Canadian Payroll Reporter

10 Canadian HR Reporter, a Thomson Reuters business 2018 News February 2018 | CPR Quebec report takes aim at pension, group insurance plans Proposes prohibition on treating employees differently based solely on hire date BY SHEILA BRAWN THE QUEBEC government should act quickly to amend its labour standards law to prohibit employers from treating em- ployees differently for coverage under retirement plans, group insurance plans and other em- ployment benefits based solely on when they were hired, a gov- ernment task force recommends. In a recently released report, the task force also suggested that the government work with other provinces to examine the feasi- bility of other jurisdictions tak- ing similar action. The government set up the task force in December 2016 to examine the issue of employ- ees being treated differently in employer pension plans based only on their date of hire. The task force opted on its own to include group insurance plans in its study. The move to establish the task force came in response to calls from labour and youth groups concerned that there is a grow- ing problem of younger workers not benefitting from the same type of pension plan coverage as older employees with defined benefit pension plans. "Cases of disparity in treat- ment based solely on hiring date occur mainly in plans that were originally defined benefit plans only. These plans are amended to add a defined contribution component for new members," said the task force report, called Groupe de travail sur la question des causes de disparité de traite- ment dans les régimes de retraite: Current situation and potential solutions. To conduct the study, the task force analyzed pension plans su- pervised by the government body Retraite Québec, as well as collec- tive agreements that provide for a pension plan. It looked specifical- ly at plans that met two criteria: they provided plans with defined benefits for employees hired be- fore a certain date and defined contributions for workers hired on or after that date. Its analysis did not find that differences in treatment based solely on an employee's hiring date were widespread in pension plans in Quebec. Only 97 of 668 defined ben- efit pension plans supervised by Retraite Québec had a defined contribution component for employees hired after a specific date, affecting about 14.5 per cent of plans and about 9.6 per cent of plan members. It also found that fewer Que- bec employers were implement- ing disparity clauses compared to a few years ago. The task force traced the beginnings of the clauses to the early 2000s when declining interest rates, increas- ing life expectancy and financial crises made pension plans, par- ticularly defined benefit plans, more expensive to operate. Instead of decreasing pension benefits for all workers, some employers changed their plans to make them less generous for newer employees, the task force said. Retraite Québec statistics show that the number of plans that introduced disparity-in- treatment clauses based solely on date of hire peaked between 2010 and 2013, after the 2008 fi- nancial crisis and the beginning of a drop in bond rates. In 2012 alone, 18 plans were revised to include them, compared to 11 in 2011 and four per year from 2007 to 2009. Since 2015, when the National Assembly passed amendments that changed funding rules for defined benefit pension plans, the report said the number of plans adding disparity-in-treat- ment clauses has significantly declined. "In 2015, only one plan in- troduced disparity in treatment clauses. No new plan was identi- fied in 2016," the report said. When it looked at collective agreements with pension plans, the task force found that differ- ences in treatment based solely on date of hire were rare, affect- ing no more than one per cent of the agreements and two per cent of workers. For group insurance plans, the task force looked at two types of coverage, contracts where cover- age ends when employment ter- minates and contracts that pro- vide post-retirement coverage. With both types, the report said it was difficult to determine how common disparity-in-treatment clauses are across Quebec. "Unlike pension plans that are under the supervision of Retraite Québec or labour standards monitored by the CNESST, group insurance contracts and other benefits are not registered with a government body," said the report. "As a result, the Québec gov- ernment has very little data on group insurance plans. It is not possible to illustrate the phe- nomenon's scope and nature us- ing real cases or analyze the issue based on comprehensive data with the information the gov- ernment has," it said. The Canadian Life and Health Insurance Association told the task force that differ- ences in coverage based solely on date of hire were uncommon for plans that provide group in- surance coverage until termina- tion of employment. For plans providing post-re- tirement coverage, the associa- tion said there were a few cases see WE HAVE page 12 Credit: CL-Medien (Shutterstock) The Quebec government set up a task force in 2016 to examine the issue of employees being treated differently in employer pension plans based only on their date of hire.

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