Selective benefits

It shouldn't come as much surprise that at least some are looking to use the economic crisis as an excuse to funnel any effective benefits upward rather than to recognize the effect that a downturn can have on everybody. And the Sask Party has not surprisingly made its choice - with a stark, if thus far little-noticed, example to be found in its proposal (warning: PDF) to deal with pension funding obligations.

The starting point is the assumption that in defined-benefit pension plans, a market downturn which reduces the value of the assets held by a plan may lead to a significant increase in funding obligations just at a time when an employer is least able to assemble the cash required to provide the funding. Which reasonably enough gives rise to the two suggested courses of action to benefit employers - one to temporarily suspend the usual funding rules, the other to give employers more time to meet solvency requirements under the usual rules.

Assuming that an employer can reasonably be given some leeway in a downturn to temporarily trade off some measure of plan solvency for the immediate benefit of reduced funding obligations, then so far, so good. But then one arrives at the first condition which the province wants to impose as a requirement for any employer taking advantage of a relaxed funding requirement:

Although the relief may be subject to several requirements, there are three conditions that the SFSC would consider important:
1. The benefits provided by the plan cannot be improved on or after the date the notice of election has been filed with the Superintendent and during the course of the relief period, except where the benefit improvements have been previously established by contract or agreement. This condition is aimed at minimizing the risk of a plan worsening its solvency position during the course of the relief.

In other words, having reached the policy conclusion that the downturn may require relaxing the normal solvency rules for an employer's financial benefit, the province is simultaneously looking to prohibit any discussion of whether the same principle might apply when it comes to members - no matter how negatively any workers or retirees might be affected by the economic crisis.

What's more, the balance of the proposal suggests that it's up for discussion as to whether the rule could be triggered by an employer request alone with no input from the plan members affected - and indeed this isn't suggested as one of the province's preferred conditions. Which would provide an obvious loophole for employers to reduce their longer-term funding obligations by artifically limiting pension benefits even if they're perfectly capable of funding a plan under the current rules.

Now, the proposal is up for comment until January 31, and hopefully the end result will contain at least some recognition of the interests of pension plan members. But it still speaks volumes that the Sask Party's first inclination is to make zero benefit to workers a condition of its proposed help for employers.