New Brunswick

N.B. government behind financial problems of CUPE pensions, ruling suggests

New Brunswick Premier Blaine Higgs has made the poor financial condition of two CUPE pension plans that serve school board workers a central issue in the strike by public-sector unions, even though the province drove the pension plans into financial trouble in the first place, according to a labour arbitration case.

Province ordered to fix $69.2 million funding shortfall

CUPE Local 1253 represents about 1,900 New Brunswick school custodians, maintenance workers and school bus drivers. Its pension plan has a $69.2 million deficit that an arbitrator blamed on the province and ordered it to fix. (Camille LaCroix/Radio-Canada)

New Brunswick Premier Blaine Higgs has made the poor financial condition of two CUPE pension plans that serve school board workers a central issue in a strike by public-sector unions, even though it was the province that drove the pension plans into financial trouble in the first place, according to a labour arbitration case.

In a decision issued June 28, experienced national labour arbitrator Elizabeth MacPherson found the province failed to meet its obligation to fully fund the pension of CUPE Local 1253, representing about 1,900 New Brunswick school custodians, maintenance workers and school bus drivers, over several years.  

That helped drive it into a $69.2 million deficit as of Jan. 1, 2018, its last full actuarial evaluation.

CUPE president Stephen Drost says members of locals 2745 and 1253 have made all of their required pension contributions and are not responsible for their poor financial condition. (Jacques Poitras/CBC News)

In her ruling, MacPherson ordered the government to begin paying $5.5 million per year as part of a 15-year plan to fix a deterioration in the pension that years of underfunding caused.

"I find that by failing to make the contributions to the Plan necessary to fund the going concern deficit identified by the Actuaries, the Employer has breached the collective agreement," wrote MacPherson, the former chair of the Canada Industrial Relations Board, first appointed in 2007 by the former government of Stephen Harper.  

"As remedy for the breach, the Employer is directed to commence making regular contributions to the Plan in accordance with the 2018 Actuarial Valuation in amounts sufficient to eliminate the going concern deficit within 15 years."  

MacPherson noted the figure of $5.5 million per year was an estimate from 2018 of what is required to fix the pension shortfall and may have to be updated when a 2021 actuarial valuation of the deficit is made available.

She is in private practice now in Ontario and was jointly picked by the province and CUPE to rule on the dispute, which came forward as a union grievance in 2018

Another grievance to be heard

A second nearly identical grievance filed by CUPE Local 2745, the union representing school administrative staff, also alleges government wrongly starved its pension plan of millions of dollars in required contributions.

That grievance is scheduled to be heard next year.

Higgs has been criticizing the financial condition of both pensions, which are two of only three defined benefit plans left among New Brunswick government employees. The third plan belongs to provincial court judges.

Defined benefit plans guarantee employees agreed-upon amounts of retirement income and benefits. Although employees and the employer both contribute to a pension fund to pay those costs, any unexpected shortfall is a financial responsibility of the employer alone.

Most New Brunswick government unions were moved from defined benefit to "targeted benefit" pension plans in 2014,  but the two CUPE locals had special wording in their collective agreements that blocked the province from switching them over.

Workers are among lowest paid 

The two plans serve employees who are among the lowest paid in government.  

According to the province's latest financial statements, members of the two unions make an average of just under $36,000 per year with retired members of CUPE Local 2745 earning average annual pensions of $8,724. Average pensions of former CUPE Local 1253 members are $11,979.

"They are no way a gold-plated pension plan," said Theresa McAllister, president of Local 2745.

The pension plans have been depicted as financial wrecks in government messaging as part of an effort to pressure the two unions to give them up for cheaper retirement plans with benefits the province does not have to guarantee.

Theresa McAllister (in pink sweater) is president of CUPE Local 2745, whose members, she says, earn under $36,000 on average, with retirees collecting average annual pensions under $9,000. (CBC)

In government news releases, the plans are described as being unsustainable and in financial "jeopardy" and last week Higgs told the legislature that winning changes to the two plans was a key government goal in its current labour fight with multiple CUPE unions

 "That is one of the stalemates in the CUPE discussion," he said

Largely government's doing

Both pension funds are in a serious deficit position, but according to MacPherson's account of what happened to the CUPE 1253 pension, this is largely government's doing for unilaterally failing to make regular "special payments" to keep the plans fully funded as it is required to do. 

MacPherson said special payments are typical in defined benefit plans.

Iris Lloyd is President of Local 1253 and said evidence gathered by the union and presented to MacPherson showed that as a deficit appeared in the plan following the financial crash of 2008, regular special payments from the province began but then suddenly stopped in 2013.  

Higgs was minister of finance at the time and the end of special payments triggered a downward spiral in the pension's financial position from which it has not recovered.    

New Brunswick Premier Blaine Higgs says a decision from a labour arbitrator that the province owes CUPE 1253's pension plan $69.2 million is not why he's pushing for the plan to be changed. (Government of New Brunswick)

The former government of Brian Gallant did make a $10.1 million retroactive payment in 2018 to try to shore up the plan but it remains in a significant hole.

"Premier Higgs back in 2013 decided to stop making payments into our pension plan and therefore we were able to prove that he purposely underfunded our pension plan by that $69.2 million," Lloyd said in an interview. 

"You really have to talk to Premier Higgs about why these plans are in the shape they are in." 

In her decision, MacPherson said the province was wrong to withhold special payments from the plan that were needed for it to remain financially healthy.

"Because this is a collectively bargained pension plan, the Employer is not free to simply ignore or amend the provisions of the Plan text or otherwise act unilaterally, as it has been able to do with pension plans applicable to other bargaining units that are solely controlled by the Employer," MacPherson wrote. 

"Any changes to this Plan, including the parties' respective obligations under the Plan, must be negotiated by the Employer and the Union."

Future of arbitration case

The province has filed for a judicial review of MacPherson's decision. 

Asked Monday about MacPherson's ruling, Higgs said it is unclear who is to blame for the two pensions' poor financial position.  

"We can all have our different views on whether it was funded properly or not, but I'm not an actuary," said Higgs.

He also denied his goal in changing the pension plans is to escape the expense of MacPherson's funding order. 

"Absolutely not." he said

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