The Voice of Multi-Employer Plan Interests in Canada

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MEBCO's primary activity is to monitor and assess the impact of legislative reforms that affect Canadian multi-employer pension and benefits plans. In many cases, we advocate our position through written submissions to government, and regulatory and administrative agencies.

To view a submission, just click on a title of interest from the list below. In the interest of avoiding repetition, we have deleted standard introductory remarks that provide background information on MEBCO from many of these documents.

Documents that are presented as Adobe Acrobat PDF files require Adobe Acrobat reader to properly view. If you would like an original copy of any of these submissions, you can obtain one by contacting MEBCO.

Comments by the Multi-Employer Benefit Plan Council of Canada (MEBCO)

The Multi-Employer Benefit Plan Council of Canada (MEBCO) was established in 1992 to represent the interests of Canadian multi-employer pension and benefit plans (MEPs). MEBCO consults with provincial and federal governments regarding proposed or existing legislation and policies affecting these plans. MEBCO is a federal no-share capital corporation, operating on a not-for-profit basis.

MEBCO is representative of all persons and disciplines involved in MEPs, including trustees (union, independent, professional and employer), professional third party administrators, non- profit or “in-house” plan administrators, and professionals including actuaries, benefit

consultants, lawyers, investment managers, investment counsel and chartered public accountants. MEBCO is administered by a Board of Directors consisting of representatives from each of the above groups. The Board of Directors serve MEBCO on a volunteer basis, and are responsible for identifying issues that impact MEPs, developing a strategy to address those issues, and then carrying out the strategy. MEBCO’s member-plans provide comprehensive health coverage to over 1,000,000 Canadians.

As the representative organization for traditional target benefit multi-employer pension plans (MEPPs), the Multi-Employer Benefit Plan Council of Canada’s (MEBCO) comments are limited to subsection 3570, Target Pension Plans. MEBCO is pleased that the exposure draft (ED) recognizes the special nature of MEPPs.

MEBCO is opposed to the payment of transfer values to MEPP participants (other than for small amounts), because that permits participants to convert a defined benefit type pension entitlement into something that was not bargained on their behalf – a defined contribution benefit. However, MEBCO recognizes that such a change would not be possible without legislation, and that is beyond the jurisdiction of actuarial standards.

In general, MEBCO believes that the scope of subsection 3570 is appropriate. However, MEBCO notes that the New Brunswick Pension Benefits Act (NB PBA) currently forbids the reduction of accrued benefits for all ongoing plans of solvent employers that are not “shared risk plans.” Notwithstanding that legislation, MEBCO is aware of a national MEPP that was permitted, by ministerial action, to reduce its New Brunswick participants’ accrued benefits identically to those elsewhere in Canada when benefits needed to be reduced. MEBCO would like the ED to be clear that traditional MEPPs where some or all of the participants are subject to the NB PBA may apply subsection 3570.

MEBCO proposes that MEPPs should be permitted to elect to cap transfer values at either 100% of the going concern funded amount or 100% of the amount that would be payable from a plan that does not qualify for subsection 3570, or the greater or lesser of the two computations, where that is legally permitted.

The Québec Supplemental Pension Plans Act (QC SPPA) embraces the concepts of subsection 3570, but requires the actuarial computations to be determined on a solvency funding basis. MEBCO believes that this computation should be accepted actuarial practice. Indeed, we believe that any reasonable determination, such as the going concern basis without removing PfADs, should be accepted actuarial practice.

MEPPs are constrained by the fact that contributions are fixed in collective agreements, so the consequence of additional actuarial calculations is an increase in administrative expenses and therefore a decrease in the assets available to provide benefits. The requirement to do a recalculation within three months of the commuted value date, and the requirement to remove PfADs from the assumptions, both necessarily increase the cost of the actuary’s work, to the detriment of the non-terminating participants. As a minimum, a roll-forward of the actuarial present values should be clearly permitted.

Determining the funded ratio based on the actuarial cost method last filed makes sense under individual determinations of the actuarial accrued liability, but not under aggregate methods. The unit credit actuarial cost method should be required where the filed valuation used an aggregate method.

Because most MEPPs have portability among employers, deferred members may not take their deferred pension at the most valuable age. It should be made clear that the assumed retirement age may be based on actual experience, not the most valuable age. It should also be made clear that reciprocal agreements with other plans may be reflected consistent with the actuarial assumptions.

Please feel free to contact us to discuss these matters.

