A defined benefit pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum (or combination thereof) on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns.
The bill would allow a type of "shared risk" pension plan(TP) with the target a specific benefit and defined contributions. But there could be reduction of accrued benefits if the plan ran into financial problems because of market conditions. The employees enrolled with the plan share the risk and could be subject to reduction of pension benefits rather than having a guaranteed pension as under the defined benefits plan. The former
Conservative Harper government proposed such a plan in April 2014. There was so much opposition from pensioners and retirees that the government withdrew the planned legislation.
Nevertheless, the Liberals Bill C-27 is the same type of plan and contains much of the original Harper plan. If the bill were to pass it
could have effects on all pensions not just those who work for the government:
" It will set the new standard for pension reform across the country, and it will accelerate the erosion of decent pensions in both the private and public sectors. Employers and the pension industry are paying close attention to Bill C-27 for this very reason. If the federal government signals that employers in one sector are no longer legally required to live up to their pension promise to workers and retirees, employers everywhere will demand the same treatment."
Bill C-27 would do away with the legal protection of the present DBP pension that guarantees pensioners accrued benefits to be replaced by a Target benefit (TB) pension. Under the TB plan accrued benefits can be retroactively reduced. The bill would remove all the legal protection of such benefits. Employers would be allowed to persuade active and retired members to surrender their earned DB benefits in exchange for the TB plan benefits. The legislation does not require that individual workers give up their DB plan but would encourage them to do so and employers would reap large benefits by persuading them to do so.
Employers can use various carrots and sticks to persuade employees to switch plans, including potential job losses, reduced benefits, restructuring processes or even bankruptcy as a means of avoiding obligations under a DBP pension. New Brunswick in 2012 introduced a TB plan. Plan conversions have resulted in class action lawsuits, constitutional challenges, and plummeting membership in defined-benefit plans. The appended video promotes the plan as a plus and a rational solution to pension deficits. No drawbacks are mentioned.
In conclusion:
The Target Benefit "Shared Risk" pension plan proposal contained in Bill C-27 is not the solution to create a secure and sustainable pension for retirees. Target benefit plans will have the effect of watering down existing DB plans. Governments and companies that currently offer DB plans will be encouraged to adopt TB plans that will cost employers less while offering workers less and taking all the risks.
The opposition to the bill has finally moved the Liberal government to "freeze" the bill pending consultations on it. A recent
tweet claims: "Because workers made their voices heard, government has agreed to freeze the anti-pension Bill #C27 and hold consultations. #cdnpoli #canlab " The Liberals are supposed to be progressive and far to the left of the reactionary former Harper Conservative government yet even in the face of strong opposition they are not withdrawing the bill as Harper did. They are holding consultations. There will need to be a concerted effort to ensure that the interests who will benefit from changes to the pension law do not drown out the opposition. Only clear evidence that passing the bill would be too costly in political terms will lead to its withdrawal. It will have nothing at all to do with keeping Liberal election promises.
