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Teamsters Canada's Submission in Response to Finance Canada's Regulatory Framework for Federally Regulated Defined Benefit Pension Plans consultation:

September 2005

Teamsters Canada is a labour organization with more than 125,000 members. Teamsters Canada represents workers in many sectors including all areas of transport (air, rail, road and ports), retail, motion picture, brewery & soft drink, construction, dairy, and warehousing. Teamsters Canada is affiliated with the International Brotherhood of Teamsters, which has 1,500,000 members across North America.

The private pension plan system in Canada, the U.S. and other G-8 countries is, we submit, entering a period of financial crisis caused by years of inappropriate practices by those responsible for the well-being of such plans. The financial deficit of the system is in the billions of dollars and may well be in the trillions of dollars. Those responsible include Government and Government regulators, Plan sponsors and professional involved with the operation of the plans, including actuaries, investment managers, accountants, lawyers and others.

If actions are not taken promptly, the financial problems within the private pension plan system could have severe and undesirable consequences to Plan members, Plan sponsors and Governments.

Recent experiences with major employers, such as Air Canada and Stelco are small examples of the problems to be faced by the private pension plan system.

Pensions are unpaid wages, put aside to provide for and assure the payment of pensions for workers during their well earned retirement.� They are not an asset of the employer.

Pensions and their funds are trusts.� Speculative investments, including the employers own stock, can lead to surpluses in "good times" - producing contribution holidays.� It can also lead to deficits in "bad times" - employee and retiree benefits are then subject to reduction.�

In order to avoid their financial and moral obligations, many employers are changing their pension plan programmes. No matter the reason, the move from defined benefit plans to defined contribution plans places the risk on employees.� The risk an employer faces in providing a defined benefit plan is in part of its own making.� The risk that employees face with defined contribution plans is in part of the Government's making.� Ensuring the income of retirees is not a concern of an employer; it is a social concern and should be of great importance to Government.

New principles must be enshrined in law to safeguard current and future retirees.� The Government needs to act!

Teamsters Canada does not have all the answers.� But, we wish to contribute to the debate by putting forward some principles or ideas that we believe would act to safeguard pensions of current and future employees, and also contribute to the survivorship of employers.

1. Currently, there is nothing requiring all pension plans to conduct proper asset / liability modelling studies based on factual historical information.� The past few years have shown the problems and results that occur when these are not done.� Investment policies must we be consistent with these studies.� Results of these studies should be included in actuarial reports. Regulate proper asset/liability modeling, investment requirements and their inclusion in actuarial reports.�

2. The only reason for a pension plan to exist is to deliver promised pensions to current and future retiree members of the plan.� Funding requirements are a start; establishing the principle of delivery of pensions with a very high degree of certainty would be even better.� Investment policies should be focussed on this as a primary objective.

3. To achieve this end we must revisit the broad concept of appropriate investment policies and allowable investments for pension plans.� Pension plans should have similar investment policies and allowable investments as an insurance company selling life annuities.� It may limit investments and reduce investment returns; however, the certainties of delivery of the pensions that are promised are of paramount importance.� The lack of investment limits on pension plans has played a major part in the current "crisis".� Expectations are only that, expectations do not result in assurance of future pension payout. The Government's policy goal should be to put in place laws and regulations that ensure no promise to current and future retirees is broken.

4. The 50% cost rule was well meaning and while it may have had appropriate application to corporate plans, it is not valid for negotiated cost Trusteed pension plans.� In the past few years, more and more plans began to have employee contributions to overcome the resistance of employers to increase contributions.� It is not appropriate for negotiated cost, Trusteed pension plans.� This structure damages the long run benefits of retirees, and leads us to the conclusion there should be a review of the ITA as well as pension benefit legislation.

5. All Employee pension plans should be governed by a Board of Trustees of which at least one-half are elected by the Employees.� �

6. Regulators should revisit the application of solvency rules to negotiated cost, Trusteed pension plans.� All of the regulations, all of the oversight, all of the red-tape, it has not protected workers.� You have failed.� Why?� Many of the rules were the wrong rules.�� This is especially true for negotiated cost pension funds.� Many features of the laws and regulations ignore the reality of the role of unions in pension plans.� The ITA and Pension Benefit legislation should properly reflect the unique nature of negotiated cost Trusteed plans that cover very large numbers of union members.