DIPAC Blog
Advocacy Day
Recall that at our Annual General Meeting in April we discussed a number of critical issues that the DIPAC board was concerned about and working on.
At the federal level, we were gathering signatures for a petition, asking the Government to elevate the priority given to pensioners, in the event the sponsor of a pension plan ended up in bankruptcy. We had a very successful campaign and gathered over 1100 signatures which have been submitted to the MP for Kingston, Mark Gerretsen. This petition will be submitted to the Government in the fall once Parliament has resumed sitting. We have met with Mr. Gerretsen and he is working with us to develop the process he will use to maximize the potential for a positive result from our petition.
At the provincial level, we were anxiously waiting for the preliminary results of the Government's study of the requirements for plan sponsors to fund plans like ours on a solvency basis. Solvency basis is the level of funding that sponsors are required to make as a percentage of the plan's liabilities were it to be wound up tomorrow. As you know, many plans like ours are underfunded and in cases where the sponsor no longer is able to continue to operate, the pensioners would not receive the full value of their pension payout.
The Government shared a preliminary view of their intentions to modify the requirements for solvency funding in May, with the intention, after further consultation and assessment, of bringing forth legislation as early as this fall. It is fair to say that although the preliminary view of legislation was not as damaging as we feared it might be, it certainly would weaken the position of our members. Essentially the initial proposal would result in large savings for plan sponsors, by reducing their funding requirements from 100 to 85%. Minor improvements to the Pension Benefit Guarantee Fund (PBGF), would result in a large number of our members receiving a reduced pension in the case of a windup. This situation has been the primary focus of the DIPAC board for the last three months.
Under the Government’s May 19th announcement which proposes a PBGF guarantee coverage of $ 1500/month (from the current $1000/month), pensioners whose pension is $1500/month and whose plan was 60% funded would receive their full pension; in the event of a wind-up. Under similar assumptions, but if you had a pension of $3000/month, your pension would be reduced to $ 2400/month; through a combination of the funds in the pension plan and the PBGF.
Recall at our AGM that our guest speaker, Sophie Kiwala recommended that one of the most effective tools we could use to influence the Government is what is called Advocacy Day. This is a day where we would sponsor a buffet luncheon at Queens Park, immediately following question period, and invite all the MPP's and other influential people in staff jobs to attend the luncheon. We also would arrange for meetings with individual MPP's in the afternoon to put forward our position. This day is scheduled for Oct. 17th at Queens Park.
Relative to this Advocacy Day:
- We concluded that to maximize the effect we would be much better able to get our message across if all of the members of the Canadian Federation of Pensioners (CFP) were involved. We have engaged CFP and have received strong support from them; including a steering team, volunteers and funds contribution.
- As we planned the day, it became clear we needed to have a unified message and also present the government with a solution rather than merely complaining. We believe we have developed a win/win proposal that benefits both sponsors and pensioners.
- We have engaged the president of CFP, Bob Farmer, who came to our AGM in 2016. Under his leadership plus the efforts of the DIPAC team, CFP has worked with an actuary to derive an estimate of the Pension Benefits Guarantee Fund (PBGF) assessment fees that would permit it to fully protect earned pensions and to contrast that amount with the savings that employers can expect as a result of the more lax funding requirements contemplated in the May announcement. We concluded that employers will realize significant savings from the changes to the funding rules. A conservative estimate is in the order of $1.4 Billion a year. We also conclude that a small fraction of those savings, in the order of 5%, is all that would be necessary to supplement the current funding levels of the PBGF. In summary, the sponsors would retain 90-95% of the savings with the balance directed to the PBGF which would ensure all pensioners are fully protected in the event of a windup.
- The results of our study have been shared with key members of the Government and we are in the process of meeting with them prior to Advocacy Day to get our message out there. The initial response has been positive.
- There are no guarantees that we will be successful, but we feel we have a strong case and we are going to go for it.
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