Multi-Employer Benefit Plan Council of Canada
SUBMISSION TO THE HOUSE
OF COMMONS STANDING
COMMITTEE ON FINANCE
2004 PRE-BUDGET
CONSULTATIONS
2004
You can reach us at:
135 Queen's Plate Drive, Suite
200, Toronto ON M9W 6V1
T 416 745 6466 | F 416 745 51
63 | mail@mebco.org
The Multi-Employer Benefit Plan Council of Canada (MEBCO) represents the interests of Canadian multi-employer pension and benefit plans (MEPs) and is representative of all persons and disciplines involved in MEPs, including union and employer trustees, third party administrators, non-profit or “in-house” plan administrators and professionals.
Among MEBCO’s many constituents are multi-employer pension plans (MEPPs), which provide pensions to their members. There are approximately 360 MEPPs in Canada, which have membership of almost 900,000 individuals. Employee contributions to MEPPs exceeded $2 billion.
In addition, MEBCO represents the interests of multi-employer benefit plans (MEBPs), of which there are approximately 400 in Canada.
Combined, these multi-employer plans cover well over 1 million workers and their families, in industries as diverse as construction, retail, trade, entertainment, food, transportation, garment manufacturing and textiles. The majority of Canadians who participate in MEPPs and MEBPs earn middle to low incomes.
Multi-employer plans in Canada are a unique labour and management response for meeting the needs of workers and their dependents.
This role should not only be recognized by government, but should be preserved and indeed encouraged with the continuation of tax incentives to both provide necessary health and dental care benefits which are not otherwise available under Canada’s public health care system and to promote retirement savings. Multi-employer plans are the predominant form of benefit arrangements in the unionized sector of the above-mentioned industries. Often, these employees are highly mobile, working for several employers in a year. If it were not for the multi-employer plans, such employees would be forced to switch plans as often as they do employment. Benefit coverage would be haphazard, if not non-existent. Accordingly, multiemployer plans fulfill a very important social objective of providing necessary health and related benefits, which are not otherwise available under Canada’s public health care system, as well as providing supplementary pension benefits.
Any assumption that the treatment of contributions to health care plans and pensions is inequitable or constitutes a tax “loophole” is erroneous. The tax system has a multitude of incentives for a multitude of purposes. The social objectives of preserving the well-being of Canadians and the financial independence of seniors have led to the placement of certain incentives in the tax system. Those who have chosen to avail themselves of these incentives should not be penalized for doing so.
The purposes of our submission are to both assist the government in meeting its fiscal and monetary objectives; and, to represent the interests of our members with respect to retirement, health and welfare, and taxation issues.
Preservation of “EET” Approach for Registered Plans
MEBCO opposes any taxation of investment earnings or contributions to registered pension plans and RRSPs. Canada’s approach should remain exempt, exempt, tax (“EET”) meaning no tax on contributions, no tax on investment earnings, and tax on receipt of the benefit or lump sum payout.
Provide Relief for the “Solvency Crisis” facing Multi-Employer Pension Plans
MEBCO is gravely concerned that the collapse of value in Canadian and worldwide financial equity markets, the decline in long-term returns on high-quality fixed-income investments and increasing longevity has imperiled the security of pension plans in general and multi-employer pension plans in general. Single employers can address the solvency deficiency by funding
supplemental contributions. Since (specified) multi-employer pension plans are limited to contributions set forth in Collective Bargaining Agreements (CBAs), the additional contribution solution is not readily available to MEPPs. MEBCO recommends a two-fold solution.
First, MEBCO suggests that MEPPS be permitted an “action plan” to address any solvency deficiency by providing for special payments over 15-years. Technically, this solution requires changes to the Pension Benefits Standards Act, and similar provincial Acts, but we believe the House can “strongly encourage” such a solution for federally regulated MEPPs, which should encourage similar action through the Canadian Association of Pension Supervisory Authorities (CAPSA) with the leadership of the Office of the Superintendent of Financial Institutions (OSFI).
Second, at the present time, Members of MEPPs receive a Pension Adjustment (“PA”) on all contributions made by an employer under CBAs. Employers are not permitted to remit contributions to a MEPP that are not in respect of a specific Member, and which result in a PA to individual Members. MEBCO recommends that the Income Tax Act regulations be modified to permit a CBA to negotiate special payments designed to liquidate a Solvency Deficiency, and that those special payments not generate a PA for any individual Member. In this way, MEBCO believes that there can be a solution, over time, to the current solvency crisis that does not involve reducing benefits to active and retired Members.
