The Pension Surplus Litigation Trial against the federal government is starting on November 15. This is by far the most significant case of its kind in Canadian history. It is important for everyone to be aware of this trial as the events unfold and to raise awareness in the workplace.
Your union or association will periodically post messages on its web site. Add the link to your “favourites” and check it on a daily basis. Discuss the issue with your colleagues and explain its relevance to others. Make it a”water cooler/dinner table topic” at work and at home.
What is the background of the Pension Surplus Litigation?
By 1999, the pension plans of federal public sector workers (public service, RCMP and Canadian Forces employees), had accumulated a combined surplus of $30.2 billion.
One of the main contributors to the surplus was the fact that the workers were paying into the pension fund based on calculations that assumed workers were receiving annual wage increases, when in fact they had a legislated six-year salary freeze in the 1990s. On average, federal public sector workers pay higher contributions to their pension plans compared to private sector workers.
On September 14, 1999, Parliament passed the Public Sector Pension Investment Board Act (Bill C-78), which allowed the federal government to grab the $30.2-billion surplus from the three pension plans. The federal government is exempted from the Pension Benefits Standards Act, which limits employer access to any surplus in federally registered pension plans.
The Act also gave Government the authority to raise the mandatory employee contributions in case of a shortfall and to reduce or cease employer contributions if the pension fund accumulates a surplus in the future.
On November 8, 1999, unions representing workers affected by the Act, employee associations and retiree groups filed a lawsuit against the federal government.
In total, 670,000 Canadians – or 1 in 50 Canadians across the country – are directly affected by the Act. However, millions of Canadians are also affected, considering the impact the Act has on the families of the workers.
On top of the pension grab, on July 7, 2005, the federal government imposed yearly increases in employee contribution rates for the next eight years.
What is the lawsuit about?
The following arguments will be laid out during the trial:
The Government violated its legal obligation to use the surplus in the best interest of federal public sector workers and retirees.
The Government’s action constitutes a breach of contract in that the pension fund is part of the terms and conditions of employment governing public sector workers.
Since the active and retired pension plan members contributed in part to bring about the surplus, they are at least entitled to a part of it based equitably on their share of contributions.
The Act discriminates against public sector workers under Canada’s Charter of Rights and Freedoms.
Why does this matter to you?
You pay into a pension fund with the understanding that the money will be held safely and will be re-distributed to retirees. You do not pay into a pension fund so the money can be diverted into the general coffers of the federal government.
On top of taking the surplus away, the employer is now saying that employees need to contribute more to maintain the reserve and that they will cut back their share of the contribution. This adds insult to injury.
Other things could have been done with the surplus for the benefit of the active and retired pension plan members rather than the benefit of the federal government’s bottom line. For example, benefits could have been raised for current and future retirees or a cushion could have been created to protect workers and retirees from future economic fluctuations and increases in contributions.
The pension surplus grab is another example of the way the federal government operates. They use taxpayers’ money to advance their political goals, instead of protecting the interests of their citizens. They must be shown that accountability is what taxpayers demand, a message this scandal-ridden government should have been hearing loud and clear.
Besides its legal obligations, the employer has an ethical obligation towards its active and retired employees. Plan members contributed a great deal to the surplus, so they should at least be entitled to part of it based on their contributions. But the Government is taking all of it, which, in effect, is stealing money from its active and retired employees.
Public sector pension plan members should not be treated differently from private sector members.
How much outcry would there be if a private company would take money from a pension fund to pay off the company’s debts? In fact, there have been court cases, such as those against Conrad Black and Monsanto, that have ruled against employers expropriating pension plan surpluses.