Mr. Pierre Blouin
CEO - MTS Allstream Inc.
We are writing to you in the form of this joint communiqué, as each of our respective organizations feel very strongly that your current efforts in collective bargaining to convert the existing defined benefit pension plan to a defined contribution pension plan is misguided.
The incentives for the Company are obvious as a DC plan transfers the risk from MTS Allstream to the individual employee. This may lead to short term savings for the Company, however, the longer term impact upon MTS Allstream may be significant in terms of the difficulty with recruitment and retention – issues that are becoming more and more relevant as the baby-boomers continue to retire. The transfer from a DB to a DC plan is relatively uncommon with employers who have over 1,000 employees, and is much more common among companies with approximately 100 or so employees. The larger more sophisticated companies are reading the “writing on the wall”, when it comes to recruitment and retention, and understand that it is becoming a job-seekers market.
Also, larger more sophisticated companies are reading not only the writing on the wall, but the writings in business and law journals, as well as the pension publications and mainstream press that suggest that Canadian companies (like those in the US) are going to be increasingly subject to lawsuits by those who feel that they have been wronged by their employer as a result of a changeover from DB to DC.
Financial adviser Karen Hall of T. E. Financial Consultants Ltd. of Calgary noted in Canadian Business Magazine in a July 9, 2007 article on Pension Plans by Jeff Sanford that:
There are a lot of upset and resigned people, says Hall. They say, ‘they forced us into this and now I have to work longer to retire.’ There's definitely resentment out there.
From a Union perspective we have great difficulty with the transfer of risk from MTS Allstream to the individual employee. Reports, articles and studies from traditional free market entities have clearly indicated that DC’s are generally underpaid by the employer while employees are unable to effectively manage their investment portfolio, resulting in considerable losses to the individual. Many entities, such as the Actuarial Institute, suggest that more and more people will be retiring into poverty, and that this will impact our economy. Jonathan Chevreau, in a June 15, 2007 National Post article wrote:
Impartial source latest to warn on retirement saving; Actuarial institute says only 1 in 3 save enough to meet basic expenses.
With regard to employer pensions, the study found the traditional defined benefit pension has more potential to fill the retirement gap than the newer defined contribution plans that are replacing them.
We also take exception to the fact that this DC plan is being introduced upon the backs of new hires. Introducing a two-tier system is unfair and has an impact upon morale among those newly hired. Essentially MTS Allstream seeks to download the costs and the risks to the next generation – our children. In a letter to you earlier this year, the University of Manitoba Faculty Association wrote:
We believe that a fair and equitable pension plan is an important aspect of an employer’s ability to attract and retain employees.
This was echoed by the Canadian Federation of Students – Manitoba:
Young people, like all workers, deserve an adequate and well-managed pension – especially at a time when student debt continues to rise and average public savings plummet. In turn, employees are likely to show more loyalty and dedication to their employer if benefits are fair.
Also, the introduction of a DC plan will negatively impact current members. Those still under the DB plan (non-retired) who have their accrued past service could be at risk as the formula for the retirement pension depends on the members’ earnings in the five years prior to retirement. If the plan winds down at some future date as a result of the complete conversion to a DC, then those currently within the DB plan could have the “best 5 years” benefit placed in jeopardy.
As well, the Unions oppose the conversion as this will in essence cut off new money to the DB plan, limiting the plan’s ability to fund enhancements, impacting current and future MTS Allstream retirees of all levels. The bottom line is that by introducing a DC for new hires, you are ultimately opening the door for the complete removal of the DB plan, which so many of our members value dearly, and will thus not accept the introduction of a DC whether for new hires or as an optional conversion for those currently within the system.
For the various reasons cited above, we stand united in our opposition to the conversion of our pension plan for retired, current or future members.
Misty Hughes-Newman, President TEAM, IFPTE Local 161
Diane Shaver, President, CEP, Local 7
John Jacobs, Business Manager, IBEW Local 435
Darlene Dziewit, President, Manitoba Federation of Labour
Larry Pelzer, President, Winnipeg Labour Council
Ken Georgetti, President, Canadian Labour Congress