Friday, March 5, 2010

Fellow FSNA members,

The 2010 federal budget was tabled yesterday and I wanted to highlight some of the measures that may have an impact on you. (more…)

The 2007 judgment dismissed the actions challenging the pension surplus provision of Bill C-78 that allowed the federal government to take the $30-billion surplus accumulated in the superannuation accounts of the Canadian Forces, the public service, and the RCMP.

For more information on how these pension benefits are protected from inflation, click here.

Most of the measures announced on Tuesday by The Honourable Jim Flaherty, Minister of Finance, however, are related only to the 7% of pension plans which are federally regulated. The legislative and regulatory changes proposed by the Minister of Finance will not address the pension and retirement income issues that the large majority of Canadians face. In particular, these measures will not affect the situations of the 11 million working Canadians who are not covered by a company pension plan.

The report of the federal/provincial/territorial Research Working Group on Retirement Income Adequacy, which is due in December, will provide an unprecedented opportunity for first ministers to address the issue of adequate and secure retirement income for the vast majority of Canadians.

FSNA looks forward to further federal and provincial legislation that will improve the situations of present and future retirees. FSNA will be especially interested to see legislation that will enhance the effectiveness and resilience of the CPP while ensuring it remains affordable and fair for future generations.

About FSNA

FSNA is the largest and most influential advocacy group for federal retirees.  As a not-for-profit association with more than 165,000 members, FSNA is recognized by the Government of Canada as the major representative of pensioners – and their partners, and survivors – from the Public Service, Canadian Forces and the Royal Canadian Mounted Police and of retired federally appointed judges. FSNA’s mission is focused on protecting the interests and improving the benefits of pensioners.

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For further information:
Sylvia Ceacero
FSNA Executive Director
T: 613 745-2559 ext. 231
F: 613 745 5457
sceacero@fsna.com
www.fsna.com

A date is to be set for the appeal very shortly and it is anticipated that the appeal will be heard in early 2010.

The survey, which takes about 10-12 minutes to complete, will be of interest to FSNA members who may be looking for paid employment after retirement, to benefit society and/or to obtain additional income.  Persons completing this on-line survey will be able to link directly to information on transitions to employment in the non-profit sector.  Completing the survey will also aid Canada’s non-profit sector.  A summary of the results will be available to each participant, upon request.

The HR Council serves some 69,000 charitable and community organizations and is funded by the Government of Canada’s Sector Council Program.  For more information on the HR Council, visit:  www.hrcouncil.ca/home.cfm

To complete the survey and to obtain a toll-free telephone number if you have any questions, visit:  www.surveycentral.ca/npvs/survey.htm

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.

Bulletin number 22 brings you the latest information on the introduction of the pay-direct drug card, positive enrolment and the assignment of drug claims.

“Governments promised a strategy that would reduce the overall costs of prescribed drugs while ensuring their safety and effectiveness.” said Dennis Jackson, FSNA National President. “With total drug expenditures expected to reach $29.8 billion in 2008, and the upward trend expected to continue, the sustainability of private and public drug plans are at risk.”

The 2004, 10-year plan to strengthen health care in Canada included a commitment by governments to pursue pricing and purchasing strategies in order to obtain best prices for Canadians for drugs and vaccines.  The bulk buying power of all provinces and territories would greatly reduce the costs of prescription drugs.  In this context, the September 2008 Annual Conference of Provincial-Territorial Ministers of Health made the very positive announcement that there is a greater than 90% commonality amongst jurisdictional drug plans.  Inexplicably, the Ministers of Health then recommended that a national approach to pricing and purchasing savings not be undertaken collectively at this time. 

FSNA urges the Health Ministers to work together on a national strategy to achieve lower costs for safe and effective prescription drugs for all Canadians.

About FSNA

FSNA is the largest and most influential advocacy group for federal retirees.  As a not-for-profit association with more than 165,000 members, FSNA is recognized by the Government of Canada as the major representative of pensioners – and their partners, and survivors - from the Public Service, Canadian Forces and the Royal Canadian Mounted Police and of retired federally appointed judges.  FSNA’s mission is focused on protecting the interests and improving the benefits of pensioners.

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For further information:
Francis Bowkett
FSNA Executive Director
T: 613 745-2559
F: 613 745 5457
bowkett@fsna.com
www.fsna.com

Lower income seniors will also benefit from the improvements to the Working Income Tax Benefit which will allow them to retain more of their work-related earnings.

“We are disappointed, however, that Mr. Flaherty did not change his stance on the issue of annual minimum withdrawals from RRIFs”, said FSNA National President Dennis Jackson.  He continued, “By sticking with the previously-announced one-time 25% reduction to the annual withdrawal the Minister of Finance has missed an opportunity to meaningfully assist some seniors by simply deferring tax income for the government.”

FSNA supports the $500 million for Canada Health Infoway to further develop and implement electronic health records for all Canadians.  This technology will significantly support seniors and help them move through the often complex Canadian health care system.

About FSNA

FSNA is the largest and most influential advocacy group for federal retirees.  As a not-for-profit association with more than 165,000 members, FSNA is recognized by the Government of Canada as the major representative of pensioners – and their partners, and survivors - from the Public Service, Canadian Forces and the Royal Canadian Mounted Police and of retired federally appointed judges.  FSNA’s mission is focused on protecting the interests and improving the benefits of pensioners.

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For further information:
Francis Bowkett
FSNA Executive Director
T: 613 745-2559
F: 613 745 5457
bowkett@fsna.com
www.fsna.com

In a brief submitted earlier this month to the Department of Finance, FSNA urged the Government of Canada to provide the leadership and to take the necessary initiatives to help Canadian seniors age well and achieve financial security, now and into the future. 

To that effect, FSNA submitted three recommendations regarding the Canada Health Infoway, required minimum withdrawals from Registered Retirement Income Funds, and occupational pension coverage. Click here to access FSNA’s brief.

“FSNA has been urging governments to consider a more comprehensive pension system for working Canadians”, said Dennis Jackson, FSNA National President. “The federal/provincial/territorial Finance Ministers meeting to be held in December 2008 is a significant opportunity to begin the consultations and discussions that will be required to bring about major changes to the pension landscape.”

FSNA does not believe that the one-time, 25% reduction to the required minimum withdrawal amount from RRIFs goes far enough to support seniors.  “Elimination of mandatory withdrawal is needed to provide seniors with the financial flexibility and independence they deserve”, said Jackson.  FSNA calls on Minister Flaherty to reconsider the mandatory RRIF withdrawal issue when preparing the Budget 2009.

About FSNA

FSNA is the largest and most influential advocacy group for federal retirees.  As a not-for-profit association with more than 160,000 members, FSNA is recognized by the Government of Canada as the major representative of pensioners – and their partners, and survivors - from the Public Service, Canadian Forces and the Royal Canadian Mounted Police and of retired federally appointed judges.  FSNA’s mission is focused on protecting the interests and improving the benefits of pensioners.

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For further information:
Francis Bowkett
FSNA Executive Director
T: 613 745-2559
F: 613 745 5457
bowkett@fsna.com
www.fsna.com

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The Federal Superannuates National Association (FSNA) welcomes those provisions in the 2008 federal budget, which address a number of concerns of seniors.

FSNA is particularly supportive of the 2008 budget measures aimed at low-income seniors. “We recognize that this budget is based on forecasts of an economic downturn so we are pleased to see the government taking positive actions such as those to increase the income exemption in the GIS program, as well as introducing an improvement in the VIP program for survivors of Canadian veterans.” said Dennis Jackson, National President of FSNA.

Also of particular interest to seniors will be the improvements to provisions under the medical tax credit and the introduction of new health-related tax measures. “It is encouraging to see the government’s response to the work of the National Seniors’ Council in the form of the allocation of an additional $13 million to the “New Horizons for Seniors” program for the express purpose of addressing the important issue of elder abuse.”

FSNA is pleased with the budget-proposal of a “Tax-Free Savings Plan” (TFSA) that will benefit today’s seniors as well as the generation of baby boomers who are now contemplating their retirement years. Those seniors currently 65 and over will have the option to use a TFSA to generate additional income that will not impact their GIS and OAS payments. Working Canadians will be able to use the TFSA as another tool in planning sources of post-retirement income.

FSNA is committed to working with all levels of government in areas that support our members and seniors in Canada. We look forward to discussions around health care commitments and social supports for seniors as the Canadian population ages.

About FSNA

FSNA is the largest and most influential advocacy group for federal retirees. As a not-for-profit association with more than 160,000 members, FSNA is recognized by the Government of Canada as the major representative of pensioners – and their partners, and survivors - from the Public Service, Canadian Forces and the Royal Canadian Mounted Police and of retired federally appointed judges. FSNA’s mission is focused on protecting the interests and improving the benefits of pensioners.

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For further information:
Francis Bowkett
FSNA Executive Director
Tel.: 613 745-2559
Fax: 613 745 5457
bowkett@fsna.com
www.fsna.com

This decision was taken following a meeting with representatives of all the plaintiffs and their legal counsels on January 23, 2008 to further discuss the three notices of appeal that were filed on December 28, 2007 by the Public Service Alliance of Canada; by the Professional Institute of the Public Service of Canada on behalf of the other National Joint Council Bargaining agents and other organizations, including FSNA; and by the Armed Forces Pensioners’/ Annuitants’ Association of Canada in conjunction with SSEA, now the Canadian Association of Professional Employees.

