Troubled pension plan warns of drastic benefits cuts

According to a letter from the Canadian Commercial Workers Industry Pension Plan (CCWIPP) to its 130,000 active members, companies in Ontario will need to increase their contributions by up to 40 cents an hour per worker by Sept. 1, 2010, in order to maintain current levels for future benefits.

The Star says the letter also explains that inactive members who have left a contributing employer but are still eligible for a pension will experience a 40% decrease in future benefits next month. However, inactive members over 50 years of age who are currently eligible to draw a pension won’t be affected by the reductions, nor will retirees’ pensions or active members’ accrued benefits.

The Star explains that CCWIPP trustees warned of a “benefit restructuring” last year but did not mention benefits cuts. In 2005, the plan cut future benefits for members by 20%.

2008 saw CCWIPP post a -19.6% return on investment, followed by a huge comeback in 2009 when it posted a 17.1% return, outperforming many of its peers.

The plan’s trustees have struggled with governance issues as of late, culminating in a record fine by an Ontario court in April for breaching their fiduciary duty. Nine CCWIPP trustees were slapped with fines of $18,000 each, plus victim surcharges of $4,500 for breaches to the Pension Benefits Act.

The trustees were convicted of exceeding the legal investment limits of 10% of the plan’s assets in one area as a result of risky investments including hotels, undeveloped land, a Florida-based restaurant chain and a hospitality firm that has since gone into receivership.

Read the Star report here.