Update on pension surplus appeal
The appeal proceedings on the pension surplus appeal are progressing steadily.
The plaintiffs’ lawyers must file their legal arguments in a factum and exhibit book by May 21, 2009. The government’s lawyers must file their own factum and exhibit book within 30 days of that date. The Ontario Court of Appeal will then assign a date at which it will hear the three appeals as one case. The appeal hearing is not expected to happen before the end of the year.
As one of the plaintiffs, FSNA is contributing to the costs of the appeal, as it did for the costs of the court case that took place in 2007.
April 28th, 2009 at 8:00 pm
Am I the only one that believes that we are fighting a ‘non-winnable’ battle here? Surely, with all the smart people that man our office in Ottawa, somebody should see this the same as I do.
I seem to recall that, at one time, an article was published in ON GUARD that stated that our legal advisers had mentioned that, the government was not doing anything illegal by taking over the surplus and that it would be unlikely that any legal action or attempt to have the government of the day, return the funds to our account would more then likely not be successful.
I seem to also recall that, mention was made to the fact that FSNA had decided to adhere to this advice and was not going to join the action.
Am I right in my assumptions? Can anyone confirm or deny them? I would dearly love to be set straight on these matters.
An other matter that sticks in my craw is; Were we to win a ruling in our favour, from this action; What would we stand to gain? Please, please… , before the head office spends one more cent of my dues money on this action, can anyone provide me with answers to these questions.
I have always appreciated the help and advice that flows from the head office staff, down to the membership but, on this one… , I couldn’t disagree more with your decision, should you decide to continue to pursue this unwinnable battle.
Over to you guys!
April 28th, 2009 at 9:18 pm
For me, I believe the many thousands of dollars used for the smiling lawyers could have been made far better use of…such as support for the SPCA and other like-minded organizations. In my view, the government did what they did, because they could. Now our tax dollars pay the “fed” lawyers, our FSNA fees pay the opposing lawyers…fighting over money long spend. Truthfully, it boggles the mind.
April 29th, 2009 at 7:30 am
Fellow members, surely you must agree that when an employer;
1. Decides how much you will put into a pension plan to make it viable,
2. Says that he will put in the same,
3. Says that he will responsible for shortfalls, also doesn’t tell what will happen with surpluses,
4. Takes an holiday from putting his share in but doesn’t inform you of same,
5. Then says whoops!! I guess we all put in too much, so I will take all that is extra.
6. And then, increases the amount that must be contributed a couple of years later.
If that isn’t injustice then what is. There is no cost that is too great to fight for justice, particully when it is the government that is being unjust.
Cheer Jim Piche
Lawyers have wrong in the past,
April 29th, 2009 at 11:43 am
I think now it might well be a matter of too little too late, but I do believe that what the government did was morally wrong, if not legally wrong. I believe that pension plans should be untouchable by any employer, including the government, and that arbitrarily opting out of contributing should constitute a violation of a legally binding agreement that would generate instant fines. But then, government leaders have never had any trouble reconciling moral issues - to them they simply don’t exist. Now I think we should mount a very string and active political campaign, and use the money we are now spending on legal fees to either support a party that will return our money to us, or to defeat any party that will not. We’re a pretty large group of voters, and no doubt our extended influence on votes could be considerably larger then just our membership. The only thing that matters to politicians is votes, so let’s get it going in that direction and see what happens.
April 29th, 2009 at 8:31 pm
In 1985, when I retired from the RCAF, after serving close to 37 years, the government told me that they would provide me with a yearly pension, equal to 1/50 of my best 6 years pay, for every years of service, up to 35 years, IE; 35/50 of my best 6 years pay and allowances. I think I got that right?
And the government said that they would continue to do this, for as long as I live. Not only that, if I should die before my spouse, they will provide her with one half of my pension, until she dies.
Now, I am not concerned in any way, where that pension money comes from, as long as it keeps coming, and so far, the government has not welched on its agreement. As a matter of fact, (thanks in part to a strong representation from FSNA), the government has increased the amount of my yearly pension by an amount equal to the increase in the annual cost of living. I do not entirely agree with the way they arrive at this yearly figure, but that battle is for another day!
So, who cares whether our pension comes from an account that may or may not exists in some phantom ledger, kept somewhere in the bowels of the national library or in an actual national bank!
My own opinion is that FSNA should not spend any more money on this action as I doubt that the original judgment will ever be reversed on appeal.
I’ve got to agree with some of Clayton Tupper’s comments. I re-emphasize: The federal government is spending our tax money… , defending their action… , while FSNA spend our dues money… , which comes from our federal pensions… , paid to us by the federal government… , fighting each other over money that is long gone.