It is expected that it would take at least a year before the Ontario Court of Appeal hears any appeal.

The judge concludes his 102-page decision by finding that: “the members of the three superannuation plans under the three Acts, the PSSA, the CFSA, and the RCMPSA, have no equitable interest in the superannuation accounts established under the legislation.”

The parties have 30 days to file a Notice of Appeal. The National Board of Directors will review the decision and discuss possible courses of action.
Read the Justice Panet judgement for C-78. (102 pages, PDF)

“It is with pleasure that I accept to serve FSNA and our members for a second three-year term”, said Jackson.  “The delegates from Convention 07 have voted on many resolutions that will provide FSNA with the next steps for continuing success and I look forward to taking these resolutions and making them reality”.

About FSNA

FSNA is the largest and most influential advocacy group for federal retirees.  As a not for profit association with some 155,000 members, FSNA is recognized by the Government of Canada as the major representative of pensioners – and their partners, and survivors - from the Public Service, Canadian Forces and the Royal Canadian Mounted Police and of retired federally appointed judges.  FSNA’s mission is focused on protecting the interests and improving the benefits of pensioners.

- 30 -

For further information:
Francis Bowkett
FSNA Executive Director
Tel.: 613 745-2559
Fax: 613 745 5457
bowkett@fsna.com
www.fsna.com

The parties did not meet in court from April 2, 2007, when the last of the witnesses were examined, to May 1. During this lag period, lawyers on both sides completed their respective written submissions, which were due on April 11 and April 20 for the plaintiffs and Crown, respectively. Both parties had to submit reply-reports by April 27.

The 210-page plaintiffs’ lawyers’ written submissions offer very solid evidence in support of their claim.

The Crown lawyers claimed that there are no real assets in the superannuation accounts, that they are merely tracking accounts for bookkeeping purposes. The plaintiffs’ lawyers gave six different examples supporting the argument that superannuation accounts have real assets. These examples range from internal reports to provisions in the three concerned superannuation acts indicating that Parliament intended the superannuation plans to operate on a full funding basis.

When asked by Justice Panet to clear up the matter of reality of assets, the Crown lawyers stated that the plaintiffs’ expert witnesses were solely conveying an opinion that is not a standard in the industry and should not be of much value to the court. They further contended that this case is a question of law, and no one’s opinions should be given that much weight in the final decision.

In defending their argument that the government has not breeched any duties it may have with employees, the Crown lawyers stated, “no moneys have ever been taken out of the superannuation accounts”. They also said that the government does not have any fiduciary duties, and even if it did, all debits and credits done in the accounts are done in line with legislation. These arguments were heavily refuted by the plaintiffs’ lawyers.

Mr. Soulière’s appointment brings personal and professional pride,” said FSNA’s National President Dennis Jackson. “I have worked closely with our Executive Director over much of his 13-year tenure with FSNA and have appreciated his very effective but non-confrontational approach to advocacy on behalf of our members. His leadership has resulted in the extension of our association advocacy into provincial forums and in our membership in the Congress of National Seniors’ Organization.”

The Congress is a coalition of 10 major national seniors organizations representing more than 2 million older Canadians and for which Mr. Soulière was the spokesperson. As a member of the Congress, FSNA had been advocating for the creation of a federal seniors secretariat that could develop comprehensive policies, programs, and activities for the benefit of Canada’s aging population.

FSNA is confident that the creation of the National Seniors Council is a major step in ensuring that Canada is the best country in the world for all segments of society, including older Canadians.

Day 15 was the last day in court for the parties before they return for closing arguments on April 30. Justice Panet has also requested written submissions in advance. The plaintiffs have until April 11 to file their submissions. The Crown will have until April 20 to respond. Should the plaintiffs wish to file a Reply to the Crown’s submissions, or vice versa, they will have until April 27 to do so.

The original trial schedule gave the parties until April 13 to put in their evidence through their witnesses. However, the Crown completed its case on March 26, two weeks short of the allotted time. The Crown declined to call any expert witnesses, or any witnesses involved in pension administration. Three of the four witnesses who had been called by the Government testified in response to the argument made by the plaintiffs that C-78 breached section 15 of the Canadian Charter of Rights and Freedoms. The plaintiffs had claimed that certain sections of the legislation differentiate between the plaintiffs and employees in federally regulated private sector industries. Specifically, the legislation does not provide the same protections that are available in the federal Pension Benefits Standards Act, which prevent employers from unilaterally removing surplus.

One of the witnesses called by the Crown in response to the plaintiff’s Charter challenge was Monique Boudrias, Executive Vice-President of the Public Service Human Resources Management Agency of Canada. The essence of Ms. Boudrias’ testimony-in-chief was that, with 31 years pensionable service behind her, she remained passionate and committed about her career in the public service and would highly recommend such a path to young people today. All in all, a glowing picture was painted of the employer. However, the rewards of being a public servant are not relevant to the issue of whether public servants suffer discrimination on the basis of their employment status.

What is relevant is the Government’s willingness to exploit the perception that federal government employees constitute a privileged class of under-worked, overpaid employees. Such stereotyping is at the root of the plaintiff’s claim that public servants are discriminated against.

On cross-examination, Ms. Boudrias admitted that she was aware of the widespread negative stereotyping of public servants, and that she found it irritating, given that, in reality, they are highly committed and work extremely hard. She also agreed that public servants are not overpaid in relation to the private sector. Ms. Boudrias was also quick to agree that, given the reality of the hardworking public servant, the stereotype, which remains largely unchallenged, is demeaning, particularly as self-worth is, for many people, tied up in the work they do.

Ms. Boudrias stated that she was aware of the view held by many people that public servants have an overly generous pension plan, and agreed that this view was part of the same stereotype. She agreed the pension plan has always been taken into account by the employer as part of total compensation. She also agreed that the existence of such a stereotype meant that there was a receptive audience for any legislative change, such as the imposition of wage freezes for public servants. Ms. Boudrias expressed surprise when shown an internal memorandum in which the President of Treasury Board was reported as saying that the Government was prepared to introduce new pension legislation because ministers considered that public servants are viewed by the public as a privileged class.

Finally, Ms. Boudrias agreed that pensions were important to most public servants; that they expected their pension contributions to be used to pay pensions; and that they relied completely on the Government to look after their pension contributions.

The Crown’s final witness was Bryan Osborne, a private-sector actuary. He was called to testify about the transfer of assets and liabilities from the Public Service Superannuation Account to the Canada Post pension plan in October 2000.

In cross-examination, Mr. Osborne admitted that in 1998, he had been contacted by Treasury Board and asked to provide guidance on approaches to sharing pension surplus. Mr. Osborne had expertise on pension regulatory matters and explained that, in Ontario, any removal of surplus from a continuing pension plan requires the consent of the pension regulator. Mr. Osborne explained that when such consent is applied for, the employer must provide information on the amount of surplus attributable to contributions paid by plan members and that before the regulator will consent to payment of actuarial surplus out of an ongoing plan, it must be satisfied that surplus attributable to employee contributions remains in the plan.

Mr. Osborne testified that there is no standard actuarial method for calculating surplus attribution but that it generally involved calculating the percentage of the surplus attributable to employee contributions and the percentage attributable to employer contributions. Internal Treasury Board e-mails show that the approach explained by Mr. Osborne was quickly dropped by Treasury Board as it would have
resulted in a 60:40 split of the surplus, a split that officials termed “too rich”.

With respect to the transfer of assets and liabilities from the Superannuation Account to the new Canada Post pension plan, Mr. Osborne confirmed that he negotiated on behalf of Canada Post the amount of assets that would be transferred to Canada Post in order to cover the liabilities assumed. He also confirmed that CPC had negotiated transitional support to help defray the cost of employer contributions under its new pension plan for a period of years. He estimated the total value of this support to be in the order of $1.5 billion. Finally, Mr. Osborne agreed that assets transferred to the CPC plan produced an actuarial surplus in excess of $200 million in the new CPC plan.

The Trial will resume on April 30 when parties present closing arguments.

Scott Milne, an expert in public-sector accountancy and former auditor with the Office of the Auditor General, said that interest and actuarial evaluations have generated additional surplus in the former accounts. Although a total of about $29.18 billion has been taken by the government from 2000 to 2006, about $12.97 billion surplus is still left in the accounts. Contributions to these accounts ceased after April 1, 2000, and were channeled to the new Public Sector Pension Investment Board under Bill C-78. At that time, the surplus stood at about $31.25 billion.

Four days of trial were spent on the testimonies of Milne and Don Lee, a pension analyst with particular expertise in attribution analysis. Their testimonies support the plaintiffs’ claims that the three pension accounts have assets and that members have claims to a good portion of the surplus.

Milne’s work with the Office of the Auditor General included dealing with the Public Accounts of Canada and auditing the public service pension accounts. He explained in Court that the pension accounts are “non-budgetary” Specified Purpose Accounts, meaning that the funds in the accounts could not be used to pay for government programs or any other purpose but for the pension benefits of plan members. Specified Purpose Accounts were created under provisions in the Financial Administration Act.

