The Can West story is not unique - the same thing is happening to retirees and active members across the country. People thought they had a safe and secure pension and have planned accordingly. Now their financial world has changed and they can't do anything about it.
All this begs the question: where were the regulators and what have they been doing to protect plan members? Judging from the Can West story, not much. I'm reminded of Captain Renault in Casablanca: "I am shocked, shocked, to find that gambling is going on in here!"
Pension regulation in Canada is based on a set of archaic laws and regulations that are doing nothing to help members of the Can West plans of this country. Some lip service is paid to the issue and a commission is established, but the landscape isn't changing. Harry Arthurs and the OECP produced the longest report, with the most recommendations, but, like the other commissions, completely failed to deal with the real issues facing pension plans and their members:
- pension plans are financial instruments that people count upon for financial security after retirement. They are not a gift, a statement of intent or some sort of risk transference device.
- trust laws do not provide an appropriate governance structure. They do not provide adequate protection of plan members.
- regulators must be able to take into account the financial status of plan sponsors in formulating supplementary funding requirements. At present, they bend over backwards to accommodate sponsors, often in ways that reduce plan members' protections.
- laws and regulations must be changed to deal with the excess surplus issue. To date, the courts have butchered any reasonable interpretation. This highlights the problem of using trust law as a basis for interpretations - laws that are not geared to handling pension risks, guarantees and their financing.
- pension plans should be given priority in sponsor bankruptcies, the same as deferred wages.
- pension plan regulation should be principle based, not rule based, i.e. regulated in the same way as banks and insurance companies. It's hard to imagine a bank or insurance company being regulated or governed as if it were a trust account - pension plans should be viewed the same way.
I believe that any change will need to come from the federal government. OSFI has the competency, research capabilities and the experience with banks and insurance companies to make the needed changes. They could also set the framework for a desperately needed Canada-wide uniform approach.