The Voice of Multi-Employer Plan Interests in Canada

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March 8th, 2017
Honourable Minister Joe Ceci
President of Treasury Board, Minister of Finance
Office of the Minister
Treasury Board and Finance
323 Legislature Building
10800 ‐ 97 Avenue
Edmonton, AB T5K 2B6

Re: Target Benefit Legislation for Collectively Bargained Multi‐Employer Pension Plans (CBMEPPS)

Dear Honourable Minister Ceci,

The Employment Pension Plans Act (EPPA) requires that persons who terminate employment be offered a lump sum payment in lieu of a pension. As you know the current rules for calculating the lump sum payment create an imbalance between what the terminating person could be paid and the assets the applicable pension plan has in reserve for that person. The application of the EPPA rewards the terminating person for taking his/her pension away from the Alberta‐registered plan and financially punishesthe pension plan. Simply put the terminating person takes almost twice the reservesthe pension plan holds for that person’s benefit; the remaining members of the plan bear the burden of this cost. This puts the remaining members in the pension plan at risk of significant benefit reductions.

Your government and previous governments have been asked to correct this inequity. So far, no action has been taken, beyond our meeting with your officials who are alive to the issue but who are seemingly powerless to carry what is a minor and almost inconsequential ‘fix’.

This unresolved matter is now creating a crisisfor CBMEPPsregistered in Alberta and negatively impacting over 175,000 pension plan members. Based on the information we have it is possible that inaction on this matter will put most of Alberta’s 22 CBMEPPs in a cash crisis in the next year. This will be headline news as these plans will be forced to reduce benefits, including benefits to retired persons, in order to preserve cash.

Some CBMEPPs already report having to change their long‐term asset mix to allow for payment of lump sumsto terminating persons. Thisimpactsthe long‐term viability of these plans. Without adequate action these knock‐on effects will resonate for a long time to come.

We stress that the terminating persons have the right to keep their pension in the applicable plan. They should also be allowed to take a lump sum payment from the plan representing the appropriate value of their benefit. Unfortunately, a whole financial industry has been built around encouraging terminating persons to take the lump sum commuted value calculated under the EPPA because it is a windfall for the terminating person (and his/her financial advisor).

We are urging you in the strongest possible termsto take action now to correct the EPPA so that CBMEPPs can be preserved. Staff in your Ministry have advised us that the amendment to the EPPA is to only two lines. We are willing to work with your government quickly to resolve this crisis and preserve the 22 Alberta‐registered CBMEPPs.

Requesting your most urgent action,
Robert R. Blakely QC
President

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  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.