Monday 10 October 2016

Saskatoon Transit: Pension Palaver

Three weeks ago, Amalgamated Transit Workers Local 615 - which represents transit workers for the city of Saskatoon - served the City with the statutory 48 hours' notice of strike action, as required by The Saskatchewan Employment Act. It seems only right that, since this blog started with the Saskatoon Transit Lockout of '14, it continue with the Saskatoon Transit Strike of '16.

...Except there's no strike, yet. While the ATU is now in legal strike position, it appears that bargaining between the Union and the city is reconvening on October 11th, (tomorrow!) and that there will be no job action taken until then. If bargaining doesn't go well, it's possible that the ATU will take job action other than complete withdrawal of services, such as transit employees refusing to wear their uniforms (as they did back in March), a ban on working overtime, rotating strikes, and so on - though a full-on withdrawal of services would be legal, and a possibility.

Bus Riders of Saskatoon, a local group that "advocates for better public transit in our city,"  hopes that the parties can come to an agreement.  I recently opined that this disagreement between the City and ATU may be difficult to resolve without a strike or lockout, but (as a citizen, taxpayer, transit user, labour law wonk, union member, and all-around nice guy) I hope that the City and the Union can come to an agreement and prove me wrong.

...within reason.

The main barrier to reaching an agreement, according to both sides, is the proposed changes to the City's pension plan (which I'll refer to as "the Plan"). There are, of course, any number of issues that must be dealt with in collective bargaining; but both sides seem pretty clear that the pension changes are what's stopping them from reaching a deal.

[Caveat: Before I go any further, I'll note that all of what follows is based on public statements and documents from the City and from the ATU. I haven't spoken to anyone from either side, nor do I have any particular knowledge of what's going on behind closed doors or at the bargaining table.]

For what it's worth, the City's final offer regarding wages - 10% total over four years - seems to be in the ballpark for public sector unions in Saskatchewan. In their most recent round of bargaining, Saskatoon employees represented by CUPE Local 59 accepted the same offer - 10% over four years;  Saskatoon firefighters bargained, in total, a 20% increase over six years; Saskatoon police bargained wage increases of 11% over three years; and Regina Transit negotiated a wage increase of 6% over three years with its workers.


There's been some argument over whether the change amounts to turning the plan from "defined benefit" plan into a "defined target" plan, but I'm not sure that labels or definitions really matter in this scenario. ("A rose by any other name..." and all that.) If you're interested, here's a quick set of definitions of each type of pension plan, from the Globe & Mail back in 2014, when the federal government was seeking to shift some public employees' pensions from a defined benefit plan to a defined target plan.

But the problem here - labels notwithstanding - is, simply, that the City and the ATU don't accept each others' numbers. They don't agree on whether the Plan has to change and, in particular, on whether a "contribution cap" is the kind of change needed.

The City's position is that the City of Saskatoon General Superannuation Plan - i.e. the pension plan for all City employees who aren't covered by the police or firefighters' pension plan - needs to be changed to protect the Plan's long-term health. Changes include an increase to the percentage of an employee's earnings that are contributed to the plan, an increase to the retirement age, and a cap on the City's "administration fees" (i.e. those fees relating directly to the City's costs of administering the plan).  Every other municipal union involved in the plan has signed on to the changes, except ATU, and the City isn't willing to carve out an exception for transit workers.

The Union's position is that the pension plan is in good shape, that the City has provided incorrect or misleading information regarding the health of the plan (and, by implication, that the other municipal unions have accepted a bad deal) to justify changes that aren't required, and that there are other ways to deal with the Plan.

ATU says it has an actuarial report that backs up its position. The City, meanwhile, responds that the Union's report is operating with the benefit of hindsight - that the Plan is in good shape now because of the changes agreed to by the other unions.

[Another caveat: I am not an actuary, nor an expert on pension law, and so I am in no position to judge on whether the City or the Union - or both, or neither - is correct on whether the pension changes are necessary for the long-term health of the pension plan.]  

Right, so. The main issue here, as far as ATU is concerned, is that the new language puts a "cap" on contributions to the plan. That means that, bluntly, if the Plan performs badly in the future, pension benefits might be reduced. Other changes (such as the increase in retirement age) seem to be less controversial - or, at least, has not been the focus of ATU's criticisms.

