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									   SUBMISSION TO THE ONTARIO EXPERT COMMISSION ON
                      PENSIONS
                                   BY
                             BOB LINTON
         GOVERNMENT AND FOREIGN AFFAIRS LIAISON
                            UFCW CANADA
                         OCTOBER 3I, 2007
                  CONFEDERATION PLACE HOTEL
                           KINGSTON, ON


The United Food and Commercial Workers Union Canada (UFCW
Canada) welcomes the opportunity to present the Expert Commission
on Pensions with a report regarding the union’s experience with the
Ontario pension system.
Increasingly we learn of the obstacles facing aging baby boomers as
they enter or prepare for retirement. Will their pensions from the
state be sufficient or will they run out of money? What about their
private pension plans? Will they be enough to ensure they have a
comfortable lifestyle in retirement? Will they provide the benefits as
promised?
Just recently, we learned that, for the first time ever, the United Auto
Workers of America entered collective bargaining negotiations with
more retirees than working members. Is this a foreshadowing of things
to come? How will this affect the discussions around pension benefits
in negotiations?
Defined benefit plans versus defined contribution plans: Which will
best address the needs of our aging population?
The work of the Commission is timely. These are questions that must
be addressed and we trust the Commission will put forward
recommendations that ensure pensioners – present and future – enjoy
the standard of living they have earned and so richly deserve.
UFCW Canada and the Canadian Commercial Workers Industry Pension
Plan
Representing more than 240,000 members throughout Canada, UFCW
Canada is one of the country’s largest and most progressive unions.
Approximately half of our membership, or 120,000 people, can be
found living, working, and voting in communities across Ontario – from
Kenora to Cornwall and from Kapuskasing to Windsor. Our members
work in sectors as diverse as retail, distribution, education, meat
packing, food processing, health care, manufacturing and many other
sectors of the economy. The diversity and strength of our union allows
us to negotiate industry leading collective agreements and benefit
packages.
Most UFCW Canada members participate in the Canadian Commercial
Workers Industry Pension Plan (CCWIPP). Founded in 1979, CCWIPP
is the largest private sector multiple-employer pension plan (MEPP).
Currently the plan provides pension benefits for more than 290,000
current and former members of UFCW Canada who work for 328
participating employers under 600 collective bargaining agreements.
CCWIPP is jointly governed by eight trustees, four appointed by the
union and four appointed by employers such as Canada Safeway,
Loblaw, A&P and Metro Richelieu.
Employers contribute approximately $119 million annually to the plan,
through collective bargaining agreements negotiated with local unions
of UFCW Canada.
The plan currently has assets of more than $1.6 billion with a 12.1 per
cent rate of return in 2006 and average rate of return of 10.5 percent
since the inception of the plan.
While CCWIPP is strong and growing, thanks in no small part to the
able stewardship of the plan’s trustees, there are aspects of the
Ontario pension system that cause concern.
We believe that defined benefit plans should be the cornerstone of the
provincial pension system. Given the demographics of an aging
population with a longer life expectancy, defined benefit plans – as
opposed to defined contribution plans – will prevent the creation of a
new class of economically disadvantaged retirees, which will in turn
lead to greater social and economic costs being placed upon the
government and ultimately the taxpayer.


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Pension Surplus
One topic for debate, in the Commission’s discussion paper, is the
issue of contribution holidays resulting from a pension plan surplus.
Although contribution holidays may be attractive to employers, we
believe that contribution holidays should not be permitted. When a
surplus is realized in a pension plan, it should not be viewed as a
means to reward an employer through contribution holidays, nor
should it be interpreted as giving ownership of the surplus to the
employer.
A way of using pension surpluses may be to use the surplus, or part
thereof, for pension indexing. Surpluses may be the result of many
variables, including good return on investment, economic growth (as
was experienced prior to mid-2000), or a failure of pension plans to
provide indexing. In its 2003 paper A People’s Charter, the Ontario
Federation of Labour estimated that with an inflation rate of two
percent an unindexed pension will lose almost 40 percent of its value
over 25 years.
With a workforce that is aging and has a greater life expectancy, would
it not seem logical to use a surplus for indexing, which will ease the
state’s burden of providing aging Ontarians with suitable social and
economic benefits?


Pension Vesting for Part-Time Workers
Other issues such as inflation protection, and extension of mandatory
coverage of defined benefit plans to all part-time workers, are issues
that are worthy of discussion, consideration, and action.
Given the large proportion of part-time workers in UFCW Canada’s
membership, the union has long been an advocate of including part-
time workers into benefit plans, and has made the inclusion of part-
time workers into benefit plans a collective bargaining priority.
UFCW Canada still advocates for more full-time rather than part-time
jobs; however, given the dynamics of the changing workforce, with the
increasing trend of people working two or three jobs to support a
family, the needs of Ontario’s aging part-time workers cannot be
ignored. Given this situation, there is a need for mandatory coverage
of defined benefit plans for part-time employees similar to the law in
Manitoba where after two years part-time employees are covered. This
is also the case with the CCWIPP pension plan where the pension
benefits of part-time employees in the plan, are vested after two
years.



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With the growing phenomena of a part-time workforce and an
increasing decline in lifetime careers (the U.S. Bureau of Labour
Statistics has reported that people born in the years 1957 to 1964 will
hold an average of 10.5 jobs during their lifetime) the need for
pension portability has never been greater. This is a complicated issue
with many variables such as group transfers and individual options
that need to be dealt with. The Commission cannot ignore the
demographics of the current and future workforce and must address
the need for pension portability.


