New Brunswick Prime Minister Blaine Higgs has made the poor financial condition of two CUPE pension plans serving school board employees a central issue in a public service unions strike despite the provincial running the pension plans initially brought place into financial difficulties after a labor arbitration proceeding.
In a June 28 ruling, veteran national labor arbitrator Elizabeth MacPherson found that the province has failed to fully fund the pension of CUPE Local 1253, which has represented approximately 1,900 school carers, maintenance workers and school bus drivers in New Brunswick for several years .
This helped it hit a deficit of $ 69.2 million as of January 1, 2018, its last full actuarial valuation.
In her ruling, MacPherson ordered the government to begin paying $ 5.5 million a year as part of a 15-year plan to remedy a deterioration in pension caused by years of underfunding.
“I am discovering that the employer has breached the collective agreement by not making the necessary contributions to the plan to fund the going concern deficit identified by the actuaries,” wrote MacPherson, former chairman of the Canada Industrial Relations Board, the first time Appointed in 2009 in 2007 by the former government of Stephen Harper.
“As a remedy for the violation, the employer is instructed to make regular contributions to the plan in accordance with the actuarial assessment 2018 in sufficient amounts to eliminate the going concern deficit within 15 years.”
MacPherson noted that the $ 5.5 million per year figure was a 2018 estimate that would be needed to correct the pension deficit and may need to be updated when an actuarial assessment of the deficit for 2021 is available.
She now has her own practice in Ontario and was jointly selected by the Province and CUPE to resolve the dispute that was brought up as a union complaint in 2018
Another complaint needs to be heard
A second, almost identical complaint from CUPE Local 2745, the union that represents school administrators, also alleges that the government falsely starved its retirement plan for millions of dollars in required contributions.
This complaint is to be dealt with next year.
Higgs has criticized the financial health of both pensions, which are two of only three defined benefit plans that remain among New Brunswick government employees. The third plan belongs to the judges of the provincial courts.
Defined benefit plans guarantee employees agreed amounts for retirement income and benefits. Although both employees and employers pay into a pension fund to cover these costs, any unexpected loss is borne by the employer alone.
Most New Brunswick government unions switched from defined benefit to targeted benefit plans in 2014, but the two CUPE locals had specific wording in their collective agreements that prevented the province from moving.
Workers are among the worst paid
The two plans serve employees who are among the lowest in the government.
According to the province’s most recent financial statements, members of the two unions make an average of just under $ 36,000 a year, while retired members of CUPE Local 2745 earn an average annual pension of $ 8,724. The average pensions of former CUPE Local 1253 members are $ 11,979.
“They are by no means a gold-plated retirement plan,” said Theresa McAllister, president of Local 2745.
The pension plans have been portrayed in government news as financial wreckage to pressure the two unions to abandon them for cheaper pension plans with benefits the province does not have to guarantee.
Government press releases describe the plans as unsustainable and financially “at risk”, and last week Higgs told lawmakers that winning changes to the two plans was a key government goal in the current labor dispute with several CUPE unions
“This is one of the standoffs in the CUPE discussion,” he said
Mostly government work
Both pension funds are in serious deficit positions, but according to MacPherson’s account of the CUPE 1253 pension, this is largely the government’s doing because it has failed to unilaterally make regular “bonus payments” to keep the plans fully funded, like it did is required to do.
MacPherson said bonuses are typical of defined benefit plans.
Iris Lloyd is president of Local 1253 and said the evidence gathered by the union and presented to MacPherson showed that when the plan ran into a deficit after the 2008 financial crash, the province’s regular bonus payments started but then suddenly stopped in 2013.
Higgs was Treasury Secretary at the time, and the end of the special payments started a downward spiral in the pension’s financial position from which it has not recovered.
The former Brian Gallant administration made a $ 10.1 million backdated payment in 2018 to try to prop up the plan, but it remains in a significant void.
“Premier Higgs decided in 2013 to stop making payments to our retirement plan, so we were able to demonstrate that he deliberately underfunded our retirement plan by that $ 69.2 million,” Lloyd said in an interview.
“You really need to talk to Premier Higgs about why these plans are in the shape they are in.”
In its decision, MacPherson said the province was wrong to withhold special payments from the plan that were necessary to stay financially healthy.
“Since this is a collectively agreed pension plan, the employer is not at liberty to simply ignore or change the provisions of the plan text or otherwise act unilaterally, as was possible with pension plans that apply to other tariff units that are exclusively controlled are employed by the employer, “wrote MacPherson.
“Any changes to this plan, including the parties’ respective obligations under the plan, must be negotiated between the employer and the union.”
Future of arbitration
The province has requested a judicial review of MacPherson’s decision.
When asked about MacPherson’s ruling on Monday, Higgs said it was unclear who was responsible for the poor financial condition of the two pensions.
“We can all have different views on whether or not it was properly funded, but I’m not an actuary,” said Higgs.
He also denied that his goal in amending retirement plans is to avoid the cost of MacPherson’s funding arrangement.
“Absolutely not.” he said