As a resident of St. Paul’s, I need to hear from my MPP, Michael Bryant, (Ontario’s Minister of Economic Development and Ontario’s Cabinet Minister responsible for the GM bail out negotiations) on this matter:
Today we learn that the CAW is looking to the McGuinty government to bail out GM workers’ pension and have taxpayers assume those liabilities, playing the “sympathy card” as the policy rationale for doing so.
Meanwhile it was the McGuinty government and the CAW who were instrumental in unsympathetically destroying the pension savings of 2.5 million Canadians (40% of whom are Ontario residents/taxpayers), who had invested their pension savings in income trusts. As a result, these people lost $35 billion of their hard earned life savings as well as an essential means to generate retirement income.
Meanwhile the trust businesses themselves (40% of whom are headquartered in Ontario) were denied a competitive form of investment capital and were rendered vulnerable to foreign takeover (eg. Lakeport Brewing, Union Energy Waterheaters, ED Smith, Canada Cartage etc). Both the CAW and the McGuinty government premised their support of Flaherty’s income trust tax on the demonstrably false supposition that income trusts cause tax leakage. That is a total hoax, however the tax leakage from the foreign takeovers of these trusts, caused by this policy is very REAL tax leakage.
Now these two incompetents, the CAW and the McGuinty government, are planning on having these taxpayers who were aggrieved by their actions, bail out the CAW’s pensions? How completely unjust would that be?
Meanwhile the trust tax was already set up in a way that allowed McGuinty to exploit the average Ontario taxpayer, since McGuinty’s deal with Flaherty, involved a carve out for pension funds like Ontario’s OMERs and Teachers’ to own income trusts privately and not pay the 31.5% tax incurred by the average taxpayer in his/her RRSP. This carve out is a blatant and a completely underhanded “tax arbitrage” that has been exploited to full effect by the McGuinty government, in transactions by Teachers’ and OMERs. The most recent example being the $2 billion takeover of Teranet Income Fund by OMERs. This is an expropriation of investors’ wealth by the Ontario government, through a Federal tax policy that was only made possible with the explicit support of the McGuinty government, courtesy of Greg Sorbara, Ontario’s Finance Minister.
It would appear that Dalton McGuinty wants to create his own version of “faith based funding for schools” policy fiasco, in the area of pensions, by on the one hand destroying the pensions savings of the average Ontario taxpayer with his endorsement of Flaherty’s income trust tax, and on the other hand, using taxpayers savings and taxpayer dollars to pad the pensions of Ontario’s public service workers and the CAW? How utterly arbitrary and unfair would that be?
GM pensions: who's responsible?
From Friday's Globe and Mail
March 5, 2009 at 8:29 PM EST
When Brian Rutherford retired from his job as a logistics manager at General Motors of Canada Ltd. in 2006, he never imagined there was reason to worry about the security of his pension after more than 30 years at the company.
“Being fat, dumb and happy, I never really gave it much of a thought,” he says. “That was until last summer, when I saw the Canadian, U.S. and world economy going south.”
Since then, Mr. Rutherford and thousands of former and current GM Canada employees have watched with mounting fear as the company has warned of potential collapse.
Both General Motors Corp. [GM-N] and Chrysler LLC have appealed to governments in the United States and Canada for bailout funds to stay afloat. Thursday, GM said its auditors have raised doubts about whether the company can continue operations, and warned it may have to seek bankruptcy protection if it can't complete a restructuring plan.
The pension issue is a powder keg, and bound to become one of the thornier problems in the Canadian bailout talks. GM Canada says the fund will crush the company, warning there will soon be five retirees for every active worker. The 56,000 plan members say it's up to the Ontario government to help fund the shortfall, arguing legislation from the Bob Rae era hurt the plans.
And the province fears it is left with a painful choice: to prop up the company or save the pensions.
”The province has choices, but they are choices that are politically distasteful and painful,” notes Robert Brown, a professor of actuarial sciences at the University of Waterloo.
GM's pension plans – one for salaried employees, the other for hourly workers – were deeply underfunded as far back as the end of 2007, before the market collapse savaged their assets.
Pension experts estimate GM Canada's total pension shortfall may have ballooned to over $6-billion from $4.5-billion as of Nov. 30, 2007 (an updated valuation will not be available until this summer). That means the Canadian plans may have assets worth as little as 50 per cent of their obligations.
For salaried retirees, who recently formed a group aimed at winning a voice at the table, filing for bankruptcy protection had seemed a distant risk.
“We never thought we'd really get to this point for years – if ever – and all of a sudden we came into this situation where GM is restructuring,” says Lynn McCullough, who retired from GM Canada in 2008 after 44 years.
While GM says it must cut its “legacy” pension and benefits costs, the company's salaried retirees and the Canadian Auto Workers union, which represents hourly employees, both say the province should help fix the two pension plans, arguing its policies from the early 1990s helped make the pension dangerously underfunded.
CAW president Ken Lewenza said Thursday that the pension underfunding is a matter entirely between the province and GM.
“It's not a result of the workers or our collective agreement,” he said. “It's because of the government approval to give [GM Canada] some relief in the area of funding the pension plan.”
Provincial officials have so far made no commitments to take on GM's pension, but they will undoubtedly feel pressure to act. GM's liability could land squarely on Ontario's shoulders if the company were to collapse, because the province's Pension Benefits Guarantee Fund is required to backstop retirees' pensions.
Mr. Rutherford and Mr. McCullough, who say retirees have been astonished by the speed at which GM has eroded, have helped set up a new group this year to give salaried workers a voice in GM talks with government. They want to ensure part of any bailout money is allocated to help fund their pension, and are seeking a seat at the table as the company negotiates for assistance.
The Genmo Salaried Pension Organization has so far signed up almost 1,500 members out of 13,000 retirees and active workers covered by the plan.
Both Genmo and the CAW argue Ontario must help their pension plans because the province helped create their precarious funding position through a relief measure that was offered to several large employers in 1992 by the New Democratic government of the day.
“We were victims of this,” Mr. Rutherford says.
The program was designed to give a handful of the province's largest pension plan sponsors the right to fund their pensions to a less-onerous “going concern” level, which assumes the companies will continue to operate and only need to cover shorter-term service costs. Companies normally must fund their pension plans to a “solvency” level, which requires funding as if the companies are going to wind up and close their doors.
The program was nicknamed “Too Big To Fail,” referring to the fact only the biggest employers were eligible. Ironically, the other two main beneficiaries – Algoma Steel Inc. and Stelco Inc. – both later filed for bankruptcy protection and have since been sold.
The pension policy was cancelled in 2002 by the province's then-Conservative government as Algoma was going through a restructuring. GM was the only company “grandfathered” under the program.
Pension lawyer Murray Gold of Toronto law firm Koskie Minsky LLP, who is representing GM Canada retirees, says all the companies that opted to use the program ended up with underfunded pension plans.
“It was one of the worst pension policies that we've ever seen in this province,” he said. “The fact is, if you're going to make a pension promise, we all accept that you have to keep it. And if you're going to keep it, that means you have to set enough money aside so there is a pension to be paid at the end of the day.”
But Hugh O'Reilly, a former pension policy adviser in the Ontario government, defends the policy, arguing the province had little choice at the time. Mr. O'Reilly, who is now a pension lawyer in private practice in Toronto, helped draft the reform while working for former premier Bob Rae in the early 1990s.
Friday, March 6, 2009
Posted by Fillibluster at 9:12 AM