The Canadian Federation of Pensioners (CFP) recently submitted an eleven page critique to Ontario Finance Minister Duncan expressing their initial assessment of the government’s indicated ‘next phase’ of pension reform. The government’s proposals were announced via a Technical Backgrounder August 24^th, and while DIPAC participated in developing the CFP submission, we decided input directly from DIPAC was also warranted.

Following is the letter sent by DIPAC which tends to focus on those issues we consider to be especially important to our membership, as distinct from those important to the broader pensioner community which is represented by CFP. While a number of the proposed reforms are decidedly technical in nature, our overall concern is generally with the scope and adequacy of the proposed changes.

Government representatives are about to start the consultation process with interested stakeholders, on their Technical Backgrounder, seeking further input to enable refinement of their thinking. The eventual outcome will determine further changes to the Pension Benefits Act and associated regulations. It is expected this will involve several months of discussion.

As this process takes place you will, from time to time, be asked to contact your MPP and register your support for the changes that DIPAC will be advocating on your behalf. Your participation will be an important and critical part of this exercise.

The DIPAC letter:

Fax to: (416) 325-0374 - Two pages in total

September 24, 2010

The Honourable Dwight Duncan

Minister of Finance

Government of Ontario

7 Queen’s Park Crescent

Toronto ON M7A 1Y7

RE: DIPAC comments regarding the Technical Backgrounder (TB) on pension reform dated Aug 24, 2010

Dear Minister Duncan

DIPAC is an active member of the Canadian Federation of Pensioners (CFP) and we wish to express our strong support for the comments recently forwarded to you by the CFP regarding the TB. While the TB contains some positive proposals, the majority of the reforms are marginal and do not adequately fulfill the government’s declared promise to protect pensions for Ontarians. Very simply, they can only be characterized as “window dressing” type changes.

While the announcement stated that the reforms addressed two-thirds of the 142 recommendations contained in the OECP, it is the quality of these reforms in phase 2 that is most disappointing since they do little to address the current crisis in Ontario pensions. While the CFP has provided a response on all aspects of the TB, we would like to particularly emphasize several areas:

1) Funding

The TB described strengthening of funding rules applicable to DB plans, the changing of the interest rate used to value plan liabilities and the limiting of the use of “smoothing’ techniques are all positive and important; however, the solvency ratio threshold for annual actuarial valuations is 85%. This is entirely unacceptable as we feel that all plans should file annual valuations both on a going-concern and solvency bases. To continue with the triennial valuations for plans with a solvency ratio of greater than 85% is unconscionable. The economic conditions that prevailed in 2008 and 2009 revealed how quickly pension plans can transition from funded to significantly underfunded. In addition, any deficiency should be rectified in no more than five years.

2) FSCO

The TB was completely silent on the subject of much need reforms for FSCO. The OECP spoke volumes on repositioning FSCO or a successor. This is an organization that requires greater powers to protect pensioners but also the ability to exercise them in a judicial and effective manner. The current model is ineffective and unfortunately of little value in diligently monitoring pension plans. To avoid addressing this issue is a grave omission and borders on irresponsibility.

3) PBGF

While we applaud your efforts to financially strengthen the PBGF, the current payoff benefit of $ 1000 is unacceptable. We recognize that the OECD recommendation of $2500 cannot be immediately achieved; however, it can be achieved by gradual transition over several years. The lack of any discussion of this issue in the TB is a critical omission.

4) Financial Sponsorship Model (FSM)

We are most disappointed with your recent announcement rejecting the private sector financial management model proposed by Nortel. To do so, would have demonstrated bold and innovative leadership. The Nortel experience is destined to be revisited many times in Ontario in the coming years. We would strongly urge you to reconsider your decision.

In its various submissions, DIPAC has emphasized that strong funding rules are essential if the Province’s private DB plans are to be kept from falling to an under-funded state. And if they do, it is essential that the situation be remedied within a reasonable time frame. Absent effective and enforced funding rules, more plan failures can be expected in the future thereby placing greater burden on government programs.

In conclusion, DIPAC and the CFP will be meeting with your staff on October 6 to reinforce our concerns which we believe are well founded. We would like to see legislation that you are currently drafting include our issues. We do not think that waiting until the regulations are drafted next year will enable our concerns to be effectively dealt with by your Government.

We would appreciate a confirmation from you that this request will be followed up and acted upon.

Yours very truly,

Chair - DIPAC

CC. S.Orsini – via email

A. Mazer - via email