Yours truly
Robert R. Blakely, QC President

Comments of MEBCO

The Multi-Employer Benefit Plan Council of Canada (MEBCO) was established in 1992 to represent the interests of Canadian multi-employer pension and benefit plans (MEPs). MEBCO consults with provincial and federal governments regarding proposed or existing legislation and policies affecting these plans. MEBCO is a federal no-share capital corporation, operating on a not-for-profit basis.

MEBCO is representative of all persons and disciplines involved in MEPs, including trustees (union, independent, professional and employer), professional third party administrators, non-profit or “in- house” plan administrators, and professionals including actuaries, benefit consultants, lawyers, investment managers, investment counsel and chartered public accountants. MEBCO is administered by a Board of Directors consisting of representatives from each of the above groups. The Board of Directors serve MEBCO on a volunteer basis, and are responsible for identifying issues that impact MEPs, developing a strategy to address those issues, and then carrying out the strategy. MEBCO’s member-plans provide comprehensive health coverage to over 1,000,000 Canadians.

MEBCO believes that sponsors of defined benefit plans should be informed of the risks related to the maintenance of such plans. However, which risks are of consequence varies significantly based on the characteristics of the plan and the sponsor. Based on this reality, MEBCO believes that disclosure of risk is essentially a consulting matter and is not a suitable topic for actuarial standards of practice, at least as proposed in the Exposure Draft (ED).

MEBCO notes that the ED includes special provisions that would primarily apply to typical multi- employer pension plans (MEPPs). MEPPs have fixed contributions, and therefore any increase in expenses (such as for additional actuarial work) leaves less for participant benefits. MEBCO is not persuaded that universal mandatory compliance with the ED as part of every going concern actuarial valuation for a MEPP is a good use of limited funds.

Further, the risks are borne by the participants, not the intended users of that actuarial report – the Trustees and the regulators. In short, those who bear the risks are not intended users. With respect to the potential impact of a decline in the contribution base of a MEPP, any illustrative calculations are likely to be an unreliable forecaster of the actuarial impact, primarily because that decline can come about due to a variety of causes, individually and especially in combination. Possible sources of a decline might include:

  • Hours worked per active member decline. Contributions decline by person, but actuarial costs may stay the same or change disproportionately, depending on the service credit rules.
  • Retirements may accelerate, causing actuarial losses but also lowering the average age of the actives.
  • Actives with the least service may lose their jobs, thus increasing the average age.
  • Employers may go out of business or withdraw from the plan, thereby triggering certain benefit reductions for those who worked for that company.
  • Most likely, the decline will be from an unpredictable combination of causes.

In summary, any disclosure of funding risks is only useful if it meets the needs of the intended users of that report. That is best handled as a consulting matter, not an actuarial standard. Many MEPPs are getting that sort of advice from their consultants now, tailored to the needs and desires of the Trustees. MEBCO strongly supports such advice for all MEPPs, as well as meaningful communication of the funding risks to the plan participants. The ASB’s attempt to mandate the existence and form of such disclosure, however, is unlikely to do anything more than the current disclosure. This is because of the unpredictability of the impact of risks on most MEPPs most of the time. In short, if the events of a plausible adverse scenario actually appear to happen, the outcome is highly likely to diverge significantly from the forecasted effect, because those events will not happen in isolation. That will actually reduce Trustee confidence in the actuarial reports. MEBCO therefore believes that the ED should not be adopted as presented. If there is to be a pension risk disclosure standard, MEBCO suggests that it be limited to language directing the actuary to disclose the areas of perceived risk for the plan under review and to make recommendations for additional studies, if any, that would be enlightening for the intended users with respect to those risks. This would also allow the Trustees of MEPPs to manage costs better. We would be pleased to discuss any of these comments with you.

Yours truly,

Robert R. Blakely,QC
President

June 30, 2017 – TORONTO – The Multi-Employer Benefit Plan Council of Canada (MEBCO) is the expert voice of multi-employer plan interests in Canada. MEBCO welcomes yesterday’s announcement by the province of Ontario that there will be permanent relief from solvency funding for SOMEPPs. This has been a goal MEBCO has advocated for on behalf of our members for several years.

However, MEBCO remains concerned about the introduction and uncertainty regarding a provision for adverse deviation (PfAD) requirement because it can have unintended consequences such as intergenerational inequity.   MEBCO remains committed to working with the Ministry of Finance to develop funding, and more specifically reserve requirements, that are appropriate for Ontario MEPPs.   Accordingly, MEBCO will take all available opportunities to make submissions on these issues that are of critical importance for all members and beneficiaries of these plans.

