VIA Rail Canada Pensioners' Association
***VIA Rail Pensioners / Pension Plans***
A bit of History
Initially, when VIA Rail was formed in 1978, pensions continued to be administered by CN & CP, the respective parent railroads of the new VIA employees. On May 22, 1979, VIA Rail registered two pension Plans with the Department of Insurance of Canada, one as the "VIA Pension Plan for Employees in Non-Scheduled Positions" the other as the "VIA Pension Plan for Employees in Scheduled Positions".
These plans have since been revised twice to reflect the changes that came about as a result of 1989 and 1997 negotiated changes. Subsequent to the establishment of the Plans, VIA undertook negotiation for the transfer of monies (a long drawn out process) from CN and CP into the new VIA Plans. Even though the Plans are separate, they are invested as one - the return on investment would be identical.
In May 1978, Frank Roberts, VIA's first President, wrote a letter to employees transferred from CN and CP welcoming them to the VIA Rail Canada family and assuring them of a continuance of the benefits that they had been accustomed to. One paragraph of his letter (translated from a French language copy) reads as follows:
" At VIA, you will be entitled to advantages comparable to those of your former employer, these benefits include the pension Plans, termination of employment life insurance, Insurance in case of accidental death or the loss of a limb, health insurance, vacations, etc. We will keep in mind the years of service when time comes."
Although many pensioners have interpreted this as being a promise that these "advantages" will never be less, or different, than the current Plans of CN and CP, the paragraph does not say that. Since the formation of VIA, it's Plans, as well as CN's and CP's have evolved somewhat differently. VIA's Plans are preferable in many ways - witness the number of running trade positions that bid and make their last trip on VIA, to ensure their retirement under VIA's Plan.
In 1982, VIA Human Resources, felt that there was a need for a "VIA Rail Pensioners Association" (VRPA) and arranged for Gus Campbell, retired Ontario VP, to visit the Regions and promote the formation of local chapters. In December 1983, Letters Patent were filed, under the Canada Corporations Act, with Consumer and Corporate Affairs Canada creating the "VIA RAIL CANADA PENSIONERS' ASSOCIATION", a body corporate and politic in accordance with the provisions of the said Act. The initial chapters were at Halifax, Toronto, Winnipeg and Vancouver. VIA assisted by providing an initial start-up grant of $2.50 per pensioner, paid the legal expense of incorporating the Association, agreed to provide secretarial help and services, pay for mailing costs and stationary and where practical, provide meeting quarters. John Mercier of Winnipeg was the first National President and the initial Pensioners' representative to the VIA Rail Pension Board - representing both Plans. He was followed in 1992 by Al Cerilli as National President and Representative to the Pension Board for scheduled employees. Currently, Ken Sing fills these positions. At the Pension Board, the non-scheduled group has, since March 1992, been represented by Bryant Gunhouse.
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The Pension Plans
The first major Pension Plan change was the 1989 Cost Of Living Adjustment (COLA) that was a result of collective bargaining with the negotiating labour organizations. The adjustment was 50% of the Consumer Price Index (CPI) over 3% but not exceeding 6% and was retroactive to December 31, 1978 (for example, a pensioner who retired between Dec. 31st, 1978 and Mar. 31st, 1979 received 16.1%). The members of the Scheduled Plan received this adjustment in 1990, however, the Non-Scheduled Plan members had to wait till 1991, pending a corporate financial review. What this delay did create was a disparity between the two Plans in that the non-sched. Plan accrued some investment improvement during '90/91.
Prior to the next round of negotiations (1997), the VRPA submitted a list of preferences to the negotiating Unions - the foremost of which was an improvement in the COLA adjustment; a matter that we had been pressing at Pension Board meetings for a number of years. The CPI had been increasing for a number of years at a rate less than 3%, resulting a zero COLA for VIA retirees. Each year the disparity to the CPI compounded resulting in a substantial loss in pensioner's spending power. In that both Plans were in a strong surplus position as a result of a very positive investment climate, the COLA improvement was not a difficult decision to arrive at. The continuous lobbying of management and the labour groups by the VRPA certainly contributed to having this matter placed on the table for consideration.