Jesus wept!
April 30th, 2009 at 6:10 pm
The $30+ billion surplus in the pension fund arose because either:
A. The employer (i.e. government) charged higher premiums
than were warranted, or
B. The employer paid-out lower pensions than they
could/should have, or
C. A combination of A & B
Either way, employees clearly did not receive full value for the premiums they paid over a period of several decades.
If the reverse had happened…..the employer/government discovered a $30 billion SHORTFALL in the pension fund……would the employer have balked at immediately increasing employee premiums to cover the entire shortfall?
In the case at hand, not only did the employer steal the accumulated $30 billion surplus…..at least half of which was contributions right out of the pockets of its employees….they then had the unbelievable gall to increase pension plan premiums for existing employees.
In a defined benefit program such as ours, the employees must assume that the employer is acting in good faith in the calculation of the bi-weekly payroll deductions towards the pension plan.
Clearly, our employer knew for years that they were acculumating a huge surplus in the pension plans. Armed with this information, did they reduce employee premiums? Did they increase pension benefits? No, they alowed the surplus to accumulate, then stole it, like thieves in the night. Then increased premiums.
Mr. Gregoire retired in 1985, possibly before the employer began to accumulate huge surpluses in the pension plans. On the other hand, he may not object to having paid more into the plan than he perhaps should have.
I do.
(As for indexing…..we paid for it in full. It’s not a gift from the employer.)
Critics of the lawsuit may, in the end, be correct that while the employer’s actions are unethical and reprehensible, they were probably not illegal.
I say proceed with the appeal as long as there’s any possibility that a judge, somewhere, will rule in favour of the little guy.
And for those brainwashed ex-public servants who still hold to the belief that our government pension plans are so wonderful, I note that the Canadian Auto Workers just reluctantly agreed to start paying $1/hour towards their own pensions, to a maximum of $1700 per year. Hmmmm….better pensions than the federal government, at no cost to the employees….and, until now, indexed at no cost to the worker.
Sounds pretty good to me.
Lastly, is anyone else out there interested in the FSNA starting an on-line message board?
May 5th, 2009 at 2:37 pm
As I read the comments about how we government pensioners have been shortchanged I had to smile.
When you think of what is happening to pensioners of other defined benefit plans like GM and such, we should be grateful. Look what happened to those plans when the employer and employees were allowed to raid the surplus in the good years.
The government takes the risk of any shortfalls not the pensioners.
Any temporary surplus based on actuarial reports is just a bookkeeping entry. Keep in mind there is no actual fund that has our pension assets except for the small amount accrued since pension reform. Your pension is paid from tax dollars received today.
My understanding is that the government contributes 60% of the cost of our pensions whereas as employees we contributed the other 40%.
With the power of taxation to back it up you can be pretty confident that you will continue to receive your public service pension as promised.
Would you be happier if you received a part of the surplus under appeal, and then had to be concerned about taking a hit to your pension when there is a shortfall?
May 13th, 2009 at 4:13 pm
Going through some Office of the Superintendent of Financial Institutions I came across a page that talks about refund of surplus to the employer.. Under a heading Claim to Surplus
(3) An employer has a claim to the surplus, or part of it, if, after being notified of the employer’s proposal for a refund of that surplus or part of it, at least two thirds of the persons in each of the following categoies notify the employer that they consent to the proposal:
(a) members of the pension plan; and
(b) former members of the plan and any other persons within a prescribed class.
I’m certain that two thirds of CF/RCMP Pension Fund members were never asked for their consent of Bill C-78
May 14th, 2009 at 6:00 pm
Thanks to Fred King for providing some legal support for behavior that most folks would consider only reasonable, ethical and fair.
We have a situation where the employer singlehandedly determined the employee premiums required to meet its future pension obligations. They then “discover” a huge actuarial surplus of $30 billion and arbitrarily decide that it belongs entirely to them. (I wouldn’t dispute the statement that 40% of the surplus likely represented employee contributions.)
Then, having absconded with the entire surplus, the employer has the gall to increase pension premiums for existing employees…..presumably with the intention of building another huge surplus, available for plunder whenever required.
(And this kind of unethical behavior isn’t restricted to our pensions. Look at the state of the current EI fund: a surplus in the order of $40 billion or more, yet the government of the day refuses to make improvements that might allow benefits to be
paid to some of the hundreds of thousands who pay into the fund but have little chance of collecting when they need assistance.)
I’m constantly amazed by those who feel they should somehow be grateful to an employer that meets its contractual obligations. What part of “contractual obligations” don’t you understand? Private sector employers who fail to meet their obligations certainly deserve our condemnation.
