The pre-election debate on improving the Canada Pension Plan is important and overdue. Despite the Harper government’s reluctance, there is a broad consensus that, as a national newspaper said recently, “raising mandatory CPP contribution rates and boosting future payouts are the most prudent, most effective and least costly fix.”
But that’s not enough. While necessary, even an expanded CPP will not be sufficient to fully support the retirement of workers who don’t also have well-funded workplace pension plans. This is especially true for employees of non-profits and charities — excluding hospitals, colleges and universities — who typically work for modest salaries and almost never have good pension plans and sometimes not even individual RRSPs.
There are 1.3 million such workers across Canada. They perform some of our communities’ most important tasks through programs that provide food security, affordable housing, women’s shelters, newcomer integration, youth employment and much more. Not only do the organizations that employ them need to ensure viable retirements for their older employees, these groups also must attract young recruits who have the talent and drive to meet the evolving challenges of a complex world.
Quebec may have an answer for the rest of Canada. The Régime de retraite des groupes communautaires et de femmes — the retirement plan for community and women’s organizations — serves 4,800 non-profit workers in some 550 mostly small community groups across Quebec. The average age of plan members is 43, their average base wage is $33,500, and, even more notably, 86 per cent of all members are women.
Since 2008, these members have built a pension fund of $32 million in assets that are invested by the insurance arm of the Desjardins group, often through ethically screened securities. Sustainability is a priority for this pension plan. A significant reserve is in place to absorb shocks and stabilize contributions. The reserve also enables the plan to index pensions to the cost of living. With a current funding ratio of about 170 per cent of capital assets to pension obligations, the plan offers real security to its members.
The Régime is a member-funded, multi-employer plan. When a non-profit organization decides to join, the levels of its contributions are adapted to its resources and approved by its board. The employer’s contribution to the plan must match that of its employees. This contribution may be raised or lowered over time to take into account a group’s evolving financial situation. The Régime is not a replacement for, but rather a complement to, the Quebec Pension Plan, the CPP analogue in that province.
Michel Lizée, former co-ordinator of an outreach centre at the University of Quebec at Montreal, and who 10 years ago began working with the reference group of community-sector leaders that set up the plan, made two important points about the plan at a recent conference at Carleton University. First, he said, an educational process is necessary for non-profit leaders and employees to demystify the technical issues associated with pensions, to learn about the relevant laws and regulations, and to assume governance of the plan they are creating.
Second, observed Mr. Lizée, this made-in-Quebec model may offer useful lessons for English-speaking Canada. “The existing legislation on multi-employer plans in several provinces could provide a suitable framework for a similar plan.” That is, he adds, “if the hurdle that the community sector is not typically unionized can be overcome,” since these laws have usually been drafted for unionized workplaces.
The umbrella group for the non-profit sector, Imagine Canada, could and should investigate the application of this model to other parts of the country. A consortium of non-profits and charities, universities and colleges, governments and trade unions, should be organized to carry out research and education and design pension plans that fit the needs and conditions of the community sector in individual provinces.
Non-profit organizations are regulated for labour standards, collective bargaining and employer pension plans by provincial governments. In a subsequent email, Mr. Lizée made the case that it is possible to set up multi-provincial pension plans for non-profit workers by registering each plan in the province where most of the plan members work. The legislation of that province will dictate the governance, funding and investment rules for the plan.
What could the federal government do to enable the development of pension plans for non-profit workers? For one thing, the Minister responsible for the Canada Revenue Agency must grant an exemption, under the Income Tax Act, to member-funded pension plans in non-unionized work places. The Régime lobbied hard to get that exemption, which now stands as a precedent for other non-profit plans.
For another, the Government of Canada could also provide seed money for the consultations and legal work necessary to assess and revise existing laws on multi-employer pension plans in several provinces in order to allow the participation of non-profits and charities. Experienced actuarial and legal advisers would be essential in this exercise.
But, at the end of the day, argued Michel Lizée: “The best thing the federal government could do for employees of the non-profit sector is stop blocking improvements to the CPP and work with the provinces to improve it. Raising the salary replacement rate of the CPP to 50 per cent, or 40 per cent, would reduce the gap between what the public plans provide at retirement and what would be really needed to maintain a good standard of living.”
And, he said: “That would make it easier to set up multi-employer plans for non-profits, which would be able make more modest and feasible contributions to achieve this goal.”
As Canada navigates forward in a turbulent world, we need the best talent we can get in our community organizations. Addressing the pension challenge for this important group of workers is a priority — and, it turns out, very possible.
Originally published in the Huffington Post blog on June 16th, 2015 by Edward Jackson
Edward Jackson, a member of the Canadian CED Network, is President of Jackson and Associates and a thought-leader and practitioner in program evaluation, engaged philanthropy, social finance, social enterprise, gender equality, and higher education. He has advised Canada’s Department for Foreign Affairs, Trade and Development, Danida, the Swiss Agency for Development and Cooperation, MasterCard Foundation, Rockefeller Foundation, World Bank and founda