BC: What should the new government do about pension sustainability?
Hargrove: I agree with the Governor of the Bank of Canada, David Dodge, who says we have to strengthen defined benefit pension plans. And the way to do that is to bring in a pension benefit guaranty fund that the government would put some money in initially to get it up and running. Then the parties would decide what kind of funding they’d need from the companies and workers. Something similar
to what we did when we developed the Canada Pension Plan.

BC: How do you see a Canadian guaranty fund working ?
Hargrove: The problem with the American fund at the federal level is that it has been used as a part of normal business decisions to go into bankruptcy and dump your costs onto the fund. I even think it’s been abused in bargaining by employers and unions. Employers, by offering rich pension benefits that they couldn’t afford to fund and unions accepting them because they couldn’t bargain wages.

So we would want a system, and I’ve already been in discussions with the former government—the finance minister and the labour minister—as to how we would design a fund that would avoid being subject to abuse but that would ensure that workers were guaranteed their post-retirement earnings.

BC: Aren’t healthcare and pension costs a large part of building automobiles?
Hargrove: Let’s put that into perspective. General Motors used the [figure] of US$1,500 [as a per vehicle healthcare charge when they began] their bargaining with the United Auto Workers. That US$1,500 of cost was paying [for the] healthcare for its workforce. But the comparable figure in Canada, because of our socialized system, was US$120 dollars. One hundred and twenty dollars is a very reasonable cost to provide a health plan for the workforce.

BC: Other concerns with benefits or healthcare?
Hargrove: One of the issues is on public pensions. Our Old Age Security pension system, we think, is long overdue for an upgrading and better benefits for people.

BC: So what are you proposing?
Hargrove: A strengthening of the Old Age Security, which means more money out to people who use
it. [The money] has to come from general revenue. Again, we have huge surpluses and instead of giving tax cuts that mostly benefit the wealthy, we believe an increase in Old Age Security would help all seniors in the country and would be a much better way.

BC: Do you think there needs to be a national regulator?
Hargrove: Yes, absolutely. We have the Superintendent of Pensions, but the system has to put more power in the hands of the superintendent’s office. We are talking to a number of employers in the federal jurisdiction about this.

Employers, when there is a minority [government], are generally more open to looking at these things as opposed to waiting for somebody to bring in regulations that someone may not like.

There’s a lot of money, for example, tied up in companies that have huge assets in the country that can’t leave. The railways are a good example— huge capital assets that are there and abatable to ensure that people get their pensions. And you could look at different funding systems for some of the companies that have that situation. There are a number of things that I think should be open for discussion.

Joel Kranc is news editor of BENEFITS CANADA. Joel.kranc@bencan-cir.rogers.com.