Charge higher CPP premiums to firms without pension plans

Added money would finance better CPP benefits for workers without company pensions - Larry Brown

Ottawa (7 Nov. 2007) – The National Union of Public and General Employees (NUPGE) is launching a campaign to change Canada Pension Plan rules, requiring employers without workplace pension plans to pay higher Canada Pension Plan (CPP) premiums.

The extra money would be used to pay higher CPP benefits at retirement to workers who do not have a workplace pension plan.

NUPGE outlined the proposal at a recent conference attended by more than 300 union representatives and leading pension policy experts. The event was arranged by the Canadian Labour Congress (CLC), which brings together affiliated unions with a combined membership of more than three million members.

NUPGE is one of Canada's largest unions, representing 340,000 public and private sector workers across the country. Collectively, the NUPGE members participate in pension funds with combined assets of more than $100 billion.

The union recently released a research report identifying an alarming decline in pension coverage in Canada. The report revealed that the percentage of the Canadian workers covered by a pension plan declined from 46% in 1991 to 38.5% in 2005.

Employers lack incentives to provide pensions

Larry Brown, NUPGE's national secretary-treasurer, says Canada now provides few incentives for employers to create pension plans, despite the obvious social and economic benefits of doing so for workers and for society in general. In fact, disincentives exist to discourage employers from setting up their own plans, he said.

Brown says employers with pension plans now pay exactly the same CPP premiums as those without plans. At the same time, they assume legitimate administrative costs and requirements set out in pension legislation, including funding obligations and reporting and actuarial evaluations, he said.

“Employers have a moral obligation to their employees to provide decent pensions, but our system does very little to encourage this behavior. Instead, it subjects employers who provide pensions to necessary but often complex legislative requirements,” Brown notes.

"Why should an employer assuming the burdens and obligations of providing a pension plan pay the same CPP premiums as employers who do not?" he asks.

“We don’t think that makes sense and we’re launching a campaign that calls for an extra payment to the CPP from those employers that don’t offer a workplace pension plan,” he says.

"We are saying that employees should receive improved CPP benefit coverage during any years they work for employers without a workplace plan, and those benefits should be financed by additional CPP premiums collected from employers who do not offer pension plans.”

Brown says this would create an incentive for employers to provide pension plans. "They would pay for a workplace pension plan, or pay higher CPP premiums. Either way, they would be required to meet their moral obligations to their employees”, he said. NUPGE