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Leaving pensions alone would be unfair to taxpayers

Opinion letter by Yves-Thomas Dorval, President & CEO, Quebec Employers Council
The Gazette, p. D07 - August 30, 2014

https://www.cpq.qc.caPrior to adopting a position on Bill 3, the Quebec Employers Council took the time to listen to all parties affected by the issue and to analyze the arguments put forth by both sides. In light of these arguments, the Council has decided it needs to support the government and municipalities, but especially the taxpayers, in the adoption, in general, of the proposed changes to the law.

The pension plan situation in municipalities is unsustainable in the current context. The overall cost of pension plans in the City of Montréal has more than quadrupled since 2002, going from $125.9 million to $549.6 million in 2014. In its 2014 budget, charges related to pension plans represented 12% of the City of Montréal’s expenses. Although the levels may vary, a similar situation exists in most of the major Québec municipalities.

While negotiations are always the best course of action, the extensive changes that are required, cannot be made without a redefining of the regulations and legislation. The objective guiding our thoughts on the issue is maintaining the existence of defined benefit pension plans while respecting current and future taxpayers’ ability to pay.

The current problems with these pension plans aren’t entirely due to market volatility or contribution holidays. We are definitely going through the longest continued stretch of low interest rates in modern history and a life expectancy that has grown considerably since these pension plans were implemented. But these factors weren’t part of the equation when these pension plans were negotiated.

Additionally, the argument that, in past pension plan negotiations, employees in many instances made salary concessions in order to have a better pension plan in the municipalities isn’t substantiated. In fact, based on data published by the Institut de la statistique du Québec, overall remuneration for municipal employees is higher than it is for public workers in the provincial, federal, public and private enterprise sector.

What about the proposed changes?

The 18% cap on contributions (20 % for police officers) seems reasonable to us to limit future cost increases and to be in line with all of the taxpayers whose contributions are capped at this rate. For the same reason, the objective of a 50/50 sharing of the deficits seems relevant. Incidentally, the Bill provides for a period of negotiations between the parties to find ways that are best suited to each plan to pay down past deficits with a minimum impact on the participants; other aspects might also be considered, such as the age of retirement, types of benefits or member contributions, without it being a wall-to-wall type of approach.

In the area of past deficits, Bill 3 does not plan to eliminate indexation but to ensure it would be done when plans allow for such.

This being said, the Quebec Employees Council isn’t comfortable with changing the terms and conditions of agreements that have already been signed. Clearly, collective agreements that are still in force should not be touched until they expire, unless the parties concerned mutually decide otherwise.

Meanwhile, it is hard to overlook the conditions under which these agreements were signed. Was there a fair balance of power when the cities had no recourse to the possibility of a lock-out and there was sometimes undue pressure, even intimidation, which removed any free reign for municipally elected officials? In some of the instances, did the arbitrators use the most effective criteria in settling the disputes?

In conclusion, we believe we need to support Bill 3, even though some slight changes should be made to the proposed legislation after the parliamentary hearings.

The Quebec Employers has consistently asked our elected officials to have the courage to make the required changes in this regard, and this is why we are supporting the government in its initiative.

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Leaving pensions alone would be unfair to taxpayers

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