Beyond The Commons

Aaron Wherry covers all the goings-on in and around Parliament Hill. Follow Aaron on Twitter: @aaronwherry

Categories: Beyond The Commons, Capital Read

Idea alert

by Aaron Wherry on Thursday, October 22, 2009 1:11pm - 59 Comments

Jack Layton talks pension reform.

NDP Leader Jack Layton is proposing a national pension insurance program to protect workers whose companies go bankrupt and leave retired employees in the lurch. The self-sustaining program would be funded by employer contributions and guarantee pensioners $2,500 per month in the event their plan is wound up.

Layton says other countries, including the United States and the Netherlands, have similar programs that adopt so-called orphaned pension plans. The NDP is also proposing an increase to the Guaranteed Income Supplement for low-income seniors – a measure that would cost the federal treasury about $700 million a year.

Tags: guaranteed income supplement, insurance, Jack Layton, NDP, pension, pension reform, pensions

More by Aaron Wherry

tobyornottoby

They do but, my understanding, from what is happening to my dad is they will only guarantee the first $1000 per month, and then reduce whatever the retiree is receiving over and above that. So if the pension is 70% funded at valuation and you were entitled to $1500 per month you get $1350. $150 per month is a big hit to a pensioner.
tobyornottoby

The other problem that needs fixing is when someone retires while a pension is fully funded, and years after planning his or her retirement on that promise, the company is sold and then resold and eventually goes bankrupt. The pensioner by this time has no relationship whatsoever to the company that is making the contribution decisions (or just not contributing is more like it) and should be protected in each transfer of assets and liabilities. Grandfather the grandfathers and put them ahead of all the creditors.
http://intensedebate.com/people/sea_n_mountains sea_n_mountains

i love that happy, secure workers are not considered 'productive'. oooh sweet tunnel vision.
kcm

Why couldn't Kady have stayed here and…nix that. I don't dislike the CBC[tv] that much.
knick

Not just to puff up the value of their executive options, but to hoodwink potential investors into thinking that a valuation of the company that includes pensions funds is a realistic one.
Mulletaur

And bankrupt the treasury. Great idea.

Why is the state supposed to get between a bargain freely entered into between workers and owners ? Instead of making stupid political statements on issues which have nothing to do with the welfare of those whom they pretend to represent and defend, union leaders should start learning some actuarial science. Or hire some actuaries.
Peter Jay

Less personal responsibility. More taxes. Another NDP idea.
Mulletaur

Sorry, tobyornottoby, I misread. You are talking about making preferred creditors rather than state rescue. My bad.
knick

The other thing to consider with a fixed contribution level plan is that there is no government involvement, no need for a 'pension insurance' program, and no need to collect additional taxes from employers to fund that insurance program.
http://intensedebate.com/people/OntarioTown OntarioTown

What in hell do polls have to do with a discussion on pension reform? Duh!

It was Kady, and sometimes Paul Wells, that dealt with polls.

Now….back to the real discussion of pension folks.
http://intensedebate.com/people/VinceClortho VinceClortho

No you are misinterpreting. The pension money being unproductive is about having to put money into something that really nothing to do with the business and its about paying for something "twice" because of the market fall.

You dont believe that a company is going to divert money from some other product focussed on expnsion or improvement or whatever else if it has to do some unplanned
"top up"
http://intensedebate.com/people/psiclone psiclone

I wonder what would happen if come this spring harper submits another bill with the buidget that protects pensions and Jack likes it – ROFL – poor Iggy!
http://intensedebate.com/people/SisyphusThis SisyphusThis

Bobby Rae. If you hold your nose and go back to read Shooting the Hippo, you'll see why.
http://intensedebate.com/people/SisyphusThis SisyphusThis

Bobby Rae. If you hold your nose and go back to read Shooting the Hippo, you'll see why.
http://intensedebate.com/people/SisyphusThis SisyphusThis

If employees are aware that they … and they alone …. are assuming all the risk, and are prepared to
put the time into the long learning curve required to manage the investment side … well ..

I have two brothers-in-law, both .. like me … now retired.
One was in a DC plan and moved to a self-managed investment fund. Lost 40% last year.
The other worked for an employer who matched contributions to an RRSP. Lost 50 %.
I'm in a fully-funded DB plan (long story ). I lost 0%.

