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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.”