Milne further testified that the accounting of the pension plans was done on the basis that the plans were funded and that their accounts disclose contributions, investment earnings, actuarial surpluses as well as the portions of such surpluses retired by the government through amortization. He also said the funds in the accounts meet the definition of “assets,” as set by the Canadian Institute for Chartered Accountants, the body that sets accounting rules in Canada.

“We don’t make bookkeeping entries for fictional or notional transactions,” he said. “They represent real transactions, substantial events.”

Next in the witness box was Don Lee who presented his attribution analysis for the three pension plans. Lee’s expertise in this area has been accepted by courts and pension tribunals.

He first explained his method of analysis, which consisted of a review of the history of each plan, the factors that contributed to the surplus and a calculation of the extent to which the surplus grew out of employee contributions. In each case, his analysis showed that a significant portion of the surplus in each account can be attributed to plan members’ contributions: 42.2% for the public service pension account, 32.1% for the RCMP account and 25.6% of the Canadian Forces account. His analysis also showed that, in each case, the employer has withdrawn more than its fair share of the surplus.

The trial, which began on February 26, was in recess for March break and resumed on March 19.

March 20, 2007

Our Ref: 10872

The Honourable Jim Flaherty, P.C., M.P.
Minister of Finance
L’Esplanade Laurier, East Tower
140 O’Connor St., 21st Floor
Ottawa, ON K1A 0G5

Dear Minister:

The Federal Superannuates National Association (FSNA) congratulates you for following through on your commitment to include in the federal budget measures that are beneficial to older Canadians and pensioners, in particular the implementation of pension income splitting and the increases to the age amount and the pension income amount.

The increase in the spousal amount is another measure of your budget that could benefit older Canadians. We also welcome the increase of the age limit for maturing RPPs and RRSPs as a step in the right direction, as well as the phased retirement provisions that recognize the changes in the demographic make-up of the workforce.

As an organization representing pensioners, FSNA feels that the already announced increases for the Guaranteed Income Supplement program need to be further enhanced and was disappointed not to find such improvements in your budget. This is one area where improvements would have directly assisted the more vulnerable older Canadians, the majority of whom are women. We will continue making
representations on this.

The provisions of the budget providing more funding for health care will benefit all Canadians, especially seniors. Health care remains their most important concern and any measure to improve wait times and better services is welcomed. FSNA strongly urges the federal government to monitor the provinces to ensure that the additional federal funding will be effectively used by the provinces.

FSNA is pleased that the budget increased funding for the New Horizons program. As a member of the Congress of National Seniors’ Organizations, FSNA has commented favourably on the results of this program. In addition, the recent establishment by your government of the National Seniors Council is welcomed by FSNA and many national seniors’ organizations. We are of course very honoured
that the Chair of this Council is our retiring Executive Director.

FSNA’s focus and objectives are related to issues of importance to pensioners and older Canadians; our comments on your budget relate specifically to measures that impact on this sector of society. FSNA is nonetheless pleased about the budget measures aimed at assisting families and at improving the environment.

A copy of this letter is being sent to the members of the Congress of National Seniors’ Organizations, to the news media, and is being posted on our FSNA’s Web site (www.fsna.com).

Sincerely,
G. Dennis Jackson
National President

John Christie, an independent actuarial consultant and Fellow of the Canadian Institute of Actuaries, was the first witness to punch a hole in the employer’s argument that no assets existed in the Public Service, RCMP, and Canadian Forces pension accounts. He told the Court that when workers were being transferred from Treasury Board to the local airport authorities and to Crown Corporations, assets were withdrawn from the federal public service pension plan to cover the costs of their pensions that went with them.

“New, independent trustees received a series of cheques and these were invested by an investment manager,” Christie said in explaining how assets were transferred from the public service superannuation account. He added that the public service pension account showed a subsequent reduction due to the transfer.

Christie sat in the witness box for three days and gave his analysis of how the public service, RCMP, and Canadian Forces pension plans were funded and managed since the 1970s. Using charts and bar graphs, he summarized the results of a series of actuarial evaluations that reported a deficit in the 1970s. He testified that this was predictable given that the actuarial calculated costs were higher than what the employer was required to contribute by law and that the actuary did not make provisions for general salary increases until 1977.

However, after 1986, the actuarial evaluations began to report surpluses. These were mainly due to changes in actuarial assumptions, and not through the employer having covered the plan deficits or shouldering unforeseen risks, according to Christie.

In fact, he demonstrated that the employer had taken what was essentially a contribution holiday, which had no provision in legislation at the time – by using surpluses generated by the funds to reduce the employer’s contribution to the plans. As well, the employer had put a cap twice on indexing for inflation in the mid- 1980s, which, given the high inflation rates at that time, caused a 6.9-per-cent reduction in pension benefits paid out to retirees. The net effect was that the plan members bore a considerable amount of the risk during this period through a lifetime reduction of 6.9% in their indexed pension.

Christie’s clear and deliberate testimony provided evidence against the startling claims made by Toronto litigator, Alan Lenczner, in his opening statement earlier in the trial. Lenczner has been retained by the Harper government to lead an extensive team of Justice Department lawyers in this case. Lenczner argued that plan members have no claim to the surplus because there was no surplus in the account in the first place but an “over-recording of liabilities.” He further argued that the pension accounts are not the pension promised by government but are mere mechanisms to track government costs. “No money flows anywhere… It’s just numbers on a ledger sheet,” he said.

Lenczner, on several occasions, raised objections to documents, procedures, and decisions that had already been agreed to in eight years of pre-trial deliberations.

Government lawyers also tried to paint the plaintiffs’ claim as superfluous by playing up on the widespread stereotype of the spoiled bureaucrats with fat pensions. “The point is, as you approach this case,” they advised the judge, “this is a generous benefit which many Canadians do not have.”

Christie pointed out that the level of the pension benefits should not be considered in isolation but rather within the actual total compensation package. He also testified that the introduction of Bill C-78 in 1999 significantly increased employee contributions to the pension plans by as much as 21%. The government
further introduced additional increases of 0.3% per year from 2005 to 2013. In contrast, changes introduced by the Act only allowed for a slight improvement in benefits to plan members in the range of 1% to 4%.

Christie, in his experience as a private consulting actuary representing both pension plan sponsors and employees, said that he has never seen a case where a significant increase in employee contributions was introduced without a corresponding improvement in benefits, especially when there were actuarial
surpluses.

The trial, which began on February 26, will recess for March break and will resume on March 19.

In mid-February, the plaintiffs, i.e. FSNA and the Federal Public Service Bargaining Agent Representatives, remained extremely confident that the facts of this case and existing legal jurisprudence would eventually result in a court decision in favour of employees and pensioners.

In a letter to Prime Minister Harper (PDF) that they wrote, the plaintiffs strongly encourage his government to intervene in this matter and spare the Canadian public any further expense and acrimony of long and protracted legal proceedings, believing that the interests of all parties would be better served in this manner.

A February 13th press release (PDF) was sent to the Media.

The Court Challenge regards the $30.2-billion surplus taken from the Canadian Forces (CF), the Public Service (PS), and the RCMP pension accounts following the adoption of Bill C-78 in 1999.

Premier Dalton McGuinty made a public statement to that effect on Friday, December 8, as he was participating in a phone-in interview during “CTV News at Noon” broadcast by CJOH.

In a letter confirming this decision not to proceed (PDF) with the proposal, Premier McGuinty said to Mr. Jackson: “I greatly appreciated your analysis and the thoughtful presentation of your members’ concerns. It was an important part of our considerations.”

In two letters sent to Premier McGuinty and the Ontario Minister of Health (PDF) in November, Mr. Jackson had urged  to reconsider this proposal that would have discriminated against federal pensioners.

In the name of the Board of Directors and of all the members of the FSNA, Mr. Jackson congratulates Mr. McGuinty for listening to the concerns of federal pensioners in Ontario and looks forward to a continuing productive dialogue with its government on matters of mutual interest.

He also extends his thanks to all branches and individual members of the Association who have joined him in protesting against the Ontario proposal. Through these joint efforts, FSNA was successful in presenting its arguments and in achieving a reversal of the proposal.

November 3, 2006

Our Ref: 10446

The Honourable Dalton McGuinty
Premier of Ontario
Room 281, Legislative Building
Queen’s Park
Toronto, ON M7A 1A1

Dear Premier:

We have obtained a copy of the letter that was sent by the federal President of the Treasury Board to your Minister of Health and Long-Term Care and have read the newspaper articles relating to your government’s proposed changes to the Ontario Drug Benefit Plan affecting federal public service pensioners aged 65 and over. I am writing to express our profound dismay that the Government of Ontario intends to effectively cease coverage under the Ontario Drug Benefit Plan for federal pensioners who have drug coverage under the Public Service Health Care Plan (PSHCP).

The Federal Superannuates National Association, of which I am National President, defends the interests of federal pensioners in matters of pensions and benefits. Twenty-three of the Association’s eighty-five branches are in Ontario and each one of these branches will vehemently oppose and lobby against the proposed changes. The Association also represents all of the pensioner members in the governance of the Public Service Health Care Plan. These pensioners are wondering why the Ontario government intends to exclude them from the Ontario Drug Benefit Plan while pensioners in all other sectors of the Ontario economy will continue to be entitled to financial assistance under the Ontario Drug Benefit Plan. In effect, this would result in federal pensioners residing in Ontario having to shoulder a greater financial burden for coverage of prescription drugs as the costs of the PSHCP are shared between plan members and
their former employer. Pensioners feel this measure is discriminatory and, quite frankly, unacceptable.

