After being caught off guard by new legislation governing one of the NWT’s largest public sector pension funds, unions are scrambling to protect benefits they feel may be reduced.
The Northern Employee Benefits Services plan, which covers City workers and YK1 teachers, among others, has been in legal limbo since 2002 when since the federal office overseeing pensions dropped the plan. The feds argued the fund was set up by the GNWT, so it should be governed by GNWT legislation.
This new legislation, Bill 12, is expected to receive third reading in the legislative session that starts October 16.
“The best pension minds in the country have been building it,” says Shawn Maley, CEO of NEBS. “It speaks to the rights of the pensioners and how the plan will operate and provides state of the art legal certainty.”
It’s been in the works for almost a decade and a public document since March. But the Public Service Alliance of Canada North, whose members make up a large chunk of NEBS beneficiaries, only heard about the legislation two weeks ago.
For PSAC the main worry is that Bill 12 will allow NEBS to claw back benefits earned by employees using the plan.
Their fear is rooted in section 15.1 of the bill that reads, “the pension committee may at any time and from time to time amend the NEBS plan to … reduce ancillary pension benefits accrued before the effective date of the amendment … (or) reduce core pension benefits that have not yet accrued at the date of the amendment.”
Core benefits are guaranteed money for time-in; ancillary benefits are things like indexing – extra money pensioners receive to offset inflation – or benefits gained for foregoing early retirement.
Maley said this section simply gives fund managers the ability to make minor tweaks in the event of a financial emergency.
“You cannot have legislation that doesn’t allow a committee to have good financial stewardship,” he said.
Besides, he added, inflation indexing is the only benefit the pension committee has called ancillary – things like early retirement will be considered core benefits and so can’t be reduced retrospectively.
Furthermore all core and ancillary benefits accrued before the legislation comes into effect, likely in January 2015, are untouchable, he said.
Lawyer Simon Archer, council for PSAC, is not convinced by Maley’s reassurances.
“To be able to cut benefits retroactively breaks a fundamental of contract law: you invest in a right, it can’t be taken away,” he said.
“And maybe they’ll keep their word forever, but there’s nothing in the act that guarantees they won’t change the definition of ancillary benefits.”
He said he’s seen a number of lawsuits launched against governments across the country that opened ancillary benefits to rollback – most notably an ongoing lawsuit in New Brunswick involving 13,000 pensioners.
Another issue is whether the bill affects employees’ ability to collectively bargain.
The bill outlines a 50/50 contribution rate for employees and employers; should the fund run low, employees and employers will be asked to increase their contributions by an equal amount.
With this 50/50 split explicit, it’s difficult for workers to bargain with their employers, said Archer.
Most of all, he’s concerned by the lack of employee representation on the pension committee, made up of NEBS board members elected from amongst employers.
“For plans where there are target benefits (which can change depending on the pension fund’s financial performance) there has to be a joint board of employers and employees to make these decisions,” he said.
Jack Bourassa, regional executive vice-president of PSAC, says the union is planning a protest on October 17, the day after the legislature opens. They’re also starting a letter writing campaign to MLAs.
“I can appreciate that clause 15 is an issue,” said MLA Wendy Bisaro, who’s on the standing committee on government operations currently reviewing the bill. “Anytime you touch somebody’s money, they get a little touchy.”
“Any monetarily funded structure or plan needs to have the opportunity to make changes in order to keep the plan solvent. It’s going back on benefits that may be an issue.”
There are several hoops the bill still has to jump through– so there’s no guarantee it will look the same when becomes law.