Over time, a DC plan might well do better than a DB. But there is a much greater risk that it won't.
http://intensedebate.com/people/PhilCP PhilCP

I assume that opting out meant that they could take the present value and move it into a LIRA, as well as receive ongoing contributions that were managed by the employee (or some other person outside of Nortel).

What was the reason that those Nortel employees were given the choice of sticking with the existing pension or opting out?
http://intensedebate.com/people/sea_n_mountains sea_n_mountains

i don't think i am misinterpreting vince. i agree that the money could be better spent in a perfect world. i also know, as you do, we don't live in a perfect world. i also believe that a worker that has a stable, secure pension is likely less apt to be worried about said pension, and that has positive effects on that lead to increased productivity, than an employee who figures that the company may bugger his pension maliciously or via good ol' fashioned incompetence.

so, while I think Jack's is not near brilliant when it comes to ensuring that workers get their pensions, i do not see having to divert a relatively small % of a company's money to ensure its workers have a stable pension as unproductive.
http://intensedebate.com/people/SisyphusThis SisyphusThis

http://www.cbc.ca/news/canada/politicalbytes/2009…
http://intensedebate.com/people/VinceClortho VinceClortho

snm,

I see where we are at cross purposes now. I was referring to the big undfunded liabilities that happen when the market makes a big move down. This can be large amounts of dough to top up shrtfalls in defined benefit programs. I was definitiely not talking about companies paying into some kind of pension plan. My preference is that they pay into a defined contribution plan rather than defined benefit.

The unproductive piece I am referring to is the catch up companies have to do when the market leaves the returns on the plan short. Then we arent talking an extra 1 or 2 % of the wage bill but a few years profit or worse to make up the shortfalls……Even if Nortel was selling lots of eqipment its pension pan had a massive underfunding in it in the 100's of millsions. Ford has it in the Billions and it is one of the things that choked GM
http://intensedebate.com/people/sea_n_mountains sea_n_mountains

sorry vince, that was likely my fault for not reading carefully enough. yes, i certainly agree that those kinds of major market shifts are not going to be made up in anyway that does not hurt both the workers and the companies.

that said, i am still not sure i am on the same page as an only defined contribution plan, as opposed to a defined benefit plan, without some secondary mechanisms (e.g., avg actual benefits paid threshold maybe?).

thanks for the cordial clarification
knick

The plan I was in didn't require much of a learning curve at all. The various investment packages were managed by a large investment company, and there were several choices of packages ranging from low risk to high. One could switch from one plan to another with no penalty. The company explained each option in great detail, provided counselling to anyone still confused, and made current investment return information available. I would say that employees fully understood the implications of their investment choices. It gave them a much greater sense of control over their pension investment and helped them develop the kind of skills they would need after retirement to manage their investment funds. An accountant to whom I showed one of my year-end reports was amazed at the returns I was getting.
Didn't mean to go on and on about this, but it just seems to me that there are better options for employee pension plans than yet another layer of bureaucracy and taxes.
http://intensedebate.com/people/madeyoulook madeyoulook

The government has an RRSP program, CPP/QPP, OAS, age-related income tax deductions, the Canada Health Act supporting provincial medicare programs serving so many of the senior citizen's health needs, and probably a bunch of other preferential treatment of the retired. And that is just at the federal level.

Private pension goes bust, and of course Jack wants the government to bloat itself up with another program. Carry on, Jack. Don't ever change.

Question for a bona fide Dipper: Is there ANYTHING in society that should be left to the private sector? Anything at all?
Mulletaur

We don't follow orders from you.
http://intensedebate.com/people/SisyphusThis SisyphusThis

Not a bona fide Dipper but … there are any number of things the private sector does well.
The technology I'm using right now is one of them. And when they do it well they should be
respected and rewarded appropriately.
But when they abandon their contracted obligations to their employees all bets are off.
Who ya gonna call ??
http://intensedebate.com/people/SisyphusThis SisyphusThis

He doesn't seem to have a lot available on the web but he's been regarded as
the go-to pension wizard for the pro pension administrators …

http://network.nationalpost.com/np/blogs/fpcommen…