This article was originally published by CBC News on November 1st 2011, to visit their website please click here
Saint John could face a legal fight if it moves forward with a proposal to stop indexing its employees’ pension plan to the inflation rate, according to a pension law expert.
Saint John council met behind closed doors on Oct. 28 to discuss several reforms to the pension plan that line up with demands made by the provincial government’s superintendent of pensions.
The city is struggling to deal with a pension deficit that is estimated to be $123 million. The Saint John Police Association said the city plans to remove cost of living adjustments for everyone, including retirees, as a way to deal with the pension deficit.
Hugh O’Reilly, a Toronto-based lawyer who specializes in pension law, said he’s not familiar with the specifics of the city’s plan. But he said a recent decision by the New Brunswick Court of Queen’s Bench is clear when it comes to removing cost-of-living adjustments for retirees.
“A retiree, when they leave, they leave on a certain understanding — a deal’s a deal. They’ve bargained, or they’ve had their terms and conditions of retirement bargained for them throughout their career,” he said.
“And when they leave, the courts have said that entitlement that they have as a retiree vests, or becomes permanent, and it can’t be changed without the person’s consent.”
The Court of Queen’s Bench case involved the pension plan of health-care workers across the province.
But O’Reilly said a city union, or retiree could challenge any changes to their plan, based on that case.
“Based on available case law and based on my understanding of the situation, I would say that there is a risk of litigation here and it’s probably, I would assume, it’s probably a strong risk of litigation,” he said.
Saint John council is expected to vote on pension reforms to deal with the pension’s $123-million deficit Monday night.
Once the reforms are passed by city council, the package would have to go to the provincial superintendent of pensions for review.
Once the superintendent of pensions reviews the document, the legislative assembly must pass a legislative change.
The Canadian Association of Retired Persons is also arguing that de-indexing should not be extended to people who have already left the workforce.
Susan Eng, the vice president of advocacy for the Canadian Association of Retired Persons, said attempts to remove inflation indexing from the pensions of people who are already retired is grossly unfair and probably illegal.
Eng said the rules cannot be changed after people have already left the workforce.
“Governments who have made mistakes with their own investments, with the way they have funded the plans are now looking to go after the people who are least able to help themselves, the retirees,” Eng said.
Eng said the retired can’t sit down to negotiate with management like those who are still in the workforce.
© CBC News