At these negotiations, matters other than the COLA adjustment were agreed to that had considerable impact on the Pension Plans. Matters that have been referred to as "creative use of Pension Surplus." This was the first time that severance costs had been assessed against the Pension Plan; prior to this, this expense had come from Operating expense. In addition, special arrangements were made for those retiring on or after January 1,1998, that would have considerable impact on the Plans, particularly the scheduled Plan. These were:
Both Plans
- Increases in the "Final Average Earnings" percentage used to determine the monthly amount of pension.
- An improvement in spousal pensions to 65 %, without premium.
Scheduled Plan Only
- During the 1998 calendar year, a member, who is at least 50 years of age and whose allowable service totals at least 80 may apply for special early retirement with an unreduced pension under normal computation --plus
- An additional monthly pension until normal retirement of the difference between the pension computed and as if the member had 35 years of allowable service --plus
- A $300 per month "bonus" to the age of 65.
It was, and remains, the view of the VRPA is that the negotiated items noted above are unfair and unjust and do not recognize the Plan members as a whole. Every employee and pensioner is a member of the Plan and should be treated in an equal and like manner. To obtain the initial (1989) COLA adjustment, employees gave up 1% in salary increase to obtain a benefit that would, over time be of advantage to them. The 1998 changes were a "gift" to only a certain number of members of the Plan and with no additional investment required on their part. It is also our view that much of the surplus that existed in the Plan (at Jan.1/98) was generated by investment of monies that composed the Plans; a surplus that should be used to the benefit of all members, not just a specific few.A direct result of the negotiated agreement was to create a very substantial financial difference between the two Plans. The benefits noted under "Scheduled Plan Only" above, resulted in a very large deterioration in the surplus of that Plan. Between December 31,1996 and January 1, 1999 the solvency ratio of the Scheduled Plan went from 125% to 111%, whereas the Non-Scheduled Plan went from 149% to 150%. This is a very clear indication as to the impact that the additional benefits had on the Scheduled Plan.
Survivor benefits are another matter. Surviving eligible spouses of pre 1998 retirees are entitled to a 50% survivor benefit. After January 1, 1987, if the spouse signed a waiver form and a premium was paid, this could be increased to 60%. The result is that a pre 1998 surviving spouse benefit is a 50% pension, and an 1987-98 benefit, if the additional cost option was selected, is at 60%, while an after 1997 benefit is 65% at absolutely no additional cost or investment on the part of the employee. The VRPA position here is that the 65% spousal benefit should be extended to all members of the Plan, which would include existing surviving spouses; this should be retroactive to January 1998 and premiums being paid by members should immediately stop. A point of interest is that there are some members of the scheduled Plan that are receiving a bonus that is higher than the much needed pensions of some of our surviving spouse members.Since this agreement was signed, Pension Board representatives have been incessant in their pursuit of like improvement for all members of the Plans. The topic has been a subject for discussion at every Pension Board Meeting. It has been a subject of discussion, in writing and face-to-face with the responsible labour representatives - there should be no doubt in anyone's mind as to our position. Hopefully, the upcoming negotiations will see these anomalies corrected. Our position is that use of the funds and surpluses in the Plans should be for the benefit of members of the Plans equally; that changes and adjustments to the Plans should apply to all members of the Plans and a select few should not benefit at the expense of other members.
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What has been done
The VRPA view that injustice has been done to the pre-1998 pensioners has not been allowed to leave the table at either the scheduled or non-scheduled Pension Board meetings. Until just recently the attitude has been that an arrangement was agreed to during negotiation that pension Plan revision would not be considered for a period of six years. More recently, VIA's position has been stated that "...no changes will be made to the unionized and non-unionized pension Plans at least until the next actuarial valuation is completed." This valuation has come and gone...
Through the Pension Board meetings both Al and Bryant have exerted continuous pressure both orally and in writing to ensure the Pensioner's needs are foremost on everyone's mind (both Union and non-Union). Also, over the years, the VRPA, through its National President Al Cerilli, has undertaken numerous initiatives on behalf of its membership. In addition to letters to Federal MP's and Ministers, the VRPA has:
- Relative to Major Medical Insurance, the VRPA protested VIA's letter of November 14.1990 advising their phasing out of assistance with respect of health care premiums. After a lengthy correspondence exchange with VIA and the CB of RT & GW (the matter was taken to ex parte arbitration where it was ruled that the matter was not eligible for arbitration in that there was absolutely no reference to "Extended Health Care" premiums for retirees in any of the agreements), the VRPA engaged a senior Attorney in Winnipeg, for a legal opinion. His response in January 1993 was to the effect that:
- He did not feel that the matter was arbitrable however it could be an item for future bargaining negotiation.
