstrate a real problem here, then sit down and show it to us and we'll listen," he says. "They seem so ignorant when it come to pensions." LT

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