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Catherine Louli looks at the ins and outs of one of the hottest topics for the trade union movement today: your pension.

In November 2005, more than 65 CUPE pension plan trustees representing every province and nearly every sector met for the first time in Toronto to discuss the crucial role they play in ensuring a secure retirement for their coworkers. A key topic on everybody’s lips? How to get more people involved, interested and educated in managing their pensions.

If you’re under 30, you probably don’t think about your retirement very much. If you’re closer to 60, you may take your pension for granted. But at CUPE, pensions have surfaced as one of the hottest political topics of the day.

Over the years, CUPE has committed a lot of resources and time to examining the question of pensions. The pressure is on: over the next decade, Canada’s six million Baby Boomers – the largest single group in the country – are expected to retire.

The issue of pensions is so much more than the negotiations of benefits for when our members retire,” says Michel Lizée. Lizée represents CUPE Quebec on the pensions committee of the Quebec Labour Federation and also sits on the CUPE National pension advisory committee.

Pensions are directly linked to our defence of the role of the public sector and the role of government in relation to public services,” he says. “When we talk about pensions, we need to understand the political context of investments of the pension fund. When dealing with pension investment, we deal with issues like the environment or the privatization of public services – basically, all the political work that CUPE is engaged in.”

More and more people at all stages of their working lives are beginning to see the light when it comes to pensions. Cidalia Ribero is a CUPE flight attendant with Air Canada. “I was 22 when I started at Air Canada and I didn’t really know a lot about pensions,” she says. “I thought I was going to be at Air Canada for a very short period of time and it wasn’t really an issue for me. But now that I’ve been here for 10 years, I realize how important an issue it is and that we have to fight for our pensions in every round of collective bargaining.”

What kinds of pension plans are out there?

When most people think of pensions, they think of the Canada Pension Plan (CPP). Introduced in 1966 and today worth more than $70 billion, the CPP is an active part of most people’s retirement income.

The CPP is a good foundation to build on, part of our national safety net. However, it is not the sole source of retirement income for many Canadians. Workers and their employers have invested a lot of money in other pension plans over the years. As of Dec. 31, 2004, the assets of the top 100 Canadian employer pension funds with CUPE member participation sat at more than $2.19 billion.

Pension plans can be divided into two types of schemes. The one preferred by workers and recommended by the union is a defined benefit pension plan. The one preferred by many employers is the defined contribution plan. In a defined benefit plan, your total contribution is not known in advance. It can increase or diminish over time; value is assessed throughout the life of the plan. However, under this model, the amount you will receive after retirement is known and guaranteed.

The defined contribution plan, on the other hand, is similar to a Registered Retirement Savings Plan (RRSP). The amount that will be drawn after retirement is unknown and not guaranteed because it depends heavily on market fluctuations before and after retirement.

For CUPE, the choice is clear: defined benefit plans offer more security and a collective approach to pensions.

The difference between me and someone in a defined contribution plan is that I know how much money I will be receiving every month after retirement,” says Helen Fetterly, secretary treasurer of the Ontario Council of Hospital Unions (OCHU/CUPE) and chair of the Hospitals of Ontario Pension Plan committee. “If I had a defined contribution plan, it would be anybody’s guess what my monthly income after retirement would be. There are pros and cons [to a defined benefit plan]. But when I retire, I’m going to know what I’m going to get for a pension. We have control – this is key.”

How much control do we have over our pensions?

For CUPE, the single most important pension-related issue is the democratization of pension plan boards through joint trusteeship. Participants at the Toronto meeting in November know how crucial it is for workers to gain more control over their retirement security.

The Multi-Sector Pension Plan

CUPE participates in the Multi-Sector Pension Plan (MSPP). Members join this multi-employer defined benefit pension plan through their own collective bargaining process. Regardless of how small the bargaining unit is, members have the opportunity to join a good workplace pension.

