Teachers’ voices pension reform, CPP opinions

In its response, Teachers’ indicates that of all the proposals put forth to increase the pension coverage of Canadians, “the best solution is either an expanded Canadian Pension Plan (CPP) or the establishment of new multi-employer defined benefit (DB) pension plans (MEPPs), which are jointly governed by employer and employee representatives.”

What the group doesn’t want to see is the creation of a defined contribution (DC) plan and plainly says that DB plans are better—for employers and employees——than DC plans. “The movement in recent years from defined benefit plans to defined contribution plans at both employers’ and employees’ expense is, in our view, the result of short-sighted tax rules and court decisions,” the release states.

CPP
Teachers’ is supportive of making changes to the CPP to increase pension security for Canadians but warns that the changes need to be well planned and not made in haste as any changes to the national system will impact employers and current plans.

“If it is determined that the way to secure the retirement futures for the many, many Canadians who do not have a workplace pension plan is by making alterations to the CPP, we are trying to [raise awareness] that doing so is very complex,” says Jim Leech, president and CEO of Teachers’.

For example, increasing contributions to CPP may result in employers decreasing their contributions to their current plans or needing to renegotiate pension benefits. “At OTPP, the joint sponsors currently contribute 22% of teachers’ salaries toward pension security, which is borne equally by the teachers of Ontario and the government. Therefore, any increase in CPP payments to the federal plan could result in a matching decrease in OTPP contributions. If this does occur, existing plans will be weakened and rendered less flexible in how they can manage their funds,” the statement says.

What needs to be done
“We are renewing the call that we made in the summer that said, Put together a task force to determine how to do this, don’t just all get together and ink a piece of paper,” Leech urges. “Maybe you can have your cake and eat it, too—augment the CPP but have all the funds that currently flow to the CPP from that membership base flow to a jointly sponsored plan.”

“I think it’s time for [the finance ministers] to come to some resolution. There are really two choices: either they do something with CPP or they create some new body that people can opt into, like the Australian model,” concludes Leech. Get Teachers’ full response.

Related Links • Is an eligibility increase the answer for CPP?

• Securing Our Retirement Future: Consulting with Ontarians on Canada’s Retirement Income System