In yesterday’s announcement, the government intends to introduce legislation in the fall and regulation in 2018 to implement these changes and will be consulting on the details of the new framework, including the design of the reserve and how plans transition to the new requirements. As an interim step, the government is extending the temporary solvency funding exemption currently in place for SOMEPPs by one year to August 2018.

For more information, please contact:

Michael Mazzuca
MEBCO Director
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August 21, 2017

MEBCO Comments

The Multi-Employer Benefit Plan Council of Canada (MEBCO) was established in 1992 to represent the interests of Canadian multi-employer pension and benefit plans (MEPs). MEBCO consults with provincial and federal governments regarding proposed or existing legislation and policies affecting these plans. MEBCO is a federal no-share capital corporation, operating on a not-for-profit basis.

MEBCO is representative of all persons and disciplines involved in MEPs, including trustees (union, independent, professional and employer), professional third party administrators, non-profit or “in-house” plan administrators, and professionals including actuaries, benefit consultants, lawyers,  investment managers, investment counsel and chartered public accountants. MEBCO is administered by a Board of Directors consisting of representatives from each of the above groups. The Board of Directors serve MEBCO on a volunteer basis, and are responsible for identifying issues that impact MEPs, developing a strategy to address those issues, and then carrying out the strategy. MEBCO’s member-plans provide comprehensive health coverage to over 1,000,000 Canadians.

Background

In recent years, legislators and regulators have increasingly become aware that there are fundamental differences between typical single employer defined benefit pension plans (SEPPs) and traditional multi-employer target benefit pension plans (MEPPs). This salutary recognition has resulted in different funding requirements and transfer value computations, in addition to the historic differences in the ability to reduce accrued benefits. MEBCO is disappointed that this consultation paper (CP) treats SEPPs and MEPPs identically.

A multi-jurisdictional SEPP typically has uniform provisions, a uniform history, and, of course, a single participating employer. That will often not be the case for a MEPP, particularly (but not exclusively) with respect to industrial MEPPs.

A MEPP has fixed contributions that are not within the control of the Trustees. Increased expenses, for regulatory purposes or otherwise, necessarily reduce the portion of those contributions available to provide participant benefits. Any increased expenses for regulatory purposes should therefore be subject to increased scrutiny before being imposed on MEPPs. Likewise, minimum benefit provisions usually come at the expense of adequate pensions for career participants.

MEBCO’s position is that intergenerational equity is an important consideration for Trustees, but is not an appropriate subject for regulatory consideration. To the extent that regulation of MEPPs imposes intergenerational inequity, MEBCO opposes such regulation.

MEBCO is opposed to permitting terminating MEPP participants to cash out the value of their accrued pensions, as that converts the negotiated target benefit pension into a defined contribution entitlement that was not negotiated.1

MEBCO has long recognized that benefit security cannot be improved by lowering benefits – the only available option with fixed contributions. Therefore, MEBCO has consistently opposed solvency funding and mandatory provisions for adverse deviation for MEPPs, which, under current economic circumstances, compel lower current benefits and intergenerational inequity without adding to benefit security.

Funding

As an example of differing funding requirements by jurisdiction, consider a real case involving a national MEPP registered in Ontario, a jurisdiction that has had a solvency funding moratorium for MEPPs that it intends to make permanent. A large Federal jurisdiction employer and its union petitioned to be accepted into the plan. The trustees rejected that application because of the risk that the plan might have its major authority transferred from Ontario to Federal,2 which would require benefit reductions nationally. The result was that these employees now have a single employer defined contribution plan, against their wishes and perhaps against their best retirement income interests. They also do not have portability with other similar employers in the same industry who are already in the plan.

MEBCO recommends that the CP be modified so that a change in the major authority of a MEPP can only take place if (a) the Trustees consent or (b) the MEPP no longer has members in the current major authority’s jurisdiction.

Further, MEBCO recommends that the CP be modified so that it is clear that the funding rules of the major jurisdiction for MEPPs are the sole applicable rules, even if there are members in a jurisdiction that has solvency funding, but solvency funding does not apply in the major authority’s jurisdiction. All assets in a MEPP are available for benefits for all participants from all employers. A requirement to identify assets as “belonging” to a particular jurisdiction’s participants (as would be required for solvency funding determinations for a minor authority) is completely inconsistent with the nature of a MEPP.

Asset Allocation

Again, consider a real situation. A national MEPP was comprised primarily of employers in Western Canada, but more recently admitted a number of large employers from another province. The long-time employers had fully funded accrued benefits; the new groups, of course, came in with no assets.