The language that the ATU apparently takes issue with is found at p. 14 of the City's final offer. (The actuarial report commissioned by the Union, which questions the City's financial statements, is available online, here.  The actual changes to the pension plan that the City seeks are found in the City's final offer to the Union, on pp. 12-15. And the pension plan itself, including many of the changes agreed to by other City unions but not by ATU, is here (Article 1.04(10) summarizes the changes stemming from the last round of bargaining.)

On a very basic level: Under the Plan, each employee contributes a percentage of his or her "earnings" to the Plan. The City matches that contribution. When an employee retires, he or she gets a monthly pension payment from the Plan's fund.

Prior to the last round of bargaining, if the Plan performed poorly and the fund couldn't pay retirees' pensions, either the City and its unions would have to negotiate increased contribution rates, or the City (and therefore taxpayers) would have to step in to make up the shortfall. Under the new language, contributions are "capped" at 9.0% of earnings (they're currently at 8.8% - see Art. 4.01 of the Plan). If the Plan performs so badly in future that it can't fund pension payments even after an increase in contribution rate to 9.0%, then benefits will have to be cut - since the parties have agreed not to increase contributions any higher. (See p. 14 of the City's final offer.)

(The contribution rate can increase to as high as 9.5% temporarily, but that can only last for up to six years, and the overall "target" of the plan is to have a maximum contribution rate of 9.0%. In any event, that doesn't seem to be an immediate risk.)

 That's one sticking point for the ATU. There's another: if the City and its unions can't agree on what benefit reduction is required, then an arbitrator will be appointed, will review submissions from all involved, and then make a decision on what is required to keep the plan solvent at a 9.0% contribution rate. So, whether by negotiation, or by a binding decision by a third party arbitrator, the 9.0% cap will be enforced.

The changes wouldn't seem to affect those who have already retired, or those who retire prior to the changes being made - the proposal states that any such changes to benefits would fall upon future service, and Section 14.01(1) of the Plan sets out that changes to the Plan, unless otherwise specified, only affect retirements on or after the date of the change. But it looks like the proposed changes could affect those who retire after the change is implemented (as you would expect - otherwise what would be the point of the changes?).

Now, to be clear: nobody is going to lose their pension. And the changes aren't anywhere near as stark a difference as moving from a "defined benefit" plan (where the employer is usually on the hook to make up any shortfalls in the fund) to a "defined contribution plan" (where the fund operates much like an RRSP - both parties pay in, but there's no guaranteed payout upon retirement). Retirees will still get whatever level of pension benefit would be sustainable at a contribution rate of 9.0%, in the long term. And there's no suggestion at this point that there's any immediate risk of contribution rates having to increase from their current levels.

(There's nothing saying the Plan can't be further amended in the future, either. But of course it's harder to bargain away from a contribution cap once a cap has been agreed to.)

Both sides face challenges here. One, if the City concedes and carves out a pension deal for ATU - one different from what the other city unions have accepted - it will almost certainly lead to labour relations problems. Either: the other unions agree (as they seem to) that the Plan changes are necessary, and will have real concerns about one union, ATU, not "pulling its weight" in funding the Plan; or, the other unions (or their members) will feel that they got a bad deal in bargaining, and will demand the same deal as ATU next time around. For a sizeable employer like the City, with multiple unions and bargaining units to deal with, neither option is a good one. From the City's perspective, a different deal for ATU is likely a non-starter.

Two, the Union has taken a vocal, public, and uncompromising stand against the pension changes.  ATU membership seems to be behind its leadership (of those ATU members who voted, 92 per cent voted not to even consider the City's offer). This makes it difficult for the ATU bargaining committee to compromise on this issue and, specifically, to accept the same deal as the other city unions. The ATU's press releases have suggested that it's proposed alternatives, but those don't seem to be available online - and are probably moot in any event since, as I mentioned above, the City isn't going to want to have a different deal for ATU.

(...Given the current election, I'm also skeptical that any mayoral candidate or City Council candidate has "the answer" to this dispute, by the way.)

So - to bring this to a conclusion - nobody disputes that the City's proposal contemplates that pension benefits might be reduced sometime in the future, or that contributions might increase (slightly) from their current level.

But the City insists the specific changes it's put forward are necessary for the long-term health of the Plan, and it's entirely understandable that the City is reluctant to carve out an exception for transit workers when every other municipal union covered by the Plan has agreed to the changes.

The ATU, meanwhile, appears convinced the City is either wrong or, worse, lying about the numbers, and that the changes aren't necessary, and has taken a strong stance against the proposed changes.

And when you have entrenched, seemingly irreconcilable positions, that makes it difficult - but not impossible - to conclude a deal.