For decades it has been a ‘given’ that low wages in the federal public service were compensated by better-than-average benefits, decent pensions and a modicum of job security. Over the last 25 years however….at least until this recession…., wage increases in the federal public service have stagnated, benefits have become a tad second-rate, and pensions continue to be modest and expensive….but that’s another argument.
Pensions are deferred wages. In our case, the employer withheld a substantial portion of our wages through excessive pension contributions….contributions that they obviously knew were substantially in excess of actuarial requirements. That’s theft, in my books.
Please let’s stop with this irrelevant argument that there is “no actual fund that has our pension assets…..” , as if we’re talking about play money. The pension premium dollars that were taken from every paycheque were real, whichever pocket the employer decided to put them in.
As to those who defend the employer’s actions by pointing out that the employer would have been responsible to cover any deficit in our pension funds…….well……all I can say is that the minute…….no, the second…….that the governmment ever got the faintest whiff of the possibility of a deficit, pension premiums would be increased.
And if you don’t believe that, I have some swamp land in Florida you might be interested in.
May 20th, 2009 at 11:16 am
Part of the 30+ Billion surplus in the Pension Fund was created by the contributions of the employee. The employer took contribution holidays from their 60% share, while employeees continued to contribute their 40% share. The employer provided no contribution holiday for the employee, resulting in the employee contributions not being matched by the employer. The result is a large portion of the surplus, possibly nearly half with the employer contribution holidays considered, belongs to the employees and pensoners. The employees share of this surplus should be used to provide benefit improvements for pensioners, including survivor benefits.
We must keep up the fight for justice and fair treatment for pensioners and employees. The legal costs are necessary and required, if we are to receive fair treatment from the employer.
June 25th, 2009 at 9:03 am
I know some people have issues with the government and have a defeatist attitude regarding this. It is important to realize that this kind of thing happens all the time and not just with federal government pensions. To throw ones arms up and say it is what it is is completely wrong. The other day I was driving home thinking of this issue and on the radio it was announced that the NHL players association and the NHL reached a settlement in legal action regarding there own pension surplus. The interesting thing that got my attention was the commentator mentioning the benefit the widows of former players as being the biggest winners in this case. I realize some will critique this comparison or million dollar atheletes, but it is the principal that is the issue. This is one case and over the years I have heard of other pension surplus being swindled by the employer. Unfortunately for us the biggest thieves in the world are managing the pension plans for all federal employees…I believe this is a legitimate fight, and a necessary one.
July 7th, 2009 at 10:55 pm
For a full appreciation of the pension surplus case, it helps to consider it along with the current Private Member’s Bill C-201 proposed by NDP MP Peter Stoffer, which passed second reading in the House on 13 May/09.
The bill, (which FSNA reportedly opposes), would eliminate the substantial reduction in pension payments at age 65 for members of the Canadian Forces, (CF) and for the RCMP, which resulted from the integration of the CF and RCMP pensions with the Canada Pension Plan, (CPP), when the CPP was introduced in the mid-60’s.
The bill does not propose eliminating the same reduction in pensions at age 65 for the Federal Public Service, (PS), even though Mr. Stoffer acknowledges that the PS situation is identical.
(Mr. Stoffer justifies this exclusion of the PS partly on the grounds that CF and RCMP members face “unlimited liability”……..i.e. they risk their lives for their country……. while public servants do not. I appreciate the contributions and sacrifices of our police and military, but this argument ignores the fact that substantial numbers of CF and RCMP members do not, in the normal performance of their duties, expose themselves to undue physical risk. An example…….perhaps not the best…….is one military analyst’s recent observation that only about 800 of Canada’s approximate 2500-man Afghanistan contingent are actual combat troops). Mr. Stoffer’s rational also ignores those PS members…….for example Customs & Immigration Officers, Federal prison guards, nurses and other hospital staff, etc…..who do face physical threats on a regular basis. Mr. Stoffer’s exclusion of the PS also fails to acknowledge that both the CF and RCMP have historically contributed a smaller percentage towards the total costs of their pensions than have Federal Public Servants, or that CF and RCMP members can begin to collect their pensions at an earlier age than can public servants.)
The bill, which reportedly has little hope of passage since it requires a royal recommendation, has only cautious support from the Liberals…….probably because they hope/expect to be in power soon. The NDP and Bloc Quebecois, strong supporters of the bill, have no such concerns.
The really interesting correlation between Bill C-201’s proposals and the pension surplus case comes when reviewing the estimated costs to eliminate the reduction at age 65 …….. or “the clawback”, as Mr. Stoffer prefers to call it.
