Canada: Pension Plans For Municipal Employees – Bill 3

On June 12, 2014, the Minister of Municipal Affairs and Land Occupancy, Pierre Moreau, tabled Bill 3, entitled An Act to foster the financial health and sustainability of municipal defined benefit pension plans.

Bill 3 comes on the heels of former Bill 79, entitled An Act to provide for the restructuring of and make other amendments to municipal defined benefit plans, which died on the order paper when the last provincial election was called. Bill 3 incorporates the main elements of Bill 79 with some modifications.

Impact of the restructuring

The new draft legislation, which applies to 170 pension plans covering some 50,000 retirees and 122,000 active members, provides that defined benefit pension plans for municipal employees are to be restructured in order to improve their financial health and ensure their sustainability. Whereas Bill 79 compelled the restructuring of only some defined benefit plans (those that were less than 85% funded on December 31, 2013 and those that offered subsidies for taking early retirement, i.e. before age 55), Bill 3 mandates the restructuring of any defined benefit pension plan constituted under the Supplemental Pension Plans Act1 and established by a municipality. 

Thus, such pension plans must, under Bill 3, be amended so as to provide that as of January 1, 2014 the current service contribution is to be shared equally between the municipality and the active members, and a stabilization fund funded by a stabilization contribution be established. The sum of the current service contribution and the stabilization contribution must not exceed 18% of the overall payroll of the plan's active members (20% in the case of police officers and firefighters). 

Bill 3 also provides that a complete actuarial valuation must be done for each plan, on the basis of the financial information available as at December 31, 2013. The council of the municipality must then hold a session, no later than January 19, 2015, at which a report will be tabled on the financial situation of each of the pension plans the municipality has established, based on the conclusions of the actuarial valuation. 

In the event that a pension plan is in a deficit situation as at December 31, 2013, the indexation of the pensions of retired members may be suspended if the municipality so decides, and the active members and the municipality will assume in equal shares the deficiencies attributable to them for service accumulated prior to January 1, 2014 (unless they agree to share the deficiencies 60%/40% in favour of the active members, provided other elements of the overall remuneration are amended). Any new deficiency attributable to the active members in relation to service prior to January 1, 2014 and identified in an actuarial valuation subsequent to December 31, 2013 will however be borne solely by the municipality. 

Implementation conditions

While no pension plan may provide for the automatic indexation of pensions (subject to the indexation of the pensions of members who were retired as at December 31, 2013) an ad hoc indexation may be provided for in the event that a surplus is identified in an actuarial valuation subsequent to that of December 31, 2013. In addition, a pension plan may provide, with respect to active members, for the amendment, suspension, abolition or restoration of any benefits as of January 1, 2014 (other than the normal pension and the surviving spouse's pension). 

The plan must however provide that any additional obligation resulting from an amendment to the plan must be paid in full on the day following the date of the actuarial valuation establishing the value of the additional obligation. If the plan has surplus assets, they may be allocated to the payment of any additional obligation but they cannot be allocated to the payment of contributions, unless a fiscal rule so requires. 

The restructuring process

Negotiations between municipalities and active members with a view to reaching an agreement for the amendment of their pension plan must (with some possible exceptions) be undertaken no later than February 1, 2015. 

Prior to such negotiations and no later than January 15, 2015, the municipality must send every association representing active members covered by the plan a prior written notice of at least 8 and no more than 15 days indicating the date, time and place its representatives will be ready to meet with the association's representatives. A copy of the notice is to be sent to the Minister, failing which negotiations are deemed to have begun on February 1, 2015. 

Contrary to Bill 79, which provided that an agreement had to be reached within six months after the negotiations began, Bill 3 provides that an agreement must be reached within 12 months after the start of the negotiations, with a possible single three-month extension. And while Bill 79 provided for conciliation during six months following the negotiation period, under Bill 3 the parties can avail themselves of conciliation at any time during the negotiation period. 

Under Bill 79 the provincial labour relations board (Commission des relations du travail) settled any dispute. Bill 3, however, provides that an arbitrator is to be appointed by the parties to settle the dispute if no agreement has been reached by the end of the negotiation period. The arbitrator is to be assisted by two assessors designated by the parties. The arbitrator must render a decision within six months after the dispute is referred to him or her. 

Collective agreements

It should be noted that the existence of a collective agreement or any other valid agreement will not preclude the application of the Act to foster the financial health and sustainability of municipal defined benefit pension plans. Also, any decision by an arbitrator that impacts the collective agreement will effectively amend it. 

Hotly disputed

While the Union of Quebec Municipalities welcomes Bill 3, calling it realistic, responsible and sustainable, unions are highly critical of the proposed legislation, which in their view is an attack on the vested rights of retirees2 and renders negotiations meaningless, and they have vowed to contest it in court if it is adopted. In view of the recent demonstrations by unionized employees of several large cities in Quebec including Montreal, Quebec City, Laval, Sherbrooke, Saguenay and Gatineau, it is safe to say that we have not heard the last of Bill 3.

Footnotes

1 RLRQ c R-15.1.

2 As stated by Marc Ranger, spokesperson for the union coalition for free negotiation (Coalition syndicale pour la libre négociation).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions