Canada Post’s vigilance in promoting the $6.2 billion solvency cost of its pension plan has created a debate around why a public corporation should be risking so much for workers’ retirement.
As contract negotiations continue — with two near-lockouts already overcome — labour reporter Teuila Fuatai examines the pension plan debate in detail, and looks at the role of the federal government in removing this obstacle from the bargaining table.
The central argument
Kevin Skerrett, a pension plan expert, is all too familiar with the arguments being traded over CUPW’s retirement scheme.
Skerrett, a senior research officer for CUPE, has more than 20 years of experience working on pension plans. Requirements around solvency funding — cited repeatedly by Canada Post as a justification to weaken CUPW’s pension plan in the future — is something that often comes up during contract negotiations, he says.
While it’s not a bad financial measure, it’s not really relevant in Canada Post’s case, Skerrett says.
Two different funding bases — the going-concern and solvency measures — were established when workplace pensions, particularly after WWII, started being introduced in the private, and broader public sector.
Both show how much a business needs to be able to meet the costs of its pension plan, however, the going-concern basis calculates current costs of the plan to a business, while the solvency basis shows how much a business would owe to pension members if it folded, and was forced to wind-up the plan immediately.
Business lifespan is therefore essential in this debate.
As a crown corporation Canada Post, like other government organizations and governments themselves, is relatively secure in its existence, Skerrett says.
Unless it is to be privatized, which the federal government states will not happen, arguing over its solvency deficit of $6.2 billion is moot. Rather, the pension plan’s going-concern surplus of $1 billion should be considered. It is a more indicative and accurate measure of the sustainability of the scheme, he says.