Mr. Stoffer argues that the costs to return the ‘clawback” to current CF and RCMP retirees, and to eliminate the pension reduction for all future CF and RCMP retirees could be “revenue neutral”: the costs of the change could be covered by savings resulting from some CF and RCMP retirees finding themselves in a situation where they would be subject to a clawback (or a larger clawback) of their Old Age Security, (OAS), or that they would no longer qualify for the Guaranteed Income Supplement, (GIS). In addition, he proposes eliminating the EI premiums currently paid by and for CF and RCMP members, directing them instead towards the cost of removing the pension reduction, on the grounds, (incorrect), that CF and RCMP members do not qualify for EI benefits anyway.
Mr. Stoffer’s economics are suspect. First, he is flat wrong about EI. Second, it is unlikely there are that many current or future recipients of CF and RCMP pensions who qualify for the GIS, or, conversely, that their earnings in retirement will approach or exceed the current $63,511 annual income threshold that triggers any OAS clawback. I expect the vast majority of CF and RCMP retirees fall somewhere in the vast middle……income too high to qualify for the GIS and too low to have to worry much about the OAS clawback.
The Conservatives, no surprise, oppose the bill. Their economic estimates of the costs, again no surprise, paint a much gloomier picture. They say that passage of the bill for CF and RCMP retirees would result in an immediate one-time cost of $7.2 billion, and annual on-going costs of some $110 million. Including the much larger Federal public service in the reforms would, the Conservatives say, be 3 ½ times as expensive as for the CF and RCMP.
The usual political rhetoric suggests that the real costs to implement Bill C-201 would probably be somewhere between Mr. Stoffer’s optimism and the Conservative government’s pessimism.
But, for the sake of argument, let’s assume the government’s figures are accurate. So, adding coverage for Federal public servants would involve an additional one-time charge of $25 billion, and additional annual on-going costs of $385 million.
Hmmm. A total one-time charge of around $32 billion to eliminate the pension reduction for current and future PS, CF and RCMP employees , eh? Where have we heard that figure before? Hey….that’s about the same amount the federal government (mis)appropriated from the surplus in the PS, CF and RCMP pension funds a few years back…..a disproportionate share of which came from…..you guessed it……..the Federal public service.
I think I understand FSNA’s reported opposition to Bill C-201. The argument is that we paid less into our superannuation fund with the advent of CPP and therefore are entitled only to a reduced superannuation at age 65 as a result.
My argument is:
— Prior to integration with CPP in the 1960’s, federal
government pensions were quite generous….a
genuine 2% per year of service….in part to
compensate for wages that were lower than those
paid in the private sector.
— After integration, once-generous pensions became
fairly mediocre (and expensive) pensions at the
stroke of a pen, largely without consultation with
those most affected. And though a “2% per year of
service” pension now only applies until age 65,
Treasury Board continued….and continues….to use
that same misleading formula in its employee
brochures, even though the real figure, for most of
the years retirees can expect to receive their
pension, is closer to 1.4% per year.
— As with most pension plans, basing it on one’s
average salary over the last (or best) 60 months is
unfair. Pensions are intended to replace X percent
of one’s final earnings, and shouldn’t be based on
one’s earnings 2 ½ years prior to
retirement. Try asking Safeway or Loblaws if you
can pay the prices they charged 2 ½ years ago.
Sorry for being so long-winded.
July 13th, 2009 at 2:42 pm
NDP MP Peter Stoffer was kind enough to telephone me today in response to my 7 July/09 comments, (see above).
To the question: “Why isn’t the Federal Public Service included under Bill C-201?”, he explained that none of the organizations representing the public service….FSNA or the PSAC….. asked to be included. He says he attended several conferences in an effort to gain FSNA support, but each time support was denied. As far as the projected costs to implement Bill C-201, Mr. Stoffer stands by his position that costs could be relatively minimal and nowhere near the figures advanced by the Conservative government.
He agrees that the government’s appropriation of the $32 billion surplus in the PS, CF and RCMP pension funds a decade ago is relevant to current proposals to remove the reduction in superannuation payments at age 65.
July 27th, 2009 at 10:57 pm
Does this help???
No more deposits if non-permitted surplus
44.4 (1) If, following the laying before Parliament of an actuarial valuation report pursuant to section 45 that relates to the state of the Public Service Pension Fund there is, in the Minister’s opinion, a non-permitted surplus in that Fund, no further amounts shall be deposited into the Fund under paragraph 44.2(3)(a) until the time that there is, in the Minister’s opinion, no longer a non-permitted surplus in the Fund.
