QUEBEC As the global financial crisis jeopardizes the future of private pension plans, the Quebec government is taking the unprecedented move of guaranteeing benefits to pensioners and workers of companies whose plans go bankrupt.
Nearly a million workers and pensioners in Quebec are registered in more than 950 private company pension plans with assets worth about $100-billion. A handful of those pension plans could become insolvent this year if the companies declare bankruptcy, Quebec Employment Minister Sam Hamad said yesterday.
Under a bill tabled yesterday, the Quebec Pension Plan (known as the Régie des rentes du Québec) will take over the management of insolvent pension plans and guarantee retirement income for five years to those who are entitled. If proved successful, the measure could be extended beyond the five years and perhaps become permanent, a senior government official said yesterday. The fund could also be transferred to an insurance company.
All opposition parties and Quebec's major business and labour leaders support the bill. It is expected to be adopted today and will be retroactive to Dec. 31, 2008.
The legislation gives the QPP the authority to improve benefits to workers if needed. If the targeted pension plans have insufficient assets to cover benefits, the government will pay the required sums to make them solvent.
Quebec companies will have 10 years rather than five years to replenish shortfalls in their pension plans. Currently, the market value of the assets of Quebec's private pension plans is 70 per cent of their total solvency liabilities, or what they need to pay out in benefits. This represents a $22-billion shortfall to bring solvency levels up to 100 per cent. Many cash-strapped companies face serious problems in meeting their pension contribution obligations.
"We are the first in Canada to take these measures ...We aim to protect pensioners by taking over pension plans that go bankrupt and ensuring that benefits are paid out," Mr. Hamad said yesterday. "It was urgent that we act now... It gives companies more liquidity and reassures workers and pensioners."
The initiative was one of a half dozen economic stimulus measures Premier Jean Charest's newly re-elected government included yesterday in Finance Minister Monique Jérôme-Forget's economic update. Ms. Jérôme-Forget also announced $250-million in refundable tax credits for home renovation projects, a benefit of up to $2,500 for homeowners.
Other measures included a 50-cent increase in the minimum wage to $9 beginning on May 1, and public investments bringing the total amount in infrastructure and energy development projects to $13.9-billion in 2009.
Ms. Jérôme-Forget said she will try to avoid a deficit in the 2009-2010 fiscal year and expressed optimism that Quebec could even avoid falling into a recession. She said she will announce new initiatives in her budget in March, depending on what Federal Finance Minister Jim Flaherty announces in his Jan. 27 budget, and the impact of the massive multibillion-dollar economic aid package announced by United States president-elect Barack Obama.
"Let's wait and see. Let's not panic now. I'm not trying to put on rosy glasses. I'm trying to be very, very down to earth and wait for what Flaherty is going to do, wait for what's going to happen in the United States. Then in March I will have an update," Ms. Jérôme-Forget said in a news conference yesterday.
Much of Quebec's financial health rests with the federal government decision on whether to reduce equalization payments to the province. At tomorrow's first ministers meeting in Ottawa, Mr. Charest will demand that Prime Minister Stephen Harper reverse his unilateral decision to change the plan and reduce payments to Quebec.
"What Ottawa is doing with equalization payments is unacceptable," Mr. Charest said yesterday. "As far as I'm concerned, that is not the way the federal government said they would do business. "