Federal pensioners have contributed and continue to contribute to the Ontario economy and to the healthy financial situation of the Province of Ontario by paying their share of the Ontario income and other taxes, including the health surtaxes. While no one enjoys taxes, federal pensioners recognize that they are necessary. What they cannot accept is unfair treatment from the taxing government or inequality with their fellow citizens before the taxman.

In effect, the intended change of coverage for federal pensioners under the Ontario Drug Benefit Plan would constitute a special tax - for being federal pensioners - a tax not imposed on any other group of pensioners residing in Ontario. Further, as the average pension paid to federal pensioners is approximately $21,000 a year, this action by the Government of Ontario would not only constitute a tax without representation but a special tax imposed on a group that includes many economically vulnerable pensioners.

Mr. Premier, I hope that you and the Ontario Government will reconsider this proposal and restore the confidence that pensioners want to have in their governments and in equal and fair treatment under the law. As indicated above, the federal pensioners living in Ontario will not accept becoming “second-class citizens”.

I look forward to a favourable reply to these grave concerns of federal pensioners in Ontario. The members of our National Board of Directors from Ontario and I will be pleased to meet with you and/or your officials on this matter. There appears to be absolutely no rationale for this proposed action except to punish, for whatever reason, Ontarians who are receiving a pension from the federal public service.

Yours truly,
G. Dennis Jackson
National President

cc: The Honourable George Smitherman, M.P.P., Ontario Minister of Health and Long-Term Care
The Honourable John Baird, P.C., M.P., President of the Treasury Board of Canada

The conference explored the issue of pension splitting that would greatly benefit couples whose difference in their income is large enough to put them in different tax brackets. Under Canada’s Income Tax Act, a single-income couple pays significantly more income tax than a couple who draws the same combined household income from each of the individuals’ pensions.

More than 30 MPs from across the party spectrum showed up at the threehour conference that was organized by a common front of 17 seniors’ organizations, which includes FSNA, and during which there were discussions concerning methods of implementation of pension income splitting.

The Hon. Garth Turner, who co-chaired the conference and who was then sitting as the Conservative MP for the Halton County, posted a video of the event on his Web site. Members can access the video by scrolling down his Webcast News page and clicking the picture appearing under the heading “MPtv - October 3rd Webcast”.

Amending the Income Tax Act to allow pension splitting would be consistent with FSNA’s Standing Resolution No. 21 that calls for the superannuation acts to be amended “to allow for the spousal splitting of retirement pensions with or without marriage breakdown along the lines permitted by CPP/QPP”.

It is hoped that these actions will persuade the Finance Minister Jim Flaherty to address the issue of pension splitting in his spring budget.

Lobbying activities for pension splitting have been conducted by FSNA on a common front basis with the following retirees’ organizations:
• Air Canada Pionairs
• Alliance of Seniors
• Allstream Pensioners’ Association
• Bell Pensioners’ Group
• Canada’s Association for the Fifty-Plus
• Canadian Activists for Pension Splitting
• Canadian Association of Retired Teachers
• CBC Pensioners National Association
• COMTECH Communication Technologies Credit Union
• FADOQ – Mouvement des Aînés du Québec
• General Motors Salaried Retirees Association
• Police Retirees of Ontario Inc.
• Real Women of Canada
• The Retired Teachers of Ontario
• The Royal Canadian Legion of Canada
• SenTax

Plan members may wish to discuss payment options with their service provider. In some cases, plan members may be able to arrange to have the provider bill them for the services rendered to give them time to submit their claim for reimbursement to the PSHPC and avoid having to pay the provider in full up front.

Note: This does not apply to assignment of benefits for hospital, out-of-province and drug claims that can still be submitted by a service provider. For more details, visit the PSHCP Trust Web site.

While not all the improvements sought by FSNA members were attained, FSNA considers that the new agreement is the best that could be achieved and is a good deal for pensioners (PDF).

The renewed agreement introduces new benefits, a number of upgrades, increased flexibility, and new contribution rates for pensioners. These changes are the result of a two-year collaborative effort between the Treasury Board Secretariat, the Bargaining Agents, and the Federal Superannuates National Association. They are outlined in the PSHCP Trust Bulletin 18 (PDF).

Find our more about the new PDSP contributions and provisions (PDF) that came in to effect on April 1, 2006.

It is estimated that the appeal will be heard in early 2007 by the B.C. Court of Appeal and that the decision will likely not be issued for a further three months after that.

The plaintiffs’ lawyers are reviewing the judgment and will be considering their options. Further information can be found on their Web site.

1. 30 Billion dollar question (PDF)
2. Judge OKs memos (PDF)

The 128 documents support the plaintiffs’ argument that plan members legitimately consider that the government, as their employer and sole administrator of the pension plans, should act according to their best interests based on its trust and fiduciary obligations. According to the plaintiffs’ lawyers, the documents also show that the government instead used the surplus in the early 90s to pay down the national debt by using “opaque” and hidden accounting manoeuvres. They further demonstrate the government’s wide discretionary powers to unilaterally seize the assets from the pension accounts.

Most of these documents are statements, written by ministers and very high level government officials, on policies covering the pension plans, official statements to plan members (some in the form of information booklets), and briefings to decision makers, including memos to the President Treasury Board and correspondences between Treasury Board and the Ministry of Finance.

During this phase of the trial, government lawyers asked the judge not to admit as evidence the 128 government documents we’re submitting to the court, even though they concede to the authenticity of these documents. Instead, in an apparent effort to drag out the case for years, they want us to call the authors of all the 128 documents as witnesses during the trial.

They also tried to muddy the issue by claiming the funds in the pension accounts were “notional” or imaginary and that words in the documents are “terms of art,” meaning that the word “fund,” for example, may mean two contradictory things between two government officials or experts.

The 128 documents support our argument that plan members legitimately consider that the government, as their employer and sole administrator of the pension plans, should act according to their best interests based on their trust and fiduciary obligations. The documents also show that the government instead used the surplus in the early 90s to pay down the national debt by using “opaque” and hidden accounting maneuvers, well knowing that doing so was questionable. They further demonstrate the government’s wide discretionary powers to unilaterally seize the assets from the pension accounts.

Most of these documents are statements, written by ministers and very high level government officials, on policies covering the pension plans, official statements to plan members (some in the form of information booklets), and briefings to decision makers, including memos to the president Treasury Board and correspondences between Treasury Board and the Ministry of Finance.

Some of the documents reveal a rift between Treasury Board and the Department of Finance in the mid-90s over who has ownership of the surplus and how it should be used. Plan members will no doubt recall that the Finance Minister at the time was no other than current Prime Minister Paul Martin, whose scandal-ridden government is now busy trying to put out other fires.

The documents include copies of communications with then Deputy Minister of Finance, David Dodge (currently Governor of the Bank of Canada) and the Assistant Deputy Minister of Finance Don Drummond (currently Executive Vice-President of TD Canada Trust) arbitrarily declaring the federal government’s entitlement to the entire surplus in the superannuation accounts. These senior Finance Department officers were eventually successful in strong-arming and overiding the concerns of more hesitant Treasury Board officials and proceeded to “appropriate” the pension surplus through the implementation of obscure accounting measures. Although not explicitly mentioned in court, it is a logical
assumption that Mr. Dodge and Mr. Drummond could only have been acting at the time with the full knowledge and concurrence of then Minister of Finance and current Prime Minister Paul Martin.

In the next phase of the trial, government lawyers will be arguing that the government has full claim to the surplus. Strangely claiming that the funds in the pension accounts are “notional,” they will also be contesting the existence of the pension surplus, arguing that no actual funds or assets existed in the
superannuation accounts and that the government’s “amortization” of the surplus was a mere accounting exercise.

The documents, however, clearly contradict this claim, as many refer to “assets” and “funds” that exist in the pension accounts and some speak of the government’s use of the surplus as “a painless way to reduce the deficit.” In summarizing the contents of memos from Treasury Board, our lawyers pointed out that “the surplus was used as the single, biggest tool to fight the deficit.”

This phase of the trial ended on Friday, Nov. 18, and it is expected that the judge will take several weeks to decide whether to admit the plaintiffs’ documents as evidence and to determine their purpose. It is also expected that the judge will schedule the continuation of the trial for spring of 2006.

During the first four days of the trial that had started on Tuesday November 15, government lawyers asked the judge not to admit as evidence the 128 government documents the plaintiffs are submitting to the court, even though they concede to the authenticity of these documents. Instead, the government lawyers would like the plaintiffs’ lawyers to call the authors of all the 128 documents as witnesses during the trial.

The lawyers defending FSNA and the other plaintiffs argued against the points made by the Crown lawyers. The Judge adjourned the trial to examine the documents and promised he would soon announce whether he would admit the documents immediately or whether he would take a few months to determine which ones were admissible.

No one can predict how long it will take for this case to be settled, or even how it will end. The plaintiffs’ position was however summed up as follows by one of their lawyers, James Cameron, as he was being interviewed on CBC’s “The House” last Saturday. “Really at the heart of this case, what we are contending, is that the deductions from pay checks that were made over all those years, and the contributions that were made by employees and the employer, and the interest thereon was and is intended to be used for pension purposes. And so what - to be very clear about this, what we’re seeking is a return of those funds to those pension accounts. We’re not seeking a pay-out to any individual.”

