Viewpoint: Tough Assignment

Why did you say yes?

Precisely for that reason. Because it was a challenge. To learn things. I retired from teaching at the end of 2005. My time was available. So I thought this was a great opportunity to get into a new line of inquiry.

What’s the last year been like for you?

It’s been exactly as I anticipated. It’s been very much a learning experience. Learning about a new area of law, a new area of public policy, a new vocabulary, a new set of players, a new political dynamic. So it’s been really a very steep upward learning curve.

What’s been the most difficult/challenging part of your role?

Bringing myself to the level where I could talk sensibly to people, that was the first thing I had to do. Secondly, I had to find a way to talk to a variety of people with very different view about pensions. It’s a subject that’s been quite controversial amongst the stakeholders and professionals and academics who work in the field. People seem to have very firmly held views. The issues are, of course, very important from a public policy perspective. Large numbers of people, long periods of time during which their lives are involved with the pension system, large amounts of money, significant consequences for Ontario’s labour markets, for its capital markets. The stakes are very high and it’s understandable that people should have deeply entrenched views. So, finding a way to engage with people and get them to start thinking about talking to each other. That, I think, has been the business of the first year especially.

Were there any surprises along the way?

Well, everything was a surprise. I guess the first thing that struck me at the beginning of the exercise was that it had been 20 years since the last comprehensive review of the statute, and even that wasn’t all inclusive by any means.

Equally surprising was the dearth of information about some key facts. When you start asking, for example, how many people are covered by what kind of pensions? How many members are there in pension plans? How many people are currently receiving pensions? How do they break out according to different sectors and different genders? What’s the fate of recent immigrants within the pension system? All the things you want to know about how the pension system actually works. Those things weren’t known. We’ve tried to do a lot of work to put that kind of information into the public domain for the benefit of stakeholders and policymakers and the public interest.

What’s been the dynamic on the commission? How well have the advisory panel members and staff worked together? What’s the tone?

The commission, c’est moi. I’m a one-person commission. As you mentioned, I have four expert advisors who really are experts. They represent a spectrum of disciplines and perspectives on the system. They’ve been very valuable to me both in terms of a source of information and guidance and as a kind of sounding board. As I was beginning to shift gears and look for solutions, their role as a sounding board was extremely important. I’ve also worked very closely with the small but excellent staff I’ve got here.

What was your overall impression of the public hearings?

My first impression, I’m happy to say, is that people tried really hard to make a contribution. Not just to win the debate, but to win it in a way which would contribute to the search for solutions that were going to be practical and saleable and viable. Not every one of them succeeded 100%, but I really sensed that people were trying hard to approach the hearings in that spirit. I think the very fact that there hadn’t been a systematic review of the pension system for a very long time, during which a number of issues had surfaced, made people sensitive to the fact that this was, if not a one-off opportunity, arguably a once-in-a-generation opportunity to fix things. And because many of them were professionals, they knew that if their problems were going to be fixed, other people’s problems had to be fixed too. Somebody early on used the cliché about having some water with your wine, and that seemed to be the attitude that was manifest at these hearings.

Was there one submission that sticks out in your mind as having been particularly helpful?

I joked with a couple people saying they were in contention for the top three submissions. But that was because they had really approached it with such good spirit. They’d gone out, they’d done their homework, they were coming with a sensible balanced position, which of course was advocating their point of view, but in such a way that it was both hopeful and plausible.

There were other moments where professionals would come with incredible ideas. But somebody turned up at our Hamilton hearings and said, “I’ve worked at such and such a company for 40 years. I retired a couple of years early. I bear on 70% of my body scars from burns suffered in an industrial accident early on in my career. And not very long ago I was told that my pension had been reduced by an enormous amount.” In one sense that’s not a helpful submission. It doesn’t tell you what to do about it. What it is helpful with is that it reminds you at the end of the day that there are people out there who are dependent on the system. I had comparable discussions with people representing small businesses, who said, “Look, we just can’t handle it. We can’t handle the paperwork, we can’t handle the cost.

