New Brunswick Premier Blaine Higgs has made the poor financial situation of two CUPE pension plans that serve school board workers a central issue in a strike by public sector unions, albeit the province that drove pension plans into financial difficulty in the first place, according to a labor arbitration case.
In a June 28 ruling, senior national labor arbitrator Elizabeth MacPherson found the province had failed to fully fund the pension of CUPE Local 1253, representing approximately 1,900 school guardians , maintenance workers and school bus drivers in New Brunswick, over several years.
This helped drag her into a deficit of $ 69.2 million as of Jan. 1, 2018, her last full actuarial valuation.
In his ruling, MacPherson ordered the government to start contributing $ 5.5 million per year as part of a 15-year plan to correct deterioration in pensions caused by years of underfunding.
“I find that by failing to make the necessary plan contributions to fund the going concern deficit identified by the actuaries, the employer has violated the collective agreement,” wrote MacPherson, the former chair of the Canada Industrial Relations Board, first appointed in 2007 by the former government of Stephen Harper.
âTo remedy the breach, the employer is required to begin making regular contributions to the plan in accordance with the 2018 actuarial valuation in amounts sufficient to eliminate the going concern deficit within 15 years. ”
MacPherson noted that the figure of $ 5.5 million per year was a 2018 estimate of what is needed to correct the pension deficit and may need to be updated when an actuarial valuation of the 2021 deficit becomes available.
She now works in private practice in Ontario and was jointly chosen by the province and CUPE to resolve the dispute, which was presented as a union grievance in 2018.
Another grievance to hear
A second almost identical grievance filed by CUPE Local 2745, the union representing school administrative staff, also alleges the government wrongly starved its pension plan by millions of dollars in required contributions.
This grievance should be heard next year.
Higgs criticized the financial condition of the two pension plans, which are two of the only three defined benefit plans that remain among New Brunswick government employees. The third regime belongs to the judges of the provincial courts.
Defined benefit plans guarantee employees agreed amounts of retirement income and benefits. Although the employees and the employer both contribute to a pension fund to pay for these costs, any unforeseen shortfall is the financial responsibility of the employer alone.
Most of the New Brunswick government unions switched from defined benefit pension plans to âtargeted benefitâ pension plans in 2014, but both CUPE locals had special language in their collective agreements that prevented the province to change them.
Workers are among the lowest paid
Both plans serve employees who are among the lowest paid in government.
According to the province’s latest financial statements, members of both unions earn on average just under $ 36,000 a year and retired members of CUPE Local 2745 earn average annual pensions of $ 8,724. The average pensions for former members of CUPE Local 1253 are $ 11,979.
“This is by no means a gold plated pension plan,” said Theresa McAllister, president of Local 2745.
The pensions have been portrayed as financial wrecks in government messages as part of an effort to pressure the two unions to ditch them for pensions that are cheaper with benefits than the province. does not have to guarantee.
In government press releases, the plans are described as unsustainable and in financial “jeopardy” and last week Higgs told the legislature that securing changes to both plans was a key government goal. in its current union struggle with several CUPE unions.
“This is one of the dead ends of the CUPE discussion,” he said
In large part the government is doing
Both pension funds are in serious deficit, but according to MacPherson’s account of what happened to the CUPE 1253 pension plan, it was largely the government’s fault for unilaterally failing to make “special payments.” Â»Regular to keep the plans fully funded, as necessary to do.
MacPherson said special payments are typical of defined benefit plans.
Iris Lloyd is president of Local 1253 and said evidence collected by the union and presented to MacPherson showed a deficit was emerging in the plan following the 2008 financial crash, regular special payments from the province had started , but suddenly stopped in 2013.
Higgs was finance minister at the time, and the end of the special payments triggered a downward spiral in her pension finances from which she has not recovered.
The former government of Brian Gallant made a retroactive payment of $ 10.1 million in 2018 to try to shore up the plan, but it remains in a significant hole.
“Premier Higgs decided in 2013 to stop making payments to our pension plan, so we were able to prove that he deliberately underfunded our $ 69.2 million pension plan,” Lloyd said. in an interview.
“You really need to talk to Premier Higgs about why these plans are in the form they are in.”
In his ruling, MacPherson said the province was wrong to withhold special payments from the plan that were needed to stay in good financial health.
âBecause this is a collectively negotiated pension plan, the employer is not free to ignore or simply change the provisions of the plan text or otherwise act unilaterally, as it has. could do this with pension plans applicable to other bargaining units that are solely controlled by the employer, âMacPherson wrote.
“Any modification to this plan, including the respective obligations of the parties under the plan, must be negotiated by the employer and the union.”
Future of arbitration
The province has filed for judicial review of MacPherson’s decision.
Asked Monday about MacPherson’s decision, Higgs said it is not clear who is to blame for the poor financial position of the two pensions.
âWe may all have our different views on whether it was funded properly or not, but I’m not an actuary,â Higgs said.
He also denied that his goal in modifying the pension plans was to evade the expenses of MacPherson’s funding order.
“Absolutely not.” he said