For a variety of reasons, some years later the Trustees decided to spin off the newer groups into a separate plan. The requirement to allocate assets in proportion to liabilities distorted the allocation in favour of the new groups, and resulted in substantial benefit reductions for the members of the long-time employers, even though, without the new groups, those benefits were fully funded. The simplistic rules that are preserved in the CP resulted in a significant inequity.

MEBCO proposes that MEPPs be permitted to define asset allocations for major and minor events as the Trustees deem appropriate. The rules of the CP can be a default if the Trustees have not exercised this prerogative. Reasonable regulatory approval could be required to prevent abuses.

Transfer Values

MEBCO proposes that the CP be expanded to provide that the availability and amount of transfer values be determined for all plan participants in accordance with the requirements of the major authority. The inequities and administrative complexities of multiple transfer value determinations, especially as these rules are now diverging among jurisdictions, operates against a principal objective of MEPPs – treating like situations alike and different situations differently.

Conclusion

MEBCO urges CAPSA to follow the lead of several jurisdictions by having separate multi-jurisdictional plan rules for MEPPs and SEPPs, consistent with the fundamental differences between such plans.

We would be pleased to have MEBCO and CAPSA representatives meet to discuss how best to implement our recommendations.

Yours truly,

Robert R. Blakely, QC
President


1 Small amount cashouts are an acceptable exception to this position.
2 One of the jurisdictions that continues to have solvency funding requirements for MEPPs.

May 11, 2017 TORONTO, CANADA – The Multi-Employer Benefit Plan Council of Canada (MEBCO) is very proud of being able to step up to take a major leadership role in the World Pension Alliance (WPA). The Alliance met for its annual meeting in Montréal, May 9th, 2017 which preceded the 9th Transatlantic Conference, also held in Montréal. Susan Bird was elected as the Chair of the Alliance for the coming term. Ms. Bird is a Board member of MEBCO, the President of the McAteer Group of Companies from Markham, Ontario and has very significant experience in the pension and benefits area. Bob Blakely, the President of MEBCO, said “I cannot think of a better person to lead the World Pension Alliance, Susan Bird is a consensus builder and an exceptional leader who understands that the global status of pensions is a determinant of the quality of life of so many people!”

Ms. Bird said “I think that our leadership role in the WPA is a result of the engagement that we have had on the global pension community. We are known for punching far above our weight. Personally I am humbled by the task and I will work hard at it.”

The availability of an adequate workplace pension gives Canadians (and other nation’s workers) dignity in retirement and is a major positive determinant for health. The encouragement of workplace pensions is a force for the common good.

The World Pension Alliance deals with pension plans that touch the lives of over 400 million people and its members have over $10 trillion dollars under asset management. European, Asian, Antipodean, North and South American pension system are represented in the WPA.

About MEBCO: The Multi-Employer Benefit Plan Council of Canada (MEBCO) is a not-for-profit organization established in 1992 to represent the interests of multi-employer plans at all government levels. MEBCO is the voice of Multi-Employer Plan interests in Canada. MEBCO is responsible for identifying issues that impact Multi-Employer Plans, developing and carrying out strategies to address those issues. MEBCO’s member-plans provide comprehensive health coverage to over 1 million Canadians.

For more information contact:
Bob Blakely, President MEBCO
90 Burnhamthorpe Road West, Ste 300
Mississauga, ON L5B 3C3
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Joining MEBCO

Five reasons why your MEBCO membership is critical
Your MEBCO membership guarantees that multi-employer plan interests will be considered whenever change is on the horizon. With your support, MEBCO will continue to be a strong and effective voice. Join today!
  1. The threat to multi-employer plans is real.
    The legislative framework is constantly changing, and cost-management and cost reduction are at the top of every agenda.
  2. Legislative changes can be significant.
    Recent proposed changes have threatened to offload costs onto plans, restrict plan coverage, and have compromised the viability of some plans
  3. Multi-employer plans are worth protecting.
    Multi-employer plans play a vital role in providing health services and retirement plans to over 1 million workers and their families in industries typified by small companies and a mobile work force.
  4. Multi-employer plans need a united lobby.
    Multi-employer plans carry a low profile due to the fact that the coverage is thinly spread over many employer groups and mobile workers.
  5. MEBCO is committed to protecting your interests.
    When governments propose changes, MEBCO is the single, clear voice at the table representing the unique interests of multi-employer plans.