The initial trial process, focusing on the admissibility of the “Statement of agreement”, is expected to last about five days. An adjournment of two to three months will most likely follow to allow the judge to review the issue of admissibility.

FSNA National President Dennis Jackson is attending the trial’s opening session. He, as well as the Executive Director, Jean-Guy Soulière, and the National Office Senior Research and Communications Officer, Bernard Dussault, will be FSNA’s official spokespersons on this matter.

Origin of court case
The court case challenges the pension surplus related portion of Bill-C-78 that was introduced in the spring of 1999, following failure to reach an agreement on a new pension deal between the bargaining agents, the pensioners’ representative, and the employer. The negotiations ended in December 1998 because the employer refused to discuss the matter of surplus distribution.

Arguments to be laid out during trial
The following arguments will be laid out during the trial:

The Government violated its legal obligation to use the surplus in the best interest of federal public sector workers and retirees.

The Government’s action constitutes a breach of contract in that the pension fund is part of the terms and conditions of employment governing public sector workers.

Since the active and retired pension plan members contributed in part to bring about the surplus, they are at least entitled to a part of it based equitably on their share of contributions.

Bill C-78 discriminates against public sector workers under Canada’s Charter of Rights and Freedoms.

FSNA’s position on surplus
FSNA’s position in relation to the pension surplus has always been clear and consistent: Any surplus must be shared equitably by the employer (the taxpayers), the employees, and the pensioners.

Bill-C-78 pension surplus implications
Bill C-78 introduced amendments to the superannuation acts that allowed the Minister to withdraw certain portions of the surplus from the superannuation accounts over a period of time up to 15 years. Such withdrawals could only take place for a given plan after an actuarial report on that plan was laid before Parliament. “Surplus withdrawals” have since been made at least once from each of the plans. They amount to $15.6 billions for the CF account, $10.3 billions for the PS account, and $2.4 billions for the RCMP account. This represents a total of $28.3 billions as at 31 March 2004. The latest government financial report (summer 05) shows that a $28.3-billion surplus has been “retired”.

Joint lawsuits
Three lawsuits are challenging the government’s decision to take the accumulated surplus. One was filed by the Public Service Alliance of Canada; one by the Professional Institute of the Public Service of Canada on behalf of the other National Joint Council Bargaining agents and other organizations, including FSNA; and one was filed by the Armed Forces Pensioners’/ Annuitants’ Association of Canada in conjunction with the RCMP Association and the SSEA, now the Canadian Association of Professional employees.

Because the three cases relate to the same surplus matter, the three groups of plaintiffs, the government’s lawyers, and the Court agreed that the three cases would be heard at the same time, under a single trial. Consequently, the law firms representing each of the cases have been working together and holding periodic meetings with the plaintiffs.

1. Increase in employees’ and members’ contribution rates

• On the portion of salary up to the maximum covered by the CPP/QPP from 4% to 6.4% gradually from 2006 to 2013
• On the portion of salary exceeding the CPP/QPP from 7.5% to 8.4% gradually from 2006 to 2008
  Although this matter relates to employees and members, FSNA is very concerned that this decision has been taken when the matter of the pension surplus is now before the Court and is also concerned about the significant increase in the employees and members contribution rates being implemented before an actuarial evaluation of these superannuation plans is made.

2. Decrease in the reduction applied to the retirement pension at age 65

• As explained in the above-mentioned Internet link, the CPP/QPP integration/coordination provision embedded in the three relevant pension plans will be eventually modified in order to decrease the amount of the reduction applying to the retirement pension at age 65 (or upon any earlier disablement as applicable). Indeed, the reduction factor would gradually be lowered beginning in 2008 from the current 0.7% reaching 0.625% in 2012. It is to be noted that this recommendation still needs parliamentary approval.

FSNA is very pleased with the announcement of this pension increase applicable to pensioners reaching age 65 in 2008 and thereafter. It is FSNA — through the intervention of the former pensioners’ representative (Allan McLellan) on the Canadian Forces Pension Advisory Committee — that first brought the underlying issue to the attention of the government in 2001. The matter was thereafter handled by the Public Service Pension Advisory Committee, which made a recommendation to the President of Treasury Board in June 2004.

The examinations for discovery of the Plaintiffs are scheduled to begin in September2004. It is likely that one representative will be examined in each of the three lawsuits involving the Public Service Superannuation Plan, the Armed Forces Superannuation Plan and the RCMP Superannuation Plan.

We expect that the discovery phase of the litigation will be substantially completed by the end of 2004 and we have begun developing plans for presenting this very complex case at trial. This work will intensify as the discovery phase winds down. No date has yet been set for the trial. Trial scheduling will follow a Pre-Trial Settlement Conference.

What have we Learned?
The discovery process has shed a great deal of light on how and why the Government dealt with the surplus as it did. Briefly, we now know that the Government’s approach to dealing with the surplus was intimately linked to its desire to reduce the federal budget deficit in the mid-1990’s. The Government discovered that accounting rules permitted it to quietly “amortize” the surplus and reduce the size of the stated budget deficit, even though the balances reported in the Superannuation Accounts would not be reduced. The net results, which was effectively hidden from employees was the equivalent of a contribution holiday for the Government for much of the decade - a period in which employees continued to make their contributions in full. To make maters worse, one of the basic reasons for the emergence of the surplus in the first place was wage restraint and salary freezes! By 1995, $14 billion in surplus was already built into the Government’s internal plan to reduce the deficit. None of these manoeuvres were
disclosed to Treasury Board’s Advisory Committee on Pension Reform, which included members from the federal unions.

In 1999, Treasury Board proposed a new “pension deal”, but the Department of Finance refused to permit any discussion of sharing of surplus or transferring of the existing surplus to the new pension fund. Although it didn’t say so at the time, the Government needed to use the surplus to meet its deficit reduction targets. When the employee side refused to agree the Government’s “deal”, Bill C-78 was the Government’s answer. Under this version of “pension reform”, employee contributions increased and the Government retained all the surplus which had by 2000 grown to about $30 billion.

Amendment to the Claim
In January 2004 an amended Statement of Claim was filed with the Court in the Professional Institute et al v. AG Canada action. The claim was substantially amended to reflect information obtained from Government documents and witnesses through the discovery process and to take account of recent decisions of the Supreme Court of Canada dealing with the Canadian Bill of Rights.

Our Case Because the superannuation plans are legislative plans not subject to normal pension plan regulation, the interpretation of the superannuation legislation is at the heart of the case. When “pension reform” was enacted by Parliament, legislators were informed and understood that withdrawal of the surplus would not impact on employees because the Government “owned” all the surplus, However, we now know that privately the Government recognized that employees had a basis for claiming some or all of the surplus. In an internal Treasury Board Circular, for example, Treasury Board said this about the superannuation accounts: “The ownership of the funds remains with the participants in the plan or program, at least for the portion they personally contributed and any interest applicable thereon”.

Our position is that enacting Bill C-78, Parliament did not intend to take any surplus in the accounts belonging to employees and the legislation should be interpreted accordingly. As with the interpretation of any legislation, a full understanding of the context in which the legislation operates is critical.

In this case, the factual and legal context in which the plans operate has many dimensions: pension administration; actuarial issues; employee compensation; public finance and accounting rules; and fiduciary responsibility.

We believe that a full understanding of this context and the way in which the Government exercised its power as administrator of the plans does not support the Government’s contention that it owned the surplus. We remain committed to doing everything possible to persuade the Court to reverse the largest surplus seizure in Canadian history.

Commissioner Giuliano Zaccardelli
Royal Canadian Mounted Police
1200 Vanier Parkway
Ottawa, ON K1A 0R2

Dear Commissioner:

The Federal Superannuates National Association (FSNA) is very concerned about the “Audit at RCMP raises red flags” article by Andrew McIntosh appearing in this morning’s National Post. We sincerely hope that none of the reports about billing the RCMP pension funds for expenses unrelated to pensions are true. The alleged actions would be very serious abuses of the pension fund and a breach of the rights and expectations of those who contributed to the plan and the employees who are currently contributing.

FSNA, as you know, has a membership of more than 130,000 and represents retirees from the Public Service, the Canadian Forces, the Royal Canadian Mounted Police, and federally appointed judges. Its main objective is to protect the rights and benefits of pensioners under the superannuation plans. Some 5,000 of our members would be affected by the alleged “misappropriation or misuse of RCMP pension fund”.

Since your officials are quoted as saying that the audit is not complete at this time and that there is a review and follow-up actions being taken, FSNA will not make any official comments to the news media except to say that we have expressed our concerns to you and that we are awaiting a full disclosure of the facts. As you may know, FSNA is one of the plaintiffs in a court challenge to Bill C-78, questioning the authority of the Government to “retire” the surplus from the three superannuation plans. The actions reported in today’s National Post article are similar in nature to the “retirement” of pension fund surplus and are simply not acceptable.

We expect that your review and follow-up actions will be completed promptly and that there will be a complete public disclosure of the facts. The pensioners have a right to know; indeed all Canadians have a right to know. I hope that you will keep FSNA informed of the developments in this case and I will be pleased to meet with you at your convenience.