The MSPP is open to members across the country. The plan is fully controlled by CUPE and the Service Employees International Union (SEIU), not the employers. Joining is simple. Each bargaining unit negotiates the plan into the workplace. CUPE bargains the level of worker and employer contribution, and the employer provides necessary employee data. All members share the cost and the formula used is determined with expert actuarial help.

Originally, we thought we would cover some smaller social service agencies, child care workers and cleaners, but we soon discovered the need was much greater,” says Ian Thompson, CUPE cochair of the MSPP. “We now have about 2,500 people participating in the plan, everyone from golf course workers and First Air flight attendants to paramedics.”

The plan represents an especially important gain for CUPE women, since they are often the ones without a workplace pension and are therefore completely reliant on the Canada Pension Plan (CPP).

One of the challenges of the CPP is that it hasn’t expanded and there are no guarantees of inflation protections,” says Thompson. “A lot of the workers we are bringing into the plan have minimal pensions. How do you live on less than $20,000 per year in Toronto?”

Now in its third year, the MSPP provides a strong push toward CUPE’s goal of having all members retire with decent pension incomes. Visit www.mspp.ca.

In the past, employers usually decided the level of benefits paid, how administration would work, how investment policy should be made, even when to communicate to plan members,” says Darcie Beggs, a CUPE National researcher who specializes in pensions. “Far too often, they exercised this control at workers’ expense – taking their surpluses for their contributions, freezing or reducing benefit levels, and keeping plan members in the dark about their deferred wages.”

Joint trusteeship is more than an advisory committee that makes recommendations. It also means more than simply bargaining for improvements, as workers are sometimes able to do at the negotiating table. A lot happens in a pension plan between bargaining rounds.

Joint trusteeship means workers have the power to make decisions when it come to hiring agents, developing investment policy, improving benefits, and communicating with plan members,” Beggs notes. “But the most important concrete advantage to joint trusteeship is the right to share decisionmaking about funding surplus and deficits. Where we have won joint trusteeship of plans, we were able to insist that the surplus be used to improve the plan instead of to pay the employer’s own contributions.”

Over the past few years, CUPE has obtained joint trusteeship of a significant number of our members’ pension plans. There is now at least one major CUPE pension plan held in joint trust in almost every province, with more on the way.

Joint trusteeship also offers an opportunity for increasing knowledge about the plan. Selecting trustees and keeping them accountable becomes a vital part of regular union business. Maria Wahl, a CUPE member from Port Moody, B. C., is one such trustee.

Our board of trustees is composed of 11 union members and 11 employer members,” says Wahl, a trustee of her province’s municipal pension plan. “Being a trustee enables you to understand what is happening with the investment of the pension money. It can be an intimidating experience, with the actuaries, the lawyers and the consultants who talk a whole different language.”

Wahl says union education is key to gaining self-assurance amid the “suits”. “Education prepares us so that when we enter those meetings we understand what is being said, and we don’t have to feel so intimidated,” she says. “These are our pensions. We have a right to be at that table and participate in decisions that will effect our futures.”

However, Wahl admits that it’s challenging not only to find interested members, but to train them properly before they take up their position on the board of trustees. Unfortunately, pension trustees are often trained or advised by industry consultants and professionals who may not share CUPE’s perspective on such things as public investment priorities.

Trustees at the November meeting in Toronto agreed that they need more education, more communication and more support. Among other things, attendees discussed establishing a website and developing an activist network so they can share information in between meetings.

CUPE has developed a week-long course for pension trustees that prepares them for their role. In particular, this course provides trustees with the background information needed to debate the issues and press for a positive, pro-public sector investment policy for their plan.

Using pensions to fight privatization

The pension funds of CUPE members represent billions of dollars of investment capital for governments. CUPE argues that some of this money could be harnessed for public investment in infrastructure. When they have invested in government bonds, workers’ pension funds have played a positive, passive role in infrastructure renewal. This role could be enhanced if our plans became more proactive.

