U.
GRANVILLE

» At provincial Wage and Contract Conference, Brother Arcand pointed out the financial details of the IWA-

Forestry Industry pension plan.

Wage and contract conference votes for
pension funding to ‘pay off the mortgage’

by Harvey Arcand
Fourth Vice-President,
IWA-CANADA
The decision by the delegates to the
recent provincial wage and contract
conference with regard to our pension
ag was in fact a simple one. It called
for reducing or eliminating the pen-
sion plan’s unfunded liability, and for
using future service benefit increases
as the means of improving pension
benefits.
Put another way, the decision was
to pay off the mortgage, and to not in-
crease the mortgage in future in order
to fund pension improvements.
Th many ways, the pension plan’s
unfunded liability is like a mortgage,
like a mortgage, it does represent
to the plan that has to be paid.
is at issue is when we do this,
how fast.
the pension plan was formed
Bane especially since we nego-
service for IWA mem-
bers in 1979, we have accrued a build
of unfunded liability - a mortgage

sorts - by providing increased bene-
iS up front to retirees, and by paying
le cost of these benefits through con-

to the pension plan on an

“basis into the future. For in-
service benefits nego-

ve, the
; cost the plan over 200

s - an unfunded liability

sae, which

ition of L1¢ per hour
ears. This “mort-

which are critical are:

1. How many hours will be worked
by IWA members over the 15 years fol-
lowing the negotiated benefit increas-
es known as “contributory hours”.

2. What interest rates will be
earned by the money in the pension
fund into the future.

Understandably, any reductions in
either of the figures below what was
originally estimated causes problems,
and in recent years, we have had
problems in both these areas.

First of all, we have seen consider-
able reductions in contributory hours
since the formation of this pension
plan. Actual hours worked by IWA
members in 1979 was 90 million hours
- since then this had reduced to the
current level of 47.3 million hours in
1992.
In this regard, the contributory
hours is a real concern today as well,
because of potential reductions due to
land use decisions in British Colum-
bia.
Secondly, we have seen a real de-
cline in recent years in interest rates.
While interest rate declines can be off-
set by changes in investments of plan
funds, one area that cannot be offset
is the measurements of our plan’s
“solvency” as required by provincial
regulatory authorities, currently in Al-
berta, but soon to be in British Colum-
bia due to recent enactment of B.C.’s
Pension Benefits Standards Act.
This solvency testing assumes that
a pension plan “windup”, or termina-
tion occurs. The rules call for the plan
to have enough funds to provide,
through the purchase of annuities, the
pensions earned by members in the
pengicn plan to the “windup” date.
the cost of annuities is
related to interest rates, and interest
rates have gone so low, we have failed

of ee ee nthe past

years.
does not mean that our pen-
sion plan is going broke. In fact, our

pension plan is growing in size, it is
reducing the unfunded liability, it is
paying pensions to over 15,000 re-
tirees, and it has reduced the amorti-
zation period (the length of time
required to eliminate the unfunded lia-
bility, and thus become fully funded)
to 8.5 years, down from 12.7 years in
1991. Our pension plan is financially
sound, and in better shape today than
it has ever been.

Solvency testing, however, is a dif-
ferent issue, and not one that we can
ignore. It is, after all, the law. In 1991
negotiations, solvency problems
brought on by a combination of re-
duced hours and reduced interest
rates produced a “shortfall” of contri-
butions to meet solvency of 35¢ per
hour. This was corrected by negotiat-
ing 35¢ per hour of the 70¢ that was
negotiated for the pension plan in the
second year of the agreement, into the
plan with no benefit changes. The ef-
fect of this was to reduce the amorti-
zation period dramatically between
1991 and 1992 from 12.7 years to 9.9
years.

This year, with interest rates declin-
ing much further, we again have prob-
lems with provincial solvency testing,
and again we are facing the potential
requirement to increase contributions
without any plan amendments to meet
this test. This is a short term problem,
as studies the trustees have done
show clearly.that with no added con-
tributions, the solvency problem dis-
appears, even at current interest
rates, within 5 years, and the plan will
still be fully funded in 8.5 years.

In short, we in the IWA are having
our agendas in contract negotiations
dictated by solvency testing, interest
rates, and contributory hours, none of
which are in the control of the IWA or
the pension plan trustees. This is a sit-
uation that has the potential to cause
serious problems for the IWA.

Additional money is
needed in the pen-
sion plan to meet
new provincial sol-
vency requirements

The solution to this is to continue
the process which was started in 1991
- to control and reduce the unfunded
liability, and to negotiate only future
service increases in future to insure
that the unfunded liability is not in-
creased.

IWA members best interests in the
long term would be served by having
secure pension benefits, and just as
having a mortgage paid off provides
security, having the unfunded liability
paid off will provide absolutely secure
pensions for our members.

The added benefits of a fully funded
plan include virtually no potential sol-
vency problems in future, no need for
increased contributions to offset po-
tential reductions in contributory
hours, and the ability to make future
pension improvements from the plans
earnings, as opposed to have to in-
crease contributions as we have in the
past.

Our pension plan, its financial con-
dition, and members security were
foremost in the minds of IWA dele-
gates to the Provincial Wages and
Contract conference, and the program
that they endorsed for 1994 negotia-
tions reflects their concerns, and will
provide the kind of secure pension
plan that we all desire.

In the short term, it will be neces-
sary to increase contributions, and to
not increase pensions for all years of
service, to achieve our goals. In the
long term it is the best move we can
make, and if we stick to the program
that has now been endorsed, and stick
with our pension plan through its cur-
rent five year rough spot, we'll all be
better for it.

The delegates to the conference dis-
played a great deal of leadership in
endorsing this program on your be-
half. What is critical to the success of
this program now is your support for
what has to be done to achieve our
objectives.

Small mill

Continued from page thirteen

toba, mostly from Repap’s license ar-
eas. Birch is considered a weed
species in the province. There are
stricter guidelines on wood waste and
proper utilization of our secondary re-
sources.

With this potential for wood utiliza-
tion, the local union hopes the mill
can eventually create more jobs in the

future.

The employees are covered under a
current 3 year agreement which ex-
pires at the end of April this year. The
union has been certified to the opera-
tion for over nine years.

The average wage is over $11.00 per
hour which is good in this sector of
the industry in Manitoba. Plant chair-
man Phil Meleck says, that since the
union bargained wages for the work-
ers there has been many improve-
ments in all areas of the contract.

The union has bargained for weekly
indemnity benefits, long term disabili-
ty, medical insurance premiums, and
accidental death and dismemberment
coverage.

It shows that the IWA can get into
the smaller operations and bargain re-
alistic agreements which better the lot
of workers.

“When we came on the scene some
people thought we'd put Perimeter
out of business,” says Brother Ander-
son. “Now everyone knows that

LUMBERWORKER/APRIL, 1994/19