With kindest regards,
Rex G. Guy
National President

Where is the case at?
Three lawsuits challenging the Government’s taking of the surplus in the Public Service Superannuation Plan, the RCMP Superannuation Plan and the Canadian Forces Superannuation Plan are being pursued jointly by Court Order. The Ontario Superior Court has ruled that it has jurisdiction to hear the cases and that the federal unions pursuing the case are entitled to do so to protect the interests of public servants and other federal government employees. The lawsuits are now at the “discovery” stage. The Government has disclosed several thousand documents relevant to the issues in the case and all of these documents have been reviewed. These documents include financial data and analyses of the plans as well as hundreds of documents, many at the senior level, dealing with the Government’s strategy for dealing with pension surplus. The availability of some cabinet documents remains unresolved.

Once review of the documents was completed, the oral examination phase of the discovery process commenced. The former head of the Pension Division at Treasury Board was examined under oath for a total of 10 days in February and April 2003, and the Comptroller-General has been examined on accounting and financial issues for several days in March and April. It is expected that examinations will be completed in the fall of this year.

When will the case be heard in Court?
Once the discovery phase is complete, the Court will schedule a Settlement Conference and assign a trial date. It is unlikely that the case will be tried before the fall of 2004.

What have we learned?
The discovery process has shed a great deal of light on how and why the Government dealt with the surplus as it did. Briefly, we now know that the Government’s approach to dealing with the surplus was intimately linked to its desire to reduce the federal budget deficit in the mid-1990’s. The Government discovered that accounting rules permitted it to quietly “amortize” the surplus and reduce the size of the stated budget deficit, even though the balances reported in the Superannuation Accounts would not be reduced. The net result, which was effectively hidden from employees, was the equivalent of a contribution holiday for the Government for much of the decade - a period in which employees continued to make their contributions in full. To make matters worse, one of the basic reasons for the emergence of the surplus in the first place was wage restraint and salary freezes! By 1995, $14 billion in surplus was already built into the Government’s internal plan to reduce the deficit. None of these manoeuvres were disclosed to Treasury Board’s Advisory Committee on Pension Reform, which included members from the federal unions.

In 1999, Treasury Board proposed a new “pension deal”, but the Department of Finance refused to permit any discussion of sharing of surplus or transferring of the existing surplus to the new pension fund. Although it didn’t say so at the time, the Government needed to use the surplus to meet its deficit reduction targets. When the employee side refused to agree to the Government’s “deal”, Bill C-78 was the Government’s answer. Under this version of “pension reform”, employee contributions increased and the Government retained the entire surplus, which had by 2000 grown to about $30 billion.

Because it involves statutory pension plans, the case presents a number of new and groundbreaking issues. We remain committed to pursuing the case and to reversing the largest surplus grab in Canada.

The Federal Superannuates National Association (FSNA) congratulates the First Ministers for taking their responsibilities seriously and reaching an accord on health care renewal. They placed the need for improving our cherished health care system above political bickering.

Although FSNA made recommendations to the Kirby Committee and the Romanow Commission to go further in certain areas, it is satisfied that the First Ministers are moving in the right direction to achieve what the majority of Canadians want: the renewal, improvement and sustainability of our public health care.

FSNA supports the Accord in that it will ensure that all Canadians will have access to health services on the basis of need, not ability to pay, regardless of where they live in Canada. The agreement maintains and reconfirms the principles of the Canada Health Act and the stated values of Canadians.

The Association is pleased to see that services such as home care are to be improved and that Health Ministers are being directed to determine, within 9 months, the minimum level of services to be provided for home care and palliative care. It will, however, continue its efforts towards the implementation of a universal home care program.

The Association also feels that implementing measures to ensure that all Canadians will have reasonable access to catastrophic drug coverage by the end of 2005/06 is a step in the right direction, but it would have preferred, and will continue to advocate, a universal pharmacare program for all Canadians.

The Association is reassured to see that politicians came to understand that the health care system is not about politics, but about Canadian values, and that they took steps not only to preserve our publicly funded system, but also to continue to promote healthy living.

The Federal Superannuates National Association congratulates Mr. Romanow for having listened to all Canadians and for correctly interpreting the clear message of the overwhelming majority of them who want the protection and enhancement of a publicly funded and administered health care system.

Although FSNA feels that the final report released yesterday by the Commission does not go far enough in certain areas, such as pharmacare and long-term home care, we are pleased to see that it addresses all of the recommendations made by the Association (PDF) when it appeared before the Romanow Commission, in April.

Those who oppose the major thrust of the report, including certain politicians, are not in tune with what Canadians want. These politicians are again reminded that the principles of the health care system are cherished by a vast majority of Canadians. Politics must not hinder improvements to the health care system. Canadians pay all taxes and value heath care far more than “turf wars”.

All FSNA members are asked to openly support the recommendations and advocate immediate action. At the national level, FSNA will work with the other 11 groups of the Congress of National Seniors Organizations to ensure that the Prime Minister and the federal Minister of Health live up to their recent commitments relating to the recommendations of the Romanow Commission. The Congress will also develop a strategy to ensure that all politicians are aware that the 2 million older Canadians who are members of these organizations will not accept anything else than the viable and expanded health care system outlined in Mr. Romanow’s report.

For more details on the PDSP, click here.

PRESENTED BY: REX GUY, NATIONAL PRESIDENT
FEDERAL SUPERANNUATES NATIONAL ASSOCIATION

OTTAWA, 21 FEBRUARY 2002

Speaking Notes For Rex G Guy
Thank you for this second opportunity to appear before your Committee.
Committee members who were present at the consultation meeting in Fredericton on 8 November 2001 will recall that, for logistics reasons, we were not able to make our presentation, although we tabled it for your consideration.
It is not my intention to repeat what is contained in that presentation. I will, however, expand on the points that are raised in that document and discuss some other points and, of course, I will be pleased to reply to questions at the conclusion of this brief presentation.
Here, at the table, with me is Roger Heath, who was with me in Fredericton. Roger is a research officer with our Association and he has been analysing the whole debate on the future of our health care system. I am also supported by the Association’s Executive Director, Jean-Guy Soulière and the Deputy Executive Director, Keith Patterson.
As you already have the background information on the Federal Superannuates National Association and who it represents, let me move right into my presentation.

OUR PRINCIPAL MESSAGE:
The majority of our members lived in Canada before the introduction of medicare, some 40 years ago. They know and understand the hardships that many Canadians and Canadian families faced.
Many of the individuals who are crying for drastic changes to the system were born after medicare was introduced. Many do not understand the dire consequences of destroying our system.
Our first message is: It is paramount that a comprehensive, efficient and effective public health care system be available to all Canadians, now and in the future.

OUR MAJOR FEAR:
To ensure that we implement a fair, equitable, efficient and effective health care system resulting from the on-going review, there must be the political will to make it happen.
The continuing useless, meaningless, and dangerous bickering between federal and provincial politicians must stop.
We urge our politicians to rise above who is right and do what is right.

MAJOR RECOMMENDATIONS OF FSNA
We have followed the debate on the future of our health care system very carefully and we have conducted research in many areas.
We have consulted our more than 120,000 members in the 80 branches across the country. We have discussed the issues with the 11 other seniors groups who form the Congress of National Seniors Organizations.
The 12 members of the Congress represent approximately 2 million older Canadians.
Based on this, FSNA is making the following recommendations:

1. That the five principles of the Canada Health Act be reaffirmed

The five principles are objectives and, as such, do not prevent innovation or reform, as many have complained. The five principles are to be considered as the basis for policy. They must be uniformly understood across the country, and uniformly applied to eliminate what now exists throughout this country - a different medicare system in each province and territory.

There is no doubt that the principles need re-definition to reflect today’s context and environment.

For example, “medically necessary” has a different meaning in different provinces. This alone prevents a consistent approach to the provision of uniform services across the country.

2. That more funding be provided to health care

It is our conclusion that Canadians are willing to pay more to ensure a quality health care system.

That the funding comes from federal taxes, provincial taxes, or directly from individuals is of little consequence - the taxpayer pays for everything. The money comes from your wallet and mine.

However, the money must go to health care and we must ensure that all necessary changes are made to the existing health care system. There are many changes that can be made to ensure savings and efficiencies.

I will make a few recommendations on how the system can be made more efficient and how savings can be realized.

3. That a universal Pharmacare program for all Canadians be implemented

It is our view that the implementation of such a system would save money. It is evident that there could be an increase in governments’ cost.

But, the overall cost to those who pay, you and me, we estimate would be less.

Why is that?

If the whole country buys most of its drugs in a coordinated way, very significant discounts can be achieved.

The program could encourage practices that would economize - such as reference drug prescribing.

Moreover, effective drug use reduces the demand on other parts of the system.

Furthermore - as the Committee has pointed out - we have a problem because Canadian governments have little experience with user-fees and mechanisms that truly integrate public and private insurance.

Private insurance and user fees for drugs are common in Canada. A national Pharmacare program could give us experience in such arrangements.

4. That home care be made part of the Canada Health Act

Like Pharmacare, some provinces provide home-care to some people and some provinces do not. Again, this illustrates how the current principles of the Health Act are interpreted differently and raises the issue of equitable services for all Canadians.