In 2003, CUPE commissioned a report by economist Monica Townson on the investment of pension funds in public infrastructure. Among her findings, she noted that “pension funds can play a positive role in helping finance public infrastructure, providing a good rate of return for pension plan members while at the same time assuring governments of capital at reasonable rates.”

Townson pointed out a revealing illustration of the alarming trend toward privatization: the 1998 amendment of the investment policy for the CPP reserve fund, which currently sits at more than $56 billion. From the time the CPP was established, this fund was invested entirely in provincial bonds used to finance local governments, schools, hospitals, universities, roads, and other public priorities. The bonds held by the CPP paid a reasonable, federal government rate of return.

However, in 1998, the federal government moved into a diversified stock and bond portfolio instead, eliminating one of the largest public infrastructure investment mechanisms at its disposal.

The government attempted to justify this change on the grounds that greater income was needed for the CPP fund to meet demographic pressures. Moreover, the decision was entrenched in legislation, which makes it harder to change. CUPE has been steadily pressuring the government to return to its previous role in issuing bonds to finance public infrastructure projects.

Once a defined benefit, always a defined benefit?

Some Canadian employers are trying to change the rules of pension schemes midstream. Several have introduced two-tier pension plans, whereby new hires are not eligible for the defined benefit plan and instead are enrolled in a defined contribution scheme. The real issue is that, as older employees retire, the two-tier system will become singletiered, and defined benefit plans will eventually be phased out completely.

Two-tier plans did not appear out of thin air. In many cases, the desire to opt out of defined benefit plans is a result of employers taking “contribution holidays”. In the 90s, there was a terrific financial market boom and many plans enjoyed excellent returns on their investments. However, Canadian law dictates that when you reach a certain point of return on your investment, you are required to take a break from your contributions. Many employers and some unions took this contribution holiday during those fat years. Now that the market has slowed down, those employers have lost the habit – and the inclination – to budget for contributions to their pension plans.

In 2004, Air Canada was in bankruptcy protection and was shopping around for a new owner. Victor Li, a Hong Kong businessman, came forward with an offer, but stipulated that the deal was contingent on the air carrier agreeing to change its pension plan.

We found ourselves having to educate all our members, new and old, as to why two-tier was not the way to go and why, collectively, we had to stay together on this issue,” says Cidalia Ribero.

In the end, CUPE’s fight was successful. Air Canada blamed “union intransigence” for allowing the Li deal to fall through, but the company was eventually able to find another investor and came out of bankruptcy protection with its pension plan intact.

Looking toward the future

In Toronto, CUPE pension trustees heard about another recent successful pension fight from Carolyn Widener, chair of the California State Teachers Retirement System (CalSTRS). In January 2005, when Republican Governor Arnold Schwarzenegger tried to pass legislation to reform the state employee defined benefit pension plan, CalSTRS joined forces with other public unions to take on the Terminator – and won. Widener shared some of the wisdom her group gained from the experience.

What we learned in California is that we can’t defend just the public plans, if the private plans are going to go under,” she told the group. “We have to ask what is a safe, secure retirement income for everyone. Private employer pension plans in the U.S. are in freefall. Defined contribution plans are not working. Americans have said quite clearly to President Bush that they don’t want to privatize social security. Now we need to reach across the lines and public and private trustees need to start talking to each other.”

As Ribero admitted at the start of this article, many young workers lack awareness about their pension fund and how it will affect them. When you’re 22, retirement can seem like a distant, foggy shore. Some young people may even resent having to contribute to a pension fund, especially if money is tight. But CUPE members who are on retirement’s doorstep know that a little education and foresight can go a long way toward ensuring a better, more secure future for all.

When I started to pay into the pension plan, I was a single mom with three kids and boy, did I feel it,” says Maria Wahl. “I would say, ‘I can’t afford this’. But you can afford it. I know it’s hard. Like I say, I looked at those deductions on my cheque and thought, ‘I need that money for my kids’. But now I’m 52, and I’m going to have a decent pension. I am forever grateful that I did not have a choice to opt out of the pension.”