You can understand the anger, at least to a point: in recent labour disputes at both Canada Post and Air Canada, one of the major sticking points is pension funds. In both instances, the companies involved want new hires to get a different kind of pension plan than current employees. It sounds innocuous enough: instead of “defined benefit” plans, the companies want to move to “defined contribution” plans.
The difference is that, in defined benefit plans, companies set up a fund that pays retirees a set amount of pension. The cheques or direct deposits come in, and they are exactly what you expect. In defined contribution plans, employers and employees make a contribution, but employees themselves handle the investment of the money, usually through company-chosen investment advisors. The regular retirement cheque? If your choice of investments perform well, that’s grand. If not, well, that’s not your former employer’s problem. Switching from defined benefit to defined contribution takes them right off the hook.
It hasn’t always been that way. In the ’80s and ’90s, there were a fair number of companies that absolutely loved defined benefit pension plans, especially when the money they had invested for employees was raking in investment surpluses that those same companies could then happily skim off for their own finances. “We don’t have to leave the surpluses alone,” many companies argued, “because we’re still responsible for paying out the benefits. The surpluses don’t automatically belong to employees.”
Well, the wheel has turned, and with the tumbling volatility of stock markets in recent years, most companies now look at defined benefit plans as potentially dangerous liabilities: “What, you mean if the market goes sour, you still expect us to treat our pensioners fairly and pay them what we promised we would?”
Look at Air Canada: the company has a $2 billion deficit in their defined benefit plan, meaning they essentially owe the plan $2 billion to balance off their pension responsibilities.
You get the picture: that kind of liability is not pretty on the bottom line, so the company wants to get out of defined benefits, one new employee at a time.
What’s happening at Canada Post and Air Canada is only a small piece of what’s happening across the country. Management employees and employees at non-unionized companies — at least, those among the minority of private businesses that actually have pension plans — are seeing themselves simply and arbitrarily bounced out of defined benefit plans.
You get a “letter to employees,” followed by promotional material promoting the benefits of being allowed to “direct the investment of your own pension money at the risk level you’re comfortable with,” and a few months later, your company walks out from under the dangerous overhang of having to do what they promised they would do.
Often, the letter comes with sanctimonious platitudes pointing out how lucky you are that your employer is generous enough to even have a pension plan.
It’s a nasty fight, and one that more and more unions are going to have to wage in the coming years. “Defined contributions” are the new “right-sizing” and “out-sourcing” — the “in” thing for corporate cost-cutting right now. And passing the pain on to future employees is the easiest way to limit liabilities, if your current employees let you do it.
Stepping into the growing union/management defined benefit/defined contribution pension battle, though, might be a dangerous thing for politicians.
The problem is that, while top executives and federal politicians might recognize the corporate dangers of defined benefit pensions, they also recognize the personal benefit of keeping those same plans.
While employees are being asked to take over the care and control of their own pension funds, the players at the top of the corporate heap have been careful to ensure that they’re none the worse off. In fact, senior executives continue to reap hefty — and growing — pension benefits, despite companies explaining that hard economic times mean they have to tighten up on employee benefit plans.
Take Air Canada: in these times of restraint, Air Canada president and CEO Calin Rovinescu’s compensation increased more than 70 per cent in a single year. Rovinescu made $2.6 million in 2009 and $4.5 million in 2010. Tightened belts, indeed.
And federal politicians? The federal government announced Tuesday that they’d bring in back-to-work legislation for Air Canada employees — private sector employees in a private sector company — because of “risks to the weakened economy.” All this in a strike where one of the major issues is pensions. Canada Post will likely be in the same boat.
Federal politicians are going to do that while sitting on one of the juiciest defined-benefit, fully-indexed pension schemes in the entire country. Let the people eat cake? Heck, let them eat cat food. The politicians will be the retirees buying cake.
It brings to mind an issue raised by the lost and lonely federal Liberals this week: interim Liberal leader Bob Rae pointed out that, while the federal Conservatives have been preaching restraint, Conservative cabinets have ballooned from 27 members to 39, and costs have shot up.
“It’s a little unusual for governments to say they’re increasing the sizes of their offices, and increasing everything they do,” Rae told Postmedia News. “(Meanwhile) you’re cutting scientists, you’re cutting people who are regulators, you’re cutting in every respect of the actual service the government offers.”
Well, no, it’s not unusual.
What it should be is unacceptable.
What’s fair for the goose often looks very different to the gander, especially when the top gander is so used to feathering its own nest.
Russell Wangersky is the editorial page editor of The Telegram. He can be reached by email at email@example.com.