Goods and Services Tax (GST) Rebate for MEBPs
We are seeking improvements to the tax treatment of MEBPs to address the inequity between single-employer benefit plans (“SEBPs”) and MEBPs, which negatively impacts the value of MEBP benefits to employees. MEBPs incur GST costs in respect of various administrative expenses considered to be taxable supplies under the Excise Tax Act. Unlike single-employer benefit plans (“SEBPs”), there is no possibility of offsetting these GST costs by claiming Input Tax Credits (“ITCs”). Due to the current GST legislation and the inherent nature of multiemployer plans, neither a MEBP nor a contributing employer can claim ITCs. To the extent necessary, MEBCO urges the Department of Finance to implement legislation that will permit Revenue Canada the latitude necessary to provide such rebates.
No Taxation of Supplementary Health, Dental and Group Life Insurance Benefits
MEBCO continues to oppose any taxation of group supplementary health and dental benefits plans. Taxation would discourage participation in MEBPs, thereby placing an additional burden on the public health care system. Therefore, MEBCO supports maintaining the current tax exemptions for supplementary health and dental premiums and benefits, and re-introducing the re-1994 exemption on group term life insurance premiums.
Health Care
The Federal Government in cooperation with the provinces must continue the process of modernizing Medicare with meaningful reforms. The recent ten year agreement between the first ministers is a positive step towards health care reform, but falls far short, particularly in the area of drug cost containment. The release of two major parliamentary reports on the future of health care in Canada, by Senator Michael Kirby and Former Saskatchewan Premier Roy Romanow, should provide the catalyst for much needed reforms.
Canada needs a health care system that meets the needs of a modern society and can adapt to newer and more effective technologies. The pressures on our health care system must be addressed in this context and not solely in terms of dollars and cents. Further, the increasing costs associated with pharmaceuticals cannot be sustained. These rising costs are a burden on Canadians, Governments, and the benefit plans we provide for our members.
Introduction
(a) Who we are
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 (MEBPs) in relation to existing or proposed federal and provincial legislation and policies affecting MEPs. MEBCO is a federal non-share capital corporation operating on a not-for-profit basis. MEBCO’s Board of Directors consists of representatives from a diverse cross-section of the employment benefits field. MEBCO represents all persons and disciplines involved in MEBPs, including union and employer trustees, professional third party administrators, non-profit or “in-house” plan administrators, and professionals including actuaries, benefit consultants, lawyers and chartered accountants. All MEBCO Executives and Directors serve in a voluntary (i.e., unpaid) capacity.
MEBCO currently has over 190 members in jurisdictions across Canada. MEBCO’s members have responsibility for administering pension plans providing lifetime retirement income for over 1 million retired and future retired Canadians, and administering health and welfare plans providing supplemental hospital, drug, vision care, dental and / or similar benefits to a cumulative membership of workers and dependants of more than 2 million people throughout Canada. There are hundreds of MEBPs registered in Canada covering approximately workers, and the dependants of those workers, in industries such as building and construction, food service, retail, hotel and restaurant, graphic art, garment manufacturing, security, textile, transportation, and entertainment. A MEBP may be national, regional, provincial or local in coverage. Anywhere from two to over one thousand employers may contribute to a single MEBP pursuant to several collective agreements.
(b) Our Submission
MEBCO is pleased to once again participate in the pre-budget consultation process. Because MEBCO’s focus is on employee pensions and benefits, the initiatives we are recommending are aimed at improving the quality of life of working Canadians and thereby productivity. Specifically, our initiatives address three broad concerns many Canadian workers have had over the past few years:
(i) The adequacy of health and welfare benefits
(ii) The adequacy of retirement income sources, and
(iii) The quality of health care
We provide our specific input in the following sections.
I. RETIREMENT INCOME AND MULTI-EMPLOYER PENSION PL1ANS
1. Ensuring Adequate Retirement Income for Canadians
MEBCO RECOMMENDATION
MEBCO opposes any taxation of investment earnings or contributions to registered pension plans and RRSPs. Canada’s approach should remain exempt, exempt, tax (EET) meaning:
The expert voice of multi-employer benefit interests in Canada.
Join Today!