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Union protests New Brunswick plan to transform public-sector pension plans

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FREDERICTON -

The New Brunswick government introduced legislation Wednesday to transfer five of its defined-benefit public sector pension plans to shared-risk plans, saying the move will ensure the sustainability of plans that have become unaffordable.

"They were not designed to have cases where (employees) might work the same amount of years that (they are) retired," Premier Blaine Higgs told a briefing. "They are not sustainable and require significant tax money."

The legislation says the shift would be mandatory, meaning the proposed law would override provisions in collective agreements that guarantee union members a defined-benefit plan -- considered the gold standard within the labour movement.

The move, which would affect 7,800 active pension plan members, has sparked outrage among the unions involved.

"We have a fair pension deal in place for our members," said a statement from Theresa McAllister, president of Local 2745 of the Canadian Union of Public Employees (CUPE), which represents educational support staff.

"The government does not have the right to change the rules of the game halfway."

Iris Lloyd, president of CUPE Local 1253, said the proposed legislation represents a violation of the union's collective agreement.

"(It's) a contract that Higgs himself advocated for," said Lloyd, whose local represents bus drivers, janitors and school tradespeople. "This is a betrayal of the very process he championed."

The three other public sector unions involved represent nurses, paramedical workers, managers and general service workers in nursing homes.

Higgs says his Progressive Conservative government tried to work out a deal with the unions, but he said it became clear talks were headed nowhere.

"Unfortunately, not only were the timelines not met, but there was no indication that they would ever be met," he told an online briefing. "We ran out of time."

The premier said that as the negotiations dragged on, CUPE called for a new pension plan that would have cost the province $1 billion to implement. "It would have been hugely costly for taxpayers," he said.

The government says the first step in the transfer is a negotiation process that will see those affected select a preferred plan within a certain time frame. The legislation is expected to go into effect on Feb. 1, 2024, and the government wants negotiations concluded within six months.

If talks fail, the legislation calls for a mediation phase followed by an arbitration phase.

During a government briefing Wednesday, lawyer Hugh Wright explained that the Nova Scotia and P.E.I. governments previously used similar legislation, but the transfers in those cases were voluntary.

In New Brunswick the majority of government pension plans were shifted to shared-risk models 10 years ago, and since then the plans have performed well adding 23 per cent to cost of living allowances since their inception, Higgs said.

By comparison, the remaining defined-benefit plans -- three of which Higgs described as unviable -- added between 16.5 per cent and 20 per cent to cost of living allowances.

Three of the pension plans are currently carrying deficits that total $285 million. None of them is fully funded. The cost of transferring the five plans -- worth $1.4 billion in assets -- has been pegged at $365 million.

Shared-risk plans, which are also know as target-benefit plans, are often described as a hybrid of defined-benefit and defined-contribution plans.

While defined-benefit plans guarantee a certain level of benefits upon retirement, defined-contribution plans do not, as their benefits are typically tied to the performance of financial markets. While shared-risk plans don't guarantee a benefit level, their base benefits have a higher probability of not being reduced.

As well, employee and employer contributions under shared-risk plans are typically fixed. Beneficiaries typically have access to indexing, but it is not guaranteed.

This report by The Canadian Press was first published Nov. 29, 2023.

For more New Brunswick news visit our dedicated provincial page.

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