The restructuring of health care in the 1990s, and the ever-growing practice of earlier discharges from acute care hospitals, has resulted in an increased demand for home care. In spite of this, home care has not received sufficient funds to keep up with hospital discharges. The current investment in home care is woefully inadequate.

Government funding for home care would be seen by many as replacing private funding. This is a consideration. Let me quote from a recent presentation made by the Congress of National Seniors Organizations, of which - as mentioned earlier - we are part, to the Romanow Commission:

“Home care and home support services help seniors maintain their independence. These services delay and even prevent institutionalization while promoting the social integration of seniors.

Home care can contribute to lower costs for the health care system by reducing the pressure on acute care beds for convalescent patients; by reducing the demand for long-term institutional care by allowing some aging Canadians to maintain their independence and dignity in their own home; and by allowing palliative care patients to spend their final days in the comfort of familiar surroundings.”

5. That as much emphasis be given to healthiness as is given to health care

Healthiness, as your Reports clearly demonstrate, requires more than a well-run health care sector and involves more ministries than the ministry of health. For example education can impart valuable life-skill that will support individuals for decades. Community programs for elders can prolong independent living.

Even in its narrow definition, health care is linked to decisions that are sometimes beyond the control of health sector. For instance, easing of drug advertising rules, now under consideration by the federal government, could have a very significant impact on drug costs - especially households’ out-of-pocket expenses.

Were health care imperatives properly coordinated in the federal system, rules that limit the advertising of prescription drugs in Canada would not be eased and US ads would be blocked from Canadian cable TV.

FSNA therefore, strongly supports the Committee’s comments on the need for better co-ordination among departments and the public on health care issues.

CONCLUSION:
Health care is currently a topic of discussion in almost every household in Canada.

We are subjected to daily bombardment by news media reports predicting the end of the health care system. Reports that, on the one hand, claim that the health care system is in crisis, and on the other hand that it is not. That provinces will “go it on their own” and that we cannot afford the health care system are all, to say the least, confusing and terrifying to most Canadians.

There is need for order and objectivity in the debate. Your Committee, we feel has tried to achieve this, and we are grateful for that.

Canadians need to receive correct information if they are to participate actively and purposefully in the debate.

Again, I thank the Committee for inviting us here, but I would also like to add one last thought.

Everyone who has followed the work of this Committee must be impressed by the quality of most of the submissions that were made. There is a great deal of commitment, understanding, and common sense outside the health sector. Moreover, the Committee’s pessimism about the possibility of achieving significant efficiency gains stems not from their impracticality, but, in part, from “the attitude and the behaviour of those with vested interests in the health care system”.

We as the Federal Superannuates National Association strongly urge this Committee to recommend mechanisms for continual public involvement in health care policy. Giving people the opportunity to defend their interests may be the only way to break the present impasse.

Again, thank you for making it possible for us to meet with you today.

Withler v. Attorney General of Canada (Court No. L010910)
Fitzsimonds v. Attorney General of Canada (Court No. L011356)

The British Columbia Supreme Court has certified the above cases as class actions. If you received or were entitled to receive a Supplementary Death Benefit under the federal Public Service Superannuation Act (”the PSSA”) or Canadian Forces Superannuation Act (”the CFSA”) between April 17, 1985 and November 2, 2001, you may be a member of the classes in these actions.

What are the actions about?
Under the PSSA and the CFSA, a Supplementary Death Benefit is payable to beneficiaries of deceased federal Public Servants and Canadian Forces members. Until late 1999, the amount of the benefit payable was reduced by 10% per year for covered members who died after age 60. Since 1999, the 10% yearly reduction under the PSSA applies after age 65, rather than age 60.
The class actions challenge the age-related benefit reduction as discriminatory, contrary to the Canadian Charter of Rights and Freedoms. A similar case brought on an individual basis in the Federal Court of Canada by Mrs. Ruth Margolis resulted in a judgment for the plaintiff. The class actions are brought on behalf of all persons who are members of the defined classes.

Who are the class members?
The classes in the two actions include persons presently resident in Canada to whom Supplementary Death Benefits under the PSSA or the CFSA were paid or became payable where:
a) The participants in respect of whom the benefits were paid or payable died between April 17, 1985 and November 2, 2001, and
b) The amount of the benefit was reduced due to the age reduction provisions of the PSSA or the CFSA.

What do I need to do to take part in the class actions?
If you do not live in British Columbia, you must contact the law firm of Giaschi & Margolis at the address below by May 19, 2002 if you want to participate in the actions. If you do not contact them, you will not be able to share in any money that the Court may award in the class actions.

If you live in British Columbia, you do not need to do anything to participate. You are automatically included in the class actions. If you do not want to participate, you must opt out by May 19, 2002 by completing an opt-out notice available from Giaschi & Margolis at the address below. Giaschi & Margolis can help confirm whether you are a class member.

Giaschi & Margolis
401-815 Hornby Street
Vancouver BC V6Z 2E6
Tel: (866) 274-6547 (Toll Free)
Fax: (604) 681-4260
E-mail: publicserviceclassaction@giaschimargolis.ca or canadianforcesclassaction@giaschimargolis.ca
When contacting Giaschi & Margolis, please provide:

• Your name and/or the name of the estate you represent
• Your address
• Your relationship to the deceased
• The deceased’s name and date of death

Do I need to pay anything?
You do not have to pay any direct legal fees out of your own pocket. If the cases are not successful, no legal fees will be charged.

By agreement with the representative plaintiffs, counsel fees may be calculated at 30% of any amounts recovered. If a settlement, judgment, voluntary payment or execution or other benefit is obtained, the lawyers will apply to court for approval of a fee that is consistent with the terms of this agreement, or some lesser amount. The court will decide what amount is fair.

This arrangement compensates the lawyers for the risk they have assumed in advancing the cases and performing the legal work. The lawyers do not receive any money unless the cases are successful. Even if the class actions do not succeed, class members are not responsible for the fees of any of the lawyers involved in the cases.

Who are the lawyers for the classes?
Giaschi & Margolis
401-815 Hornby Street
Vancouver BC  V6Z 2E6

Branch MacMaster
1210-777 Hornby Street
Vancouver BC  V6Z 1S4

Arvay Finlay
4th Floor, 888 Fort Street
Victoria BC  V8W 1H8

Who do I contact for more information?
For more information or to opt into or out of the class actions, please contact Giaschi & Margolis at the address set out above. You can also monitor Branch MacMaster’s website at:
http://www.branmac.com/pages/publicservice.html or http://www.branmac.com/pages/canadianforces.html

Mr. Guy made an obvious point; Canadian households pay all the bills for Canada’s health care - 70% through taxes and another 30% through the purchase of drugs and health services. They don’t care which level of government pays for what, only that it be done efficiently, effectively, and with respect to Canadian values like fairness.

To illustrate how badly the debate has been sidetracked, Mr. Guy pointed out that several provinces are trying to limit coverage for seniors’ prescription drugs and convalescent home care when it is clear that broad national programs for everyone would save money. A national pharmacare program for all Canadians would allow governments to negotiate the cheapest possible price, reduce wasteful prescribing practice, and diminish drug interactions. A national convalescent home-care program would save money by emptying acute care beds. “How can governments ignore programs that promise better care and reduced costs?” asks Mr. Guy.

Mr. Guy was especially critical of proposals for two-tier health care, stating that a two-tier health care system is inherently inefficient - it would have greater costs for the same level of service, it would be administratively complex and violate all five principles of the Canada Health Act.
At the same time, Mr. Guy complimented the Committee on many aspects of their analysis so far. He agreed with their finding that the health system is not as bad as many would have us believe. Like the Committee he stressed the need for reform - especially primary care reform. He also agreed that reform has been stalled by powerful interest groups, but added that bringing not-for-profit groups to the table would be a powerful way of curbing their power. “Governments should promote informed participation by households and the organizations representing them,” said Mr. Guy.

This proposal would allow governments to negotiate lower prices, refuse high-cost drugs with cheaper alternatives, and better implement effective prescription strategies. However, a national program whereby both the public and private sectors could participate would be much more effective because the private sector spends twice as much on drugs as do governments.

Public and private participation would benefit all Canadian families by lowering their drug costs and promoting intelligent prescribing practice.

Provincial and federal health ministers meeting in St. John’s today could adopt a national drug formulary and common purchasing proposal.  This proposal will only affect purchases in hospitals and other government programs.

Some data on drug costs – 1998 ($ billion)
                          Prescription($)    Drugs (%)     All ($)       Drugs (%)

Governments           3.9                  41.5               3.9              31.5
Private Sector          5.5                  58.5               8.5              68.5
Total                     9.4                  100              12.4              100

Source: Drug Expenditure in Canada – 1985 – 2000; Canadian Institute for Health Information, p. 7.

With a membership of 120,000, FSNA is a not-for-profit organization that represents the interests of retirees from the Public Service of Canada, the Canadian Forces, the Royal Canadian Mounted Police, and Judges, as well as their spouses.

It has also been reported that the decision is being appealed.

FSNA is currently assessing the situation for possible implications for our members. The SDB for Public Servants was recently improved along with changes to the current PS Superannuation Act.

