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News



October 22, 2014
COLA adds sparkle to pension debates

The 2008-09 recession saw many pension plans reduce or eliminate their built-in cost-of-living adjustments (COLA).

With the return of better times and buoyant equity markets, the retirees of two of the nation’s largest pension plans affected by the earlier pension reductions are receiving mixed messages on whether their plans will restore the inflation protection they once enjoyed.

The Ontario Teachers’ Pension Plan (OTPP) has announced that it will use part of its $5.1 billion surplus to partially restore inflation protection for teachers who retired after 2009.

Pensioners who retired after 2009 will receive a one-time increase of up to $50 per month in January 2015 to bring their pension up to the level it would have been at if full inflation protection had been provided each year since they retired.

They will also receive slightly higher inflation increases next year for the portion of their pensions earned after 2009. Cost-of-living increases for this portion of pension credits will equal 60 per cent of the annual increase in the Consumer Price Index (CPI), up from the current level of 50 per cent.  Pension credits earned before 2010 remain fully inflation protected.

The OTPP has net assets of more than $140 billion.  It serves 307,000 active and retired members.

The news was not so favourable for the 35,000 unionized retirees of General Motors of Canada.

A group representing retired GM workers is urging the federal and Ontario governments to force the auto maker to restore the cost-of-living adjustments they lost during the 2009 bail-out of the company.

The two governments contributed $10.8 billion to the failing company in 2008, $4 billion of which was used to stabilize the company’s pension plan.  The cost-of-living benefit was frozen as part of the bail-out package.

While the positive equity markets have boosted equity values and the company’s pension plan assets, the plan’s cost-of-living benefits remain frozen.  

Unifor, the union resulting from the merger of the United Auto Workers Union and the Communications, Energy and Paperworkers Union, says that while it tried to restore the benefit during its bargaining with the company in 2012, it had to focus its attention on saving the company and its jobs.  

The retirees are now taking their case to the governments responsible for the GM bail-out.

“Since it was the governments that mandated the elimination of our pension cost-of-living adjustment, it is our belief that the governments must mandate GM to reinstate that adjustment,” the retiree representatives write in letters to Prime Minister Stephen Harper and Ontario Premier Kathleen Wynne.

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