A representative [from the Canadian Federation of Independent Business] came forward and said, “The system as it exists just doesn’t work for small businesses that we represent. Why ought there not be a second tier CPP where people can just contribute voluntarily, as opposed to tier one where you have to contribute. And small business people who want pensions for themselves or their workers can simply turn up at the door and say, ‘Here’s my money. Use your very good investment strategy at a low cost because you’re administering large pools of money. Use that in order to provide us with coverage.’” I thought that was a very creative and a sensible response to small businesses that perhaps don’t participate very extensively in the present system, but have good reasons for wanting to do so.

You heard more than 70 submissions from pension funds, associations, labour, consultants, think tanks, law firms and other stakeholders. How do you, as a commissioner, take all those disparate perspectives and recommendations and determine the right, or most suitable path for reform?

I don’t do it myself. They do it. The first thing they have to do is to understand that this is a process from which no one will walk away 100% satisfied. So, you could call it either cranking down expectations or getting people to see that others have legitimate claims that have to be acknowledged. Until you get to that stage, it’s very difficult to move forward. As long as people are absolutely with daggers drawn, there’s not much you can do. So I think that would be the first big step.

Secondly, you have to look at some things that people accept as bedrock assumptions and test them against objective facts. The story that many people believe about the defined benefit (DB) pension system is that it’s falling off a cliff. Well, it isn’t falling off a cliff. The data suggest that it has been on a long, gentle downward slope for 30 years. We’re probing the reasons why it’s been on that downward slope. Some of the research plausibly suggests that the decline of the manufacturing sector and the modest shrinkage of union density largely account for that slope. That’s not to say it’s not approaching a cliff. But though the system is in significant difficulty, it’s not a recent problem. That suggests that when looking for cures to the problem you need not exhaust that search just by looking at some very recent dramatic events like the so-called Perfect Storm at the beginning of the decade. You have to look deeper and more widely.

People’s view and the intensity of their views are often a product of their own immediate experiences. Sometimes if you can get people to step outside that experience and look at what’s going on in other Canadian jurisdictions, in other countries—both obvious countries like the U.S. and U.K., and less obvious countries like Australia, New Zealand, Denmark and the Netherlands that have significant affinities with us and significant differences too—you see, “Gosh, it doesn’t have to be that way. They had a similar problem, they found a way to fix it. Maybe we can learn from them.” So I think we tried to push back people’s horizons.

Is there a receptivity in the pension community to compromise?

I think people are moving in the direction of compromise. Obviously, if you’re any kind of negotiator, you’re not going to put your end position face up on the table. So my sense is that people genuinely see the possibility of sensible compromise and balance. My ambition is that many of them will say: “From our point of view, this isn’t an ideal report. We wouldn’t have written it that way. But we feel it’s tried to take our point of view into account. It’s done so reasonably. And there is a bunch of suggestions which we’re prepared to either embrace or acquiesce on.”

Are there any no-brainers—things that pretty much everyone agrees on that obviously need changing?

The one that I always cite is, what do you do when you can’t find a beneficiary? Everybody agrees it’s a nuisance for plan administrators. Obviously they’re concerned about the plight of someone who shows up late in the day and they or their surviving partner has a claim. No one wants to slam the door in their face and say it’s too late. How you deal with that problem is a no-brainer.

What’s the most challenging issue to resolve?

I think different groups would identify different issues as first and foremost in their minds. Obviously the asymmetry issue is a big issue for the plan sponsor community. Security of funding is a big issue for the members and retirees. Coverage of the system is a big issue from the public policy perspective. So it depends who you’re talking to. But I guess those would be the top three that one has to think about.

How are things progressing since the public hearings? Are you still on track to report this summer?