- He did not believe that a lawsuit by the pensioners would result in a return to the pre-1991 plan.
- His suggestion that a claim, properly drafted could result in a court hearing on the actual merits of the case was acted upon, even though his view was that the chances of success were less than 50/50.
An application was made to the Court Challenges Program of Canada and, in July 1997, funding was received up to a maximum of $5,000 to develop arguments for case development. Our lawyers prepared a case development report for submission. We were advised by letter October 20. 1999, that, after study, the Equality Rights Panel did not feel that we had a strong enough case to support additional funding.
- Even before the 1998 changes, survivor benefits were an area that the VRPA recognised as needing improvement. We do not believe that anyone can argue that the current situation is not unfair and unjust. That a select few of the plan members may be allowed to place a demand on the Pension Fund without concern for all members is unreasonable; as is that some members are required to pay a premium to attain a 60% level of survivor benefit, while others have a 65% level at no additional cost. That a member may be given a monthly $300 bonus while surviving spouses strive to exist on 50% of an already lesser pension is unbelievable. It is interesting to note that the actuarial cost of extending the 65% survivor benefit to all retirees is estimated at $25M for unionized retirees and $7M for non-unionized - certainly affordable considering the size of the surpluses.
- As to the surpluses themselves, it is the opinion of the VRPA that all members of the Plans should have input through their representatives into the evolvement of the Plans and how the use of surplus monies is administered. Currently, the scheduled retirees have an avenue for input prior to negotiations by lobbying the unions - to the local, then through the steps to the negotiations planners - a rather cumbersome and certainly not a voice into final agreements; the non-scheduled members have absolutely no avenue for input whatsoever. As investors in the Plans and considering that the return on this investment contributed substantially to the positive financial state of the Plans, retirees should have a much greater degree of influence. This message has been related to VIA Rail as well as the negotiating Unions; it has been pointed out that of all parties involved, the non-scheduled Plan members lack completely any opportunity to express their views and ride on the coat-tails of their scheduled brothers. Although this was acknowledged to be a fact, the status has not changed.
Bill S-3, "Regulations Amending the Pension Benefits Standards Regulations, 1985", became effective June 14, 2001, and an Instruction Guide followed, dated September 2001 relative to the refund of surplus under the Act. These documents require some further study (they are available on the OSFI website). There is no doubt but that pressure by retiree organisations and labour stimulated the Government to pass this legislation. The misuse of pension fund surplus had become an issue of concern in both Canada and the US and was certainly in need of regulation. Our OSFI contact in the Private Pension Plans Division has been very helpful and keeps us advised as to material being posted.
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What Now??
It is our view, and that of the OSFI, that Pension Plan Governors and administrators owe a loyalty to the Plan and its beneficiaries over and above all other interests. We do not feel that this principle was adhered to in the 1997 negotiations.The VRPA, Nationally and locally, will be in contact with the negotiating unions to advance our interests -- to preclude future allocations such as those that accompanied the 1997 negotiations, to rectify the differences between pre and post 1998 retirees, to promote full or further improved indexation and endeavour to obtain assistance with respect to Extended Health Benefit premiums.
The Pension Board representatives will continue to ensure that the needs and interests of the VIA retirees are continuously on the Board agenda until they are resolved.
- To promote the need for retirees, as equal members of the Plans,
- To have representation and a voice when matters that directly or indirectly affect the Plans are being considered.
- To ensure that no Plan member is treated any differently than any other member of that Plan.
- To obtain a voice for Non-Scheduled Plan members at the time pension changes or trade-offs are being considered.
Irrespective of the foregoing, our Pension Plans are well invested and are very sound financially. There are a few quirks that require some straightening out and hopefully we can be successful in doing so.
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W. Bryant Gunhouse
May 2004