Retirees Are Not Mushrooms

“Retirees are not mushrooms,” he said, referring to the fungi’s light diet and needs. “Financial and actuarial information is available too late to be of much value, and there’s no requirement for the plan sponsor to distribute information to retirees unless they ask for it.”

Ian Markham, director of pension innovation with Watson Wyatt, said there is a need to fix the country’s pension system once and for all, so that temporary measures do not have to be debated each time we have a financial crisis. He outlined three elements critical to improving the system, the first of which deals with defined benefit (DB) plan termination.

“Today, the federal rules allow a DB plan to be terminated in deficit,” he said. “Some employers are moving toward non-traditional plans such as target benefit plans, but for those who choose to stick with DB, it is time to require them to fully fund the plan upon termination or within the following five years.”

Triennial funding valuations also require a rethink, according to Markham, who contends that today’s benefits formulas would be lower if the asset mix had been designed to minimize the chance of deficits all along.

“The laws across Canada have blessed the idea of a full actuarial valuation only taking place every three years,” he explained. “That is a long time in a volatile world. There needs to be a way to recognize major market shifts quicker in the future—especially when there are downward shifts in asset values.”

Markham said that convincing plan members to view DB plans as an investment as opposed to a sink hole is another element, which would result in employers making more than just minimum contributions.

Susan Eng, vice-president, advocacy for the Canadian Association for Retired Persons, reminded the panel that, actuarial intricacies aside, the basic premise of the discussion is simple. “The bottom line is that there was a promise made to give a certain amount to people for their retirement,” she said. “All we’re talking about is having people keep that promise.”

Railing against critics of the automaker’s pension plan who describe it as lavish and non-contributory, GM pensioner Bill Devine said that such discussions have a profound impact on plan members who are forced to listen to their way of life come under attack.

“The fact is, we have contributed,” he explained. “Pensions are deferred wages, and I don’t—nor do any other GM workers— want to be known as people who cheated the system.”

Former GM employee Hector McLellan told the panel that, until recently, he considered himself privileged to have a relatively comfortable lifestyle—thanks to a combination of the Canadian Pension Plan, Old Age Security and his GM pension—but he is now fearful.

“Now I find that the government has allowed General Motors the right to underfund my plan for up to five years, and there is talk of allowing employers to underfund plans for up to 10 years,” he said. “Should GM go bankrupt, I risk losing some or all of my pension and all medical coverage.”

He added that the union is being forced to make concessions to GM, warning that more are on the way. “When is enough enough?” he asked. “I would submit to this tribunal that people must come first.”

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