March 3, 2009

Quebec is about to become the first province in Canada to
protect pension plans by extending the time to rebuild funds
and, where necessary, taking over plans completely.

Cash-strapped companies are particularly hard-hit by the
economic crisis. They are legally required to fund pension
plans at 100 per cent but have five years to top up plans
when they fall short.

The Quebec government has extended that breathing room to 10
years.

When companies fail completely, it's often the pensions that
suffer. Since pensions belong to employees, it's not fair
that they should pay for the mistakes of the company.

So the Quebec government proposes the takeover of failed
pension plans for five years. If successful, the plan could
be extended beyond five years or even become permanent.

This legislated protection is necessary because some
unscrupulous businesses have failed to invest pension funds
properly or used funds to cover operating costs. Bankruptcy
should not be a way out of financial responsibility.

Some U.S. companies have cheated employees from pensions by
declaring bankruptcy and re-establishing a their business
under a new name, casting retirees adrift on a sea of debt.

The Canadian government has taken some limited steps but
more needs to be done quickly. Finance Minister Flaherty
announced that federally regulated plans will also be given
ten years of breathing room. But affected plans amount to
only seven per cent of all Canada's private pension plans.

And what does Flaherty propose for pension plans of failed
companies? Aid is needed for all cash-strapped pensions not
just federally regulated ones.

Flaherty is going on the road to talk to Canadians but it's
time for action, not talk.

Money in the hands of pensioners stimulates the economy
faster than infrastructure plans and consequently pension
plans need protection.

Those "shovel ready" projects help mostly male workers but
pensions affect men and women. Projects can be delayed due
to planning time. Pensioners inject money into the economy
now.

Canada's 1350 pension plans suffered their worst year on
record in 2008 as their assets dropped 15.9 per cent
according to an agency that monitors plans, RBC Dexia
Investor Services.

The loss of $310 billion eclipses the previous record set in
1974. To find a worse period than now "we would have to
look to the Great Depression of 1929-32" said a director
from Dexia.

Currently, the the average solvency of pension plans is only
70 per cent of the amount required to fully fund pensions,
whereas a year ago the solvency rate was 96 per cent.

About one-quarter of pension plans are especially at risk.
These plans, which represent 400,000 contributors across
Canada, do not have guaranteed retirement guaranteed
benefits. Instead, they depend entirely on investment
returns and pensioners could ultimately face a bleak future
unless happy days return to the financial markets.

Retirees should not pay for the poor judgment of pension
planners who gambled with contributors' money by rolling
the dice in the stock markets.

But even conservative plans are feeling the pinch. The B.C.
College Pension Fund, which affects faculty at Thompson
Rivers University, recently announced that extended health
and dental benefits would no longer be covered and faculty
will have to purchase their own. As well, cost of living
increases will be capped.

Not many British Columbians feel the pain of faculty who are
affected in a relatively modest way, especially those with
plans at risk or those with no pension plans at all.

Resentment would be understandable if pensions were some
perk of employment; a gift from employers. But all
employees with plans have paid for them: workers have
accepted pension benefits lieu of wage increases. Pensions
belong to the employees.

Immediate pension protection is not only good for retirees
and the companies that operate the plans but also also for
the economy. Like the unemployed and working poor, money in
the hands of retirees goes straight into the economy. They
spend every dollar.

Quebec has also increased their minimum wage. Like
retirees, low income families also spend every dollar and
provide the biggest bang for the stimulus buck.

The B.C. Government should seriously consider emulating
Quebec's plans to stimulate the economy by putting money in
the hands of those who will spend it fastest.
 

David Charbonneau is the owner of Trio Technical.
He can be reached at dcharbonneau13@shaw.ca

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