April 3, 2007

Pension Trial Bulletin No. 4

Presentation of Evidence and Expert Testimony Wrapped Up – Counsel Now Preparing Closing Arguments

Day 15 of the pension surplus trial kicked off with the recall, at the request of Justice Panet, of Scott Milne, an expert in public-sector accountancy and former auditor with the Office of the Auditor General. Mr. Milne had already given evidence at the trial on March 7 and 8. However, Justice Panet recalled Mr. Milne as he wished to have clarification of several issues related to the Public Accounts of Canada.

Day 15 was the last day in court for the parties before they return for closing arguments on April 30th. Justice Panet has also requested written submissions in advance. The plaintiffs have until April 11 to file their submissions. The Crown will have until April 20 to respond. Should the plaintiffs wish to file a Reply to the Crown's submissions, they will have until April 27 to do so.

The original trial schedule gave the parties until April 13 to put in their evidence through their witnesses. However, the Crown completed its case on March 26, two weeks short of the allotted time. The Crown declined to call any expert witnesses, or any witnesses involved in pension administration. Three of the four witnesses who had been called by the Government testified in response to the argument made by the Plaintiffs that C-78 breached section 15 of the Canadian Charter of Rights and Freedoms. The plaintiffs had claimed that certain sections of the legislation differentiate between the plaintiffs and employees in federally-regulated private sector industries. Specifically, the legislation does not provide the same protections that are available in the federal Pension Benefits Standards Act, which prevent employers from unilaterally removing surplus.

One of the witnesses called by the Crown in response to the plaintiff's Charter challenge was Monique Boudrias, Executive Vice-President of the Public Service Human Resources Management Agency of Canada. The essence of Ms. Boudrias' testimony-in-chief was that, with 31 years' pensionable service behind her, she remained passionate and committed about her career in the public service and would highly recommend such a path to young people today. All in all, a glowing picture was painted of the employer. However, the rewards of being a public service worker are not relevant to the issue of whether public service workers suffer discrimination on the basis of their employment status. What is relevant is the Government's willingness to exploit the perception that federal government employees constitute a privileged class of under-worked, overpaid employees. Such stereotyping is at the root of the plaintiff's claim that public service workers are discriminated against.

On cross-examination, Ms. Boudrias admitted that she was aware of the widespread negative stereotyping of public service workers, and that she found it galling, given that, in reality, they are highly committed and work extremely hard. She also agreed that federal public service employees are not overpaid in relation to the private sector. Ms. Boudrias was also quick to agree that, given the reality of the hardworking public service worker, the stereotype, which remains largely unchallenged, is demeaning, particularly as self-worth is, for many people, tied up in the work they do.

Ms. Boudrias stated that she was aware of the view held by many people that federal public service workers have an overly generous pension plan, and agreed that this view was part of the same stereotype. She agreed the pension plan has always been taken into account by the employer as part of total compensation. She also agreed that the existence of such a stereotype meant that there was a receptive audience for any legislative change, such as the imposition of wage freezes for federal public service employees. Ms. Boudrias expressed surprise when shown an internal memorandum in which the President of Treasury Board was reported as saying that the Government was prepared to impose new pension legislation to the effect of lowering the level of pension benefit because Ministers considered that public service workers are viewed by the public as a privileged class.

Finally, Ms. Boudrias agreed that pensions were important to most public service employees; that they expected their pension contributions to be used to pay pensions; and that they relied completely on the Government to look after their pension contributions.

The Crown's final witness was Bryan Osborne, a private-sector actuary. He was called to testify about the transfer of assets and liabilities from the Public Service Superannuation Account to the Canada Post pension plan in October 2000.

In cross-examination, Mr. Osborne admitted that in 1998, he had been contacted by Treasury Board and asked to provide guidance on approaches to sharing pension surplus. Mr. Osborne had expertise on pension regulatory matters and explained that, in Ontario, any removal of surplus from a continuing pension plan requires the consent of the pension regulator. Mr. Osborne explained that when such consent is applied for, the employer must provide information on the amount of surplus attributable to contributions paid by plan members and that before the regulator will consent to payment of actuarial surplus out of an ongoing plan, it must be satisfied that surplus attributable to employee contributions remains in the plan.

Mr. Osborne testified that there is no standard actuarial method for calculating surplus attribution but that it generally involved calculating the percentage of the surplus attributable to employee contributions and the percentage attributable to employer contributions. Internal Treasury Board e-mails show that the approach explained by Mr. Osborne was quickly dropped by Treasury Board as it would have resulted in a 60:40 split of the surplus, a split that officials termed “too rich”.

With respect to the transfer of assets and liabilities from the Superannuation Account to the new Canada Post pension plan, Mr. Osborne confirmed that he negotiated on behalf of Canada Post the amount of assets that would be transferred to Canada Post in order to cover the liabilities assumed. He also confirmed that CPC had negotiated transitional support to help defray the cost of employer contributions under its new pension plan for a period of years. He estimated the total value of this support to be in the order of $1.5 billion. Finally, Mr. Osborne agreed that assets transferred to the CPC plan produced an actuarial surplus in excess of $200 million in the new CPC plan.

The Trial will resume on April 30th when parties present closing arguments.