CBC Union Report on Pension Surplus Fight

June 27, 2000

Pension Surplus – The good, the bad and the ugly

The CBC Board of Directors has rejected a call from its Unions and Pensioners’ Association to increase the amount of payout to staff and retirees from a record pension surplus.

Under the plan approved by the Board last week, a payout of $134-million will be made to active and retired employees by year-end. That means real money from the surplus will be coming your way by the end of this year. (More on that later in this communiqué.) The amount will vary by employee and will be based on years of contribution up to the end of 1999 or the date of retirement.

In reaching its decision, the Board did adopt one key principle put forward by CBC’s unions and the Pensioners’ Association through the Consultative Committee on Staff Benefits (CCSB). It is the first time a payout has ever been made based on years of contribution. The amount is also larger than the $74-million initially proposed by the CBC.

While a return of contributions to the employees who have built the pension fund is welcome news, it is tainted by the fact there continues to be a continuing dispute between the unions/pensioners association and the CBC. When given a choice between its own interests and those of its employees, CBC management chose itself. The Unions and the Pensioners’ Association had recommended through the CCSB, a payout of $336-million. This amount would have left the fund with a gross surplus -- yes, that’s just surplus -- of more than $750-million to guarantee the future of the fund. Two independent actuaries have confirmed the viability of the CCSB proposal.The CBC has only agreed to pay $134 million. Why? It’s not clear. In its communiqué to all staff, the Corporation has misrepresented the facts. It has grossly overstated the risk attached to the CCSB proposal. It claims a ten-year amortization period remains in effect. It does not. It suggests that a principle of a 60/40 split, the bigger portion going to the CBC, has been agreed to. It has not. The split was a division imposed on employees by a past president of the Corporation. Even if such a split were agreed to, $134-million is not 40% of a billion dollars or even 40% of the $616-million CBC claims constitutes the surplus. Finally, it is suggested that the four-year "smoothing" policy, which provides a further cushion to the plan, is irrelevant because it is in keeping with established rules and regulations. First of all there is no regulation that requires a four-year smoothing. Secondly, the $468-million taken out of gross surplus to fund this smoothing is hardly irrelevant. It's real money and surplus to the liabilities of the plan.

In his communiqué CBC President, Robert Rabinovitch, notes that it’s possible another payout could be made in three years after the next pension evaluation. That’s true and it makes it much harder to understand why CBC is acting in this manner now. CBC will take its maximum benefit from the surplus, $111-million over the next three years. Don’t forget: the CBC cannot use anything beyond its "contribution holiday" for programming or other expenses, so why hold onto it, especially when two actuaries concur the money is, indeed, surplus, to the plan. Other employers have seen the wisdom of working hard to provide the maximum benefit to its employees and pensioners from such surpluses.

This fight to distribute the surplus wisely and fairly is one that we at the CMG have had a leading role in for years. There are few precedents to guide us, and we are creating precedents as we go. It’s an important battle. Despite the fact that we have "won" an early battle, we are not prepared to accept less than what is fair. In the coming weeks the Unions and the Pensioners’ Association will be meeting to explore their options. In a future report we will review how one federal employer dealt with its pension surplus and how CBC’s treatment of its employees compares.

DISPUTE ASIDE: WHAT ABOUT THE PAYOUT ITSELF? Here’s what we know about the surplus payout itself, as approved by the Board of Directors June 19.

All employees who are paying into the pension, and all pensioners, will have access to a share of the surplus money. A formula on how to determine your share has been worked out. It is based on years of contribution to the plan as of the end of 1999 or your date of retirement from the Corporation.

The money will likely come by the end of 2000, in the form of a special cheque. You will have choices on where this money goes. The money you get will be based on the contributions you've made to the pension fund.  The payout based on pre-1990 contributions should be tax sheltered.  The payout based on contributions you've made to the pension after 1990 will be taxable, but can be put directly into RRSP's depending on how much room you have available.

The decision will also result in a permanent reduction in the amount an employee must contribute to the plan. The exact size of that amount is not known at this time. 

We will provide addition updates as the information become available.

Dan Oldfield
Senior Staff Representative
Canadian Media Guild