Solvency Funding
On the issue of solvency funding for multi-employer pension plans,
UFCW Canada has long held the position that MEPPs should be treated
differently than single employer plans.
With MEPPs, as opposed to single employer plans, the chance of all
employers in the plan going out of business is negligible. For example,
using the case of UFCW Canada and CCWIPP, it is highly unlikely that
Loblaw, Canada Safeway, A&P and Metro Richelieu would all cease
operations on the same day. It is more likely that if one or two
companies were to go out of business, the others would grow and
become stronger.
On August 27, 2007 the Ontario Finance Minister announced
modifications to the regulations governing MEPPs. The primary change
being that solvency funding requirements do apply to MEPPs. UFCW
Canada does not agree with this change and views it as a regressive
move. We are pleased that there is now an amendment defining a
Specified Ontario Multi-Employer Pension Plan (SOMEPP). SOMEPPs
will temporarily be relieved of solvency funding requirements subject
to modifications to going-concern funding requirements. We welcome
this temporary change but believe the solvency funding exemption for
SOMEPPS should be made permanent and hope the Ontario Expert
Commission on Pensions will recommend that the exemption be made
permanent.
UFCW Canada does not oppose the continuance of a 95 percent
threshold (which was also included in the August 27 regulation), i.e., a
mechanism that bars a single employer from representing more than
half of the plan’s members, and a monitoring process to ensure the
threshold is achieved.
In reality, however, the 95 percent moratorium threshold is
unnecessary. Not just because MEPPs rarely wind up, but because the
pension promise is a contingent defined benefit promise based on


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contributions and earnings, and in the case of UFCW/CCWIPP
members, they are the owners so they bear any risk. Furthermore,
since contributions into the plan are fixed, unlike the case of single
employer plans, the requirement for solvency funding puts no
additional funding into the plan and therefore provides no additional
funding for benefits.


Unfunded Liability
The ongoing issue of unfunded liability has also been a contentious
issue for MEPPs. Similar to the issue of solvency funding, are the
plans actually unfunded given the fact that the chance of all employers
in a MEPP would wind up business on the same day? However, if it is
determined there is a need to amortize unfunded liabilities, given the
makeup of MEPPs, amortization should be at least 15 years as opposed
to 12 years. It is highly unlikely that sources of financing would end
before the unfunded liability is amortized; consequently, the likelihood
of the plan outliving the amortization date is far greater than the
possibility of funds or assets being unavailable to pay all of the
benefits as promised by the plan.
Furthermore, with MEPPs employer contributions are tied to the life of
the collective bargaining cycle and become a collective bargaining
issue. Funding requirements are reviewed at the expiration of a
collective agreement and new contribution requirements are
negotiated at the bargaining table. This being the case, both the
employer and employees share the risk of underfunding or benefit of a
surplus. UFCW Canada does however support the continuation of
current Ontario provision that permit benefit adjustments when
negotiated contributions from collective agreements turn out to be
inadequate to support targeted benefits.


Pensions Benefit Guarantee Fund
UFCW Canada also believes there is a need to review the Pensions
Benefit Guarantee Fund (PBGF). Although of little concern for a plan
such as CCWIPP, given the rarity of MEPP plan wind-ups, UFCW
Canada does not believe there is a need for PBGF type coverage for
MEPPs such as CCWIPP. That being said, the benefit levels workers
can be paid when an Ontario Pension Plan winds up – and there are
insufficient funds to pay the plan members and pensioners – have not
changed since 1980, when the PGBF was introduced. With the
evolution of our society and workplaces, clearly there is a need to



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revisit the PGBF and perhaps work out a formula that will raise the
level of the PGBF from its current fixed rate.


Closing Thoughts
There are many other issues over and above the ones mentioned here
that should be topics of discussion for the Commission. Many of our
issues surrounding pensions and their deliverance are mutually shared
with other organizations within the labour movement and other
pension plans. Issues such as pension indexing, contribution holidays,
mandatory coverage of part-time employees, pension portability, and
review of the PBGF are all issues of common concern.
However, because of CCWIPP’s joint trustee and multi-employer
nature, many of our concerns are unique. For UFCW Canada the
preservation and expansion of defined benefit plans are paramount.
Further, we believe that if there is to be an amortization rate for
unfunded liabilities, it should be at least 15 years. We are also of the
opinion that SMEPPs should have solvency regulations that are
stringent but designed specifically for SMEPPs. SMEPPS or MEPPs fall
into a different environment than that of SEPs and thus the need for
single and multi plan specific regulations.
In conclusion, common or unique, the issues highlighted in this brief
are all issues that need to be addressed in a manner that will ensure
the goal of a decent standard of living for everyone in their retirement
years. Canada’s three pronged pension system of government
programs, employer sponsored programs and private savings has
resulted in a system of economic security and less poverty among our
elderly. Negotiated pension plans, and in particular MEPPS and
defined benefit plans, have played vital roles in this system of
economic security. We trust that OECP will recommend the
continuation of this model and that organizations such as UFCW
Canada should continue to be a part of the consultation, legislative and
regulatory drafting process.


Respectfully submitted
Wayne E. Hanley
National President UFCW Canada




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