Dec 21, 2016
According to a recent article in Benefits Canada, a House of Commons committee is recommending that the federal government examine ways to deal with the solvency of Canada Post’s defined benefit pension plan, which was at the core of its contract negotiations with the Canadian Union of Postal Workers this summer. Writer Jennifer Paterson turns to Jana Steele, a partner in Osler’s Pensions and Benefits Practice Group, for insight regarding suggestions made in the committee’s recently published report, which recommends the government and Canada Post “take steps to modernize the pension plan so it can operate on a going-concern basis and is no longer subject to solvency funding requirements.” It also recommends investigating three options for feasibility: “adopting a shared-risk model between the employer and plan members; pursuing joint management between the employer and plan members; and incorporating the Canada Post plan into the public service pension plan.”
“Certainly for a large plan like Canada Post, a target-benefit or shared-risk model would provide a good alternative to defined benefit. It would potentially assist with long-term sustainability of the plan and address potential affordability issues,” says Jana, who tells Benefits Canada that there would still have to be legislation to facilitate such a model.
“We currently, at the federal level, have the proposed amendments to the Pension Benefits Standard Act . . . to allow target-benefit plans for federally regulated plans, but those are not yet enforced; in fact, as far as I know, they’ve only received first reading,” says Jana. “So there would have to be legislation to allow that type of design, either specific legislation for Canada Post or the passing of and bringing into force of the new target-benefit regime for federally regulated plans.”
For more information, read Jennifer Paterson’s full article “Commons report suggests shared risk as possible option for Canada Post pension plan” in Benefits Canada.