The ABC Solution

Oct 1, 2009  

The Association of Canadian Pension Management has applauded the two provinces for addressing the issue and taking a leadership role. The organization has even volunteered to help establish the steering committee in an effort to make the process as professional and non-partisan as possible.

“There is clearly a growing gap between the pension coverage in the public sector and the private sector. The ABC Plan will make it easier for private-sector employees to get involved in a pension and narrow the gap,” says Ron Sawatzky, director of pensions and benefits for Enbridge Inc. and member of the ACPM. “We are fortunate at Enbridge to have a pension program, but not all businesses do. We need to make it less onerous to participate in a pension plan, and with this proposal a lot of the bureaucracy will be taken care of by someone else. Employers won’t have to spend so much time trying to manage it.”

Some organizations, however, have questioned the design of the pension plan. The Canadian Federation of Independent Business, which has long argued for government action to address the disparity between private and public sector pensions, supports the concept of creating a voluntary pension that is accessible to everyone but doesn’t like the prospect of employers and employees being automatically enrolled.

“We are very supportive of this approach, but with two criteria: that the pension remain a voluntary plan and that it be opt-in rather than opt-out. We don’t want businesses to be automatically enrolled in the pension because it puts too much pressure on them. We want employees and employers to make the choice on their own,” says Janine Halbesma, acting director of provincial affairs for the CFIB in Alberta.

The Canadian Life and Health Insurance Association (CLHIA) has gone a step further and argued that the pension plan proposal be scrapped altogether. The pension not only duplicates products already available on the market, the association says, but the statistics used to justify the need for the pension have been overstated. “There are a lot more people saving for retirement than the JEPPS panel and frankly most government pension regulators recognize. The problem is that group RRSPs and RRSPs in general aren’t under pension law. When pension regulators say that only one in five people are saving for retirement through a pension, we say at least three out of five people are saving through pensions, RRSPs and deferred profit sharing plans,” says Ron Sanderson, director, policyholder taxation and pensions for the CLHIA.

The CLHIA supports the panel’s efforts to simplify the system but says that’s where reform should stop. If the governments scrapped outdated laws and removed barriers, the private sector could step in and offer the same kind of pension plans being proposed by the panel with the same kind of costs. “The guy running Joe’s Garage doesn’t want to be a pension administrator. He wants to run his business. What would happen if a financial institution could essentially step into Joe’s shoes, take on all the compliance and legal obligations so that all Joe has to do is send in his contributions on behalf of his company and on behalf of his employees? What we need to do is make it as easy as possible to get into a pension plan,” says Sanderson.

While the insurance industry has shot down the idea of establishing a government-run pension plan, other groups have criticized the slow pace of reform. CARP, a national organization representing seniors, has become increasingly vocal about the issue. The advocacy group has levelled the bulk of its criticism at the federal government for dragging its feet on a national strategy, but takes aim at both levels of government for not moving fast enough.

“I think the federal government has been engaging in serial stalling. The issue has been researched across the country by no fewer than three major provincial expert panels. The need now is for the premiers, their finance ministers and the federal government to sit down and start constructing solutions,” says Susan Eng, vice-president of advocacy for CARP. “Today’s retiree will no longer accept the status quo. Millions of Canadians are looking to all levels of government for bold leadership and to make retirement security a top public policy priority.”

Although the governments of Alberta and British Columbia have yet to approve the new pension plan, they do appear committed to the concept. A working group within the B.C. government is moving forward and anticipates a new plan will be established by July 2010. Alberta hasn’t moved as quickly, but Finance Minister Iris Evans has publicly supported the proposal. Meanwhile, both provinces are waiting to see if a national program is in the works.

At the end of July, finance ministers from British Columbia, Alberta, Manitoba, Ontario and Nova Scotia met in Vancouver and agreed to immediately launch a formal review and develop a national strategy. Representatives from the other five provinces, as well as two of the three territories, participated in the meeting by telephone and also supported the review. In addition to that, the federal government has set up a group chaired by Tory MP Ted Menzies, which includes representatives from five provinces, to investigate the issue and propose a package of reforms.

“The math is pretty easy, even for a lawyer like me. Unless something is done to address the issue, people in this country are either going to face dramatically lower standards of living in retirement or there is going to be a burden on the social safety net and taxpayers will have to pay for it,” says Brown.

“This issue has been studied to death. We need action and we need to get on with it.”

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