When non-permitted surplus
(2) If, following the laying before Parliament of an actuarial valuation report pursuant to section 45 that relates to the state of the Public Service Pension Fund, there is, in the Minister’s opinion, a non-permitted surplus in that Fund,
(a) the contributions payable under section 5 may be reduced in the manner, at the times and for the period that the Treasury Board determines, on the Minister’s recommendation; or
(b) there may be paid out of the Public Service Pension Fund, and into the Consolidated Revenue Fund, the amount, at the time and in the manner, that the Treasury Board determines on the recommendation of the Minister.
Minister’s recommendation
(3) The Minister shall only make the recommendation referred to in paragraph (2)(b) after estimating, based on the report, that the amount that will be to the credit of the Public Service Pension Fund at the end of the fifteenth fiscal year following the tabling of that report or at the end of a shorter period that the Minister may determine, will not be less than the total of
(a) the amount that will be required in order to meet the cost of the benefits payable under this Part and Part III in respect of pensionable service that comes to the credit of contributors on or after April 1, 2000, and
(b) the amount of any surplus in the Public Service Pension Fund that does not constitute a non-permitted surplus.
When surplus is not non-permitted surplus
(4) If, following the laying before Parliament of an actuarial valuation report pursuant to section 45 that relates to the state of the Public Service Pension Fund, there is, in the Minister’s opinion, a surplus that is not a non-permitted surplus in that Fund, the contributions payable under section 5 or paragraph 44.2(3)(a) may be reduced in the manner, at the times and for the period that the Treasury Board determines, on the Minister’s recommendation.
Non-permitted surplus
(5) For the purposes of this section, a non-permitted surplus exists when the amount by which assets exceed liabilities in the Public Service Pension Fund, as determined by the actuarial valuation report referred to in section 45 or one requested by the Minister, is greater than the lesser of
(a) twenty percent of the amount of liabilities in respect of contributors, as determined in that report, and
(b) the greater of
(i) twice the estimated amount, for the calendar year following the date of that report, of the total of
(A) the current service contributions that would be required of contributors, and
(B) the amounts that would be determined under paragraph 44.2(3)(a) and subsection 37(2) less any amount that would be determined under that subsection in respect of past service, and
(ii) the amount that would be determined under paragraph (a) if the reference in that paragraph to “twenty percent” were read as a reference to “ten percent”.
When reduction in contributions
(6) For greater certainty, a reduction in contributions under paragraph (2)(a) or subsection (4) is not to be considered as changing the contribution rate that applied before the reduction in contributions.
1999, c. 34, s. 96.
July 28th, 2009 at 1:26 pm
Jim Roache said: “Does this help???”
Without some context, no, it doesn’t.
If this is the legislation that authorized the theft of the $30.2 billion surplus in the three pension funds, so what? Laws have been used for centuries to justify all kinds of behavior that is unjust, unethical, immoral and, in the greater sense of the word, unlawful.
Forcing contributors to continue paying into a fund when the fund managers know full well they are accruing a huge surplus, and when they know they can scoop the entire surplus whenever they wish, is theft, pure and simple. That’s what happened to “our” surplus.
The same applies now to the government amassing a huge $50+ billion surplus in the EI fund while they boast of tax cuts. Then they have the absolute cheek to explain that part of the projected $50 billion national deficit is due to increased demands on the EI fund due to rising unemployment.
August 11th, 2009 at 7:21 am
There are TWO issues here:
1. Bill C-78, the Public Sector Pension Investment Board Act, which enabled the Federal Government to appropriate some 30.2 billion dollars from Public Service, RCMP and Canadian Forces pension funds; however, how the Government is handling the use of this surplus is questionable?
2. One of the main contributors to the $30.2 billion surplus was the fact that federal public sector workers (public service, RCMP and Canadian Forces employees), were paying into the pension fund based on calculations that assumed workers were receiving annual wage increases, when in fact they had a legislated SIX-YEAR SALARY FREEZE in the 1990s. The extra pension fees taken from these employees in the 1990s was definitely WRONG; therefore, these employees (wether still working, retired or deceased) should be reimbursed, either monetarily or granted extra years of pensionable service.
September 11th, 2009 at 12:12 am
I would agree with the comments of Paul Gregoire of Aoril 28th and 29th/09. What do our 40,000 members, who pay thier retirement dues, have to gain from this action ???? It would appear to me that the Federal Government has a legal agreement to privide us with our defined benefit pensions according to their agreement no matter what the surplus might have been in previous years. Therefore, why would we have to spend our pension dues fighting a surplus battle that has no relevance on our pension benefts to date, as Paul points out At present, I don’t think we have anything to worry about. however, our federal government, at present, is very unstable, and that worries me more than our pension agreement, should that change in these uncertain political and financial times.