I think so. For the last month or so, we have been consolidating all of the information that’s come our way which has been a huge amount of information, through briefs and through research studies. We’re trying to fit it all into a giant analytical matrix. So, if you want to know about problem X, or sub-problem X1 and X2, you know where to go on the matrix and look at this study, look at this brief, and we can recapture this stuff in some sensible way. So that’s been our first job, just to get hold of everything that’s come at us.

Our second job is, which we’re only just beginning, is to develop a story line—a way of talking about the things that we’ve heard. I’m planning to sit down with some umbrella organizations and stakeholders early in February and say to them, “From what we’ve heard and from what we’ve learned through our research, these seem to be really important issues and, in a broad sense, these seem to be the options that have been proposed to deal with these issues.” Inevitably, in the course of doing that you begin to think your way down the road, because I’m going to have to tell a similar story in my report. So the reason I want to speak to the stakeholders is to see whether or not they understand the story as I understand it. Have I got it wrong? Have I left something out? I’d like to be as sure as I can that we’re walking down the road together.

It’s been 20 years since Ontario’s pension legislation was substantially revised. Based on what you’ve seen and heard so far, just how much changing needs to be done?

I can’t answer that. In a certain sense it’s my job to indicate the direction of change, and not to sit down and draft the statute. I think if I got down to that level of detail, it would be minimum 2018 before I completed it.

The last attempt at pension reform in this province never made it past the legislature? What can we learn from that attempt?

I think we have done some things differently through the public hearing process and through the extended process we’re going through with stakeholders. The reach of our research program and the fact that it’s being put into the public domain, I hope those things will at least lead to common consideration. Whether people in the end buy into them or not, that’s another matter. But I hope and believe that it’s lowered the temperature a bit. If we accomplish nothing else, I hope we’ve got people to talk sensibly to each other and to the government and to draw on information to explore assumptions they’ve held for a long time. And all of those things should contribute to a calmer consideration and reflection.

Dwight Duncan took over as finance minister halfway through this process. How confident are you that he is as committed as Greg Sorbara to fixing the province’s pension system?

I don’t think Mr. Sorbara ever committed to signing on because I recommended something. And I don’t expect Mr. Duncan to do it. I think any sensible treasurer of Ontario, whether it be a different government or this government, seeing a very extensive consultative process and a bunch of knowledgeable people, not including myself, having coalesced around a bunch of ideas, would look at that and take it very seriously. He’ll be getting advice from people in the ministry. The ministry has tried to enhance its capacity to take the advice on board and give the minister good, serious analysis of everything we recommend. But what Mr. Duncan’s personal views will be, I don’t know.

Have you been in contact with the expert panels reviewing pension legislation in B.C. and Alberta, or Nova Scotia?

As it happened I was giving a speech about something else in Edmonton on the very weekend when the B.C. and Alberta folks met for the first time. So I just went round at their invitation and told them how we were going about our work. They hadn’t even begun to get their minds around what they were going to do. But they certainly seemed like an able bunch of people. I think at the staff level we’ve been in touch with Nova Scotia, but I haven’t myself been.

Do you see a future for DB plans in this province?

Yes, I think so. Will they be exactly the same kind of DB plans as we have known to this point, I’m not sure. I think that DB plans depend not just on the regulatory framework, but on the ingenuity of people who design and fund these plans to design and fund them in such a way that they work in a contemporary context. So I think the government can help by having a regulatory framework that allows legitimate innovation to occur. I think the government can help by having people who are engaged with the pension community, not necessarily in a regulatory context but who are helping them think about and solve problems. I think keeping open lines of communication is going to be very important. I see it as an evolutionary situation. There won’t be one big fix in 2008. I think government and the stakeholders will have to keep reinventing the system.

Based on how things are progressing and what you’ve heard so far, are you optimistic?

Yes. I wouldn’t have gone into this in the first place if I wasn’t optimistic in a practical sort of sense and in a realistic sense. You commit a couple of years of your life to something, you’ve got to operate on the premise that something good will come of it. So, yes, I’m optimistic.

Don Bisch is editor of Benefits Canada. don.bisch@rci.rogers.com