As a newly incorporated body of salaried retirees from General Motors of Canada Limited, we thank you for the opportunity to provide comment on those Recommendations compiled by the Ontario Expert Commission of Pensions.
While the Expert Commission was in the final stages, General Motors of Canada Salaried Retirees were gradually learning that their "life long" pensions were not as secure as they were once thought to be. Thoughts of disbelief and denial were common. "GM is too big…", Ours are guaranteed for life…".
Salaried retirees had previously received notification that certain benefits would be reduced ore eliminated but in August of 2008, news media high lighted real concerns with under funding of salaried pensions of Canada’s largest auto manufacturer.
It was therefore both timely and appropriate that the Ontario Government had established the Ontario Expert Commission of Pensions. Since the Review was completed in October, 2008, it has become evident that the global financial challenges have had a significant impact on a struggling auto industry in both the U.S. and in Canada.
Despite repeated assurances from GMCL spokespersons, that company funding of salaried retiree pensions met the requirements, it was revealed that GMCL was one of a few companies in Ontario that were exempt from maintaining 100% funding, based on an arrangement with the Ontario Government in 1992.
Today it is widely known that with the financial retreat in the equity marketplace, pension investments have been hard hit, and based on a solvency valuation, the pensions of Salaried retirees of GMCL are approximating 50% of their expected value.
Never before has there been a greater need to safeguard the security of pension benefits. Today, as the auto industry awaits government response to its request for a “bailout”, the newly incorporated GENMO Salaried Retiree Organization, takes the opportunity to comment objectively as possible, on a few of the Expert Commission recommendations as they pertain to our current predicament.
It is also interesting that the Pension Reform Review in Alberta and British Columbia is very much in synch with the Ontario Expert Commission recommendations on pension plan governance and fiduciary responsibility.
Our organization is in full agreement that the pension system in Ontario must be reviewed on a regular basis to ensure its relevancy with respect to the many changes in the last 20 years to the workforce (temps and part time), worker mobility, unionization, and a restructuring of Ontario’s economy.
Similarly GENMO endorses the appointment of a Pension Champion to proactively facilitate the analysis of pension strategies and policies as well as new regulatory initiatives with reviews every (8) eight years.
Funding or lack of, has had the greatest impact on GMCL salaried retirees. Employees and workers tend to view pension plan assets as part of their total compensation package that they have earned. This has resulted in the employee loyalty to the employer and to the workplace. A secure retirement is a fair and essential reward for years of labour.
Based on the above assumptions by the worker/retiree, unexpected failings of a pension, allows little opportunity for alternate employment or savings plans at a later age. The pension plan provides the retirees and their families with purchasing power and reduces the need for government income support programs.
While our organization agrees that making actuarial estimates is difficult, the need for a Regulatory body to provide benefit security in pension plans for the long term, is a priority. This Regulatory body must stipulate that fiduciaries must make those investment decisions in the best financial interests of plan members.
It has been reported that 69% of the salaried retiree pension fund of GMCL was invested in equities, while pension fund investments on behalf of U.S. retirees were revised in 2007, under a more conservative strategy, resulting in equities reduced below 29% of the fund.
According to “Pyramis Global Advisors 2008 Canadian Defined Benefit Survey, at the end of 2007, the average Canadian Defined Benefit Plan had allocated 54% to equities.” The Regulatory body must stringently monitor both the employer business success and the risk level of the pension investments.
Our Organization endorses pension plan funding on the basis of both solvency and going concern valuations providing the parameters are realistic for the economies of the day. There should be a requirement on the part of the employer to maintain a sufficient cushion to protect against unfavourable events and to disclose to the regulator and plan members, the ramifications of such events. Unfortunately, allowing the employer (sponsor) to take a “contribution holiday” based on being “too big to fail” has resulted in the perilous financial predicament our population finds itself in today. Employer commitments to pay future pension and health benefits to retirees must be guaranteed through pre funding and by law.
We fully support the introduction of the Pension Tribunal of Ontario or an Ontario Provincial Regulator, who is empowered to enforce non compliance of a revised Pension Benefit Act.
The Pension Benefit Guarantee Fund must continue to exist in one form or another. As stated previously, the retiree’s pension plan affects consumer purchasing and the cureent monthly guaranteed benefit must be increased from $1000 to $2500, with postential for indexing to the economy.
Again, regulation with respect to identifying and managing risk, and assess levies and to collect and invest them, must be an integral component of the PBGF.
Finally, we agree with the Expert Commission and the need for “pension plans to improve the process, quality and transparency of their own decision making and to facilitate greater participation in plan governance by active and retired plan members”. Plan members should receive a copy of the plan’s funding policy and financial status at regular intervals, or following an amendment.
Retirees and their pension and benefits should be given proper respect and no longer be referred to as “Legacy costs”.
GENMO Salaried Pension Retiree Organization greatly appreciates the many months of stake holder energy and expertise that has been part of the “Expert Commission” recommendations. We are hopeful for your understanding of the challenges that workers and retirees and their families, experience when their right to retire with dignity and security is suddenly and unexpectedly retracted.
We also look to and encourage the government to provide for speedy implementation of the “Expert Commission” recommendations.