Such a periodic review of the plan is normal. It would appear that this review would be in conjunction with a significant review of all terms and conditions of employment in the Public Service. The latest round of amendments to the plan were implemented with Bills C-71 and C-78 in 1999 and C-21 in 2000.

The Executive Director of FSNA is the pensioners’ representative on the Public Service Pension Advisory Committee and represents all Public Service pensioners. This Committee reviews all proposed changes to the Public Service Superannuation Act, and makes recommendations to the Minister. FSNA, through the pensioner’s representative and directly to the Minister, has asked that several benefit improvements be implemented.

As is normally the case, we expect that any changes to the Superannuation Plan will not reduce benefits in any way for current pensioners nor will they reduce the accrued benefits of current employees.

It is unclear at this time to what extent, if any, changes to the Canadian Forces or RCMP superannuation acts, or to the Judges Act will follow from changes to the Public Service Superannuation Act.

Bill C-33 of 1986
This Bill was not passed by Parliament. Bill C-33 would have created a Pension Management Board for the Public Service that would have determined, each year, the increases applicable on pensions earned following the passage of the Bill.

Increases were no longer to be automatically based on increases in the Consumer Price Index, but could have been somewhat less, depending on the performance of the fund.

Full and automatic indexing of pensions would have been maintained for those already retired and for that portion of the pension of a future retiree that accrued before the date of passage of the Bill.

The Public Service Alliance of Canada (PSAC) and the Professional Institute of the Public Service of Canada (PIPSC) tentatively agreed to accept the pension increase proposals in the Bill. FSNA did not – but has been accused of doing so.

The facts are:

• FSNA was not part of the agreement between Treasury Board Secretariat, PSAC, and PIPSC.
• At no time did FSNA ever agree to less than full and automatic indexing of pensions either for existing or future pensions. FSNA wrote many letters and made many representations to Ministers, objecting to the potential reduction in indexing.
• The FSNA brief submitted to the House of Commons Committee considering Bill C-33, in March of 1987, contained the following statements in relation to the Pension Management Board:
  “There must be a statutory obligation on the Pension   Management Board (PMB) to provide for the full indexing of all future pensions…
  …The Pension Management Board must be provided with the authority to meet such a statutory requirement.”
• The FSNA position on this issue has always been clear and consistent: We have always insisted on nothing less than full and automatic indexing for all pensions.

Bill C-78 of 1999
This Bill, the Public Sector Pension Investment Board Act, was passed by Parliament in 1999. Bill C-78 introduced amendments to the superannuation acts, some of which allow the Government to remove certain portions of the surplus in the superannuation accounts over a period of time up to 15 years.

Such removals to any superannuation account can only take place after an actuarial report on the account has been laid before Parliament.

To date, February 2001, no such reports have been laid before Parliament and no amounts have been removed from any of the accounts.

During the debate on Bill C-78, the President of the Treasury Board Mr. Marcel Massé stated that the largest pensioner association agreed with the government’s position that the surplus belonged to the government.

During his presentation to a Parliamentary Committee examining Bill C-78, Mr. Massé held up a printout of a page posted March 10, 1999 on FSNA’s web site which he claimed showed support for his position.

It states in part:
“FSNA’s position in relation to the pension surplus has always been clear and consistent: Any surplus must be shared equitably by the employer (the taxpayers), employees, and pensioners. This position has been included in a number of letters to Cabinet Ministers and in formal presentations to Ministers. FSNA believes that forcing a decision at the Supreme Court level on “ownership” of the surplus would inevitably lead the discussion away from a question of fairness and equity. FSNA has consulted independent professional and legal experts in the pension field and has been advised that, on the basis of current legal jurisprudence, the employer can decide how to dispose of the surplus. However, it should also be noted that, under the current legislation, the employer would be required to make up any shortfalls were the plan in a deficit position. Even in a deficit situation, the Government would not be able to reduce any of the benefits to pensioners.”

This was the statement Mr. Massé interpreted to mean that we agreed with his position that, legally, the government owned the surplus.

The statement does not say that FSNA agrees that the government owns the surplus.¼br> It says that FSNA was advised by legal experts that in their opinion the government could dispose of the surplus as it wishes. It was based on their interpretation of the Superannuation Acts as they read at that time.

FSNA believes that our members have the right to know why the Association proceeds in the way that it does. The Association is forthright and honest with the membership at all times, always giving its members full and correct information. We have nothing to hide.

This Association has been accused of trading the surplus for a dental plan.

The fact is that FSNA could not trade its members’ claim to the surplus for a dental plan because FSNA has never agreed that the government has the exclusive right to the surplus. In fact, the dental plan was the result more than 10 years of lobbying effort by FSNA. It was not part of any other agreement! It is an achievement of which we are most proud!

The PDSP will process the balance remaining as a claim provided that members attach the claim settlement statement from the provincial plan when submitting their claim to the Administrator.

“It took FSNA many years of research, persuasion, lobbying, and sustained drive to convince the government of the justice of dental plan insurance for pensioners,” said Past President Claude Edwards. “While there were others that helped to persuade the government to provide this benefit, it was FSNA’s unwavering efforts that made it possible for pensioners to be covered by a dental plan similar to the one offered to federal employees.”

The existing employee dental plan was attained through collective bargaining in 1985, but was not made available to pensioners. Prior to its implementation in 1987, wage and price controls had been in effect. In accordance with the Public Sector Compensation Restraint Act, the government imposed ceilings of 6% for 1982-83 and 5% for 1983-84 on Public Service, Canadian Forces, and RCMP wage increases. As a result of a legal challenge, the Federal Court decided that certain allowances that had been frozen by the government should have been treated as wages and allowed to increase by 6% and 5%, a judgement that was later upheld by the Federal Court of Appeal. In lieu of adjustments to these allowances, the government and the unions negotiated an out-of-court settlement. This resulted in a major change to the Public Service Dental Plan, including the elimination of employee premiums (employer’s contribution went from 50% to 100%).

Between the time the Restraint Act was imposed in June 1982 and the time the revised plan was introduced in June 1988, 50,222 employees retired from the Federal Public Service. They never received any financial benefit from this Federal Court of Appeal decision and subsequent out-of-court settlement between the union and the government.

Although there was merit in FSNA’s case, the financial climate that prevailed at the time was not favourable to the provision of dental benefits to pensioners. When it became apparent in the 90’s that the Government was moving to a balanced budget, and that the fiscal problems of the Government were lessening, FSNA redoubled its efforts to obtain this long-sought benefit for pensioners. This led to the February 1999 announcement of the Pensioners’ Dental Services Plan (PDSP).

All those in receipt of a pension under the Public Service, the Canadian Forces, or the Royal Canadian Mounted Police superannuation acts are eligible for coverage.

The other plaintiffs are: The Professional Institute of the Public Service of Canada, the Canadian Merchant Service Guild, the Federal Government Dockyard Trades & Labour Council (East), the International Brotherhood of Electrical Workers, the Federal Government Dockyard Chargehands Association, the Research Council Employees’ Association, the Association of Public Service Financial Administrators, the Professional Association of Foreign Service Officers, the Federal Government Dockyard Trades & Labour Council (West), the Translator’s Group Canadian Union of Professional and Technical Employees, the Social Science Employees Association, the Canadian Association of Professional  Radio Operators, the Canadian Air Traffic Control Association and the  Canadian Military Colleges Faculty Association.
On June 26, 2000, Ontario Superior Court Justice Paul Lalonde handed down his decision on the matter of jurisdiction in the Pension Surplus Case.

Justice Lalonde rejected all of the employer’s preliminary grounds relative to the employer’s position that the Ontario Superior Court did not have jurisdiction to hear the case.

Barring a successful appeal, this means the case will proceed. We will inform you of developments.

• April 2000
  Employee’s salary adjustment under the agreement for the period April 1, 1989 to 28 July 28, 1998. This cheque will also include a 5% lump-sum payment covering any possible personnel actions such as overtime, promotions and acting appointments for the period 1 April 1989 to 31 March 1994*.
• June 2000
  Pay rates that took effect 29 July 1998, plus a retroactive payment for the period 29 July 1998 to the present.
• August 2000
  Retroactive amount for the period 8 March 1985 to 31 March 1989, as well as a 5 per-cent lump-sum payment in lieu of recalculating personnel actions such as overtime, promotions and acting appointments during this period.
  (The third retroactive period predates the first two because it must be calculated manually and therefore takes longer to tally. The first two payments can be done automatically by the pay system.)
• July-October 2000
  Salary adjustments based on the recalculation of personnel actions such as overtime, promotions and acting appointments from 1994 to 29 July 1998.
• November-December 2000
  Interest on all previous payments. Canada Savings Bond interest rates will be used, with calculations based on the applicable rate for each six-month period.
  As well, pensions and disability insurance benefits will be adjusted, starting in late 2000 and through 2001.

* The 5-per-cent payment goes to everyone to avoid the administrative nightmare of recalculating the thousands of variables inherent in 230,000 separate cases over a 15-year period.

FSNA would have preferred if the Minister of Finance had eliminated these claw backs altogether.

Along with the restoration of full indexing, middle income tax rates will be lowered and the tax bracket thresholds will be increased - a positive effect for many seniors. There will also be automatic increases in the GST credit.

The Minister announced increased transfers to provinces for health care and while FSNA welcomes this increase in funding, it will remain to be seen how effective this is at repairing our damaged health care system.