Thank you, Mr. Speaker. Thank you, Mr. Dolynny.

Other Issues

1. Solvency versus Going-concern Valuation

Section 31 of Bill 12 sets out the requirement that the NEBS plan be funded on a going concern basis, rather than a solvency basis.

Although this was not raised as a concern in any of the submissions received by the standing committee, the committee gave consideration to this section of the bill, which represents a change in the way NEBS has conducted its business in the past.

A solvency valuation is performed to determine the funded status of a plan if it were to terminate on a certain date. It is a common practice for private sector plans to be funded on a solvency basis where there is a much greater risk that a plan might wind up as a result of bankruptcy or business closure.

A going-concern valuation, by comparison, is calculated based on whether or not there is enough money now in the plan, when combined with expected new contributions, to cover the benefits of current and future retirees.

The standing committee was persuaded by NEBS’ position that it is more appropriate that this pension be funded on a going-concern basis, as it is a type of pension plan that is likely to operate indefinitely and one which is not facing an immediate threat to its existence.

2. Limiting the Scope of Intergovernmental

Agreements

In order to deal with the practicalities of operating the NEBS plan in a multi-jurisdictional

environment, Bill 12 allows for the Minister responsible to enter into intergovernmental agreements respecting matters related to the NEBS plan. In some defined circumstances, the terms of an intergovernmental agreement will prevail, if there is a conflict, over some sections of the act.

The standing committee acknowledged the rationale for intergovernmental agreements, given the multi-jurisdictional nature of the NEBS plan, but was concerned about ensuring in the legislation that the power afforded to governments, in entering into intergovernmental agreements, not be used in such a way as to circumvent requirements of the act. Motion 3 addresses this concern.

3. Addressing the “50-50 Rule”

Clause 32 of Bill 12 specifies that, under the NEBS plan, the contribution rate for active members must be equal to the contribution rate for participating employers.

The standing committee considered the possibility that employers may wish to make pension contributions in excess of 50 percent, as an employment incentive to recruit and retain workers. The committee discussed with Minister Miltenberger the option of amending the legislation to provide the flexibility to the Pension Committee to increase the employer contribution rate beyond 50 percent.

In declining to concur with the committee’s proposal, the Minister offered the rationale that the trend for public sector plans across Canada is to require 50-50 cost sharing. The Minister also pointed out the inherent logic in enshrining a 50-50 cost sharing arrangement to complement the proposed amendments to clause 12 creating a 50-50 governance model for the Pension Committee.

The standing committee reviewed pension legislation across Canada, to determine how other jurisdictions addressed the matter of employee-employer contribution rates. Their research revealed that: • All of the statutes reviewed have clauses

intended to prohibit an employee’s contributions to his or her pension from exceeding a certain level or threshold. Under the Pension Benefits Standards Act (Canada) and eight provincial statutes, the employee’s contribution plus interest may not exceed 50 percent.

• The New Brunswick Pension Benefits Act

permits the minimum employee contribution to be determined according to the relevant pension plan. However, where the pension plan is silent, then “the plan shall be deemed to have fixed the percentage at 50 percent.”

• Three jurisdictions – Manitoba, Ontario and

Newfoundland and Labrador – refer to this as the “50-50 Rule.” In others, it is variously referred to as the “minimum commuted value,” “maximum employee cost,” or the “minimum employer contribution.”

The standing committee found that, while the effect of such provisions may be to create an environment where 50-50 cost sharing is likely to occur, the legislation is not worded to require cost-sharing. The committee’s research did not reveal any provisions in any of the statutes it reviewed that prohibit an employer from making a contribution in excess of 50 percent.

Therefore, while the committee was not persuaded by the Minister’s assertion that the trend across Canada is 50-50 cost-sharing, the committee was willing to concede that the amendments to clause 12, allowing for balanced employee-employer membership on the Pension Committee, was reasonable grounds for acceptance of the “50-50 rule.”

What We Did

The standing committee listened intently and gave careful consideration to the opinions that were expressed at the public hearing on Bill 12.

The clause-by-clause review of the bill was held on February 19, 2014. At this meeting, the committee moved 12 separate motions to amend Bill 12. Each of these motions was carried and Minister Miltenberger concurred with each:

Motion 1 - To amend clause 2 by adding “defined

benefit” after “multijurisdictional.”

This amendment clarifies, in legislation, the commitment to have the NEBS plan operate and be interpreted as a “defined benefit” plan rather than a “target benefit” plan. There is further discussion related to this motion under Motion 6, below.

Motion 2 - To amend clause 7(2) to add a provision

to provide than an intergovernmental agreement cannot waive any requirement under the act.

This amendment provides that no provision of an intergovernmental agreement may be used to waive statutory requirements of the act.

Motion 3 - To amend clause 11(3)(a)(ii) to remove

the power of the board to determine the number of pension committee members.

This is a consequential motion necessitated by the amendment to clause 12, Motion 5, which specifies the number of pension committee members. Given that the composition of the pension committee will be set in the legislation, it is no longer appropriate, and legislatively confusing, to have the current sub- clause permitting the board to set the number remain in the bill.

Motion 4 - To amend clause 11(3) to remove the

power of the NEBS Board to approve or reject contribution rate increases for participating employers.

This motion is related to Motion 6 to amend clause 15(3) and removes the authority of the board to approve or reject Pension Committee recommendations for contribution rate increases for employers.

This motion, in conjunction with Motion 6 to amend clause 15(3), means that the power to recommend and implement increases will lie with the pension committee, not the NEBS Board.

Motion 5 - To amend clause 12 to set forth the

composition of the Pension Committee.

As originally drafted, Bill 12 proposed that the Pension Committee be composed of two independent members and such other members as the board determines.

The standing committee heard the concerns that the composition of the Pension Committee was seen to be weighted to favour the interests of employer members over beneficiaries, and that employees were left without an effective voice in the governance of the NEBS plan.

The standing committee passed a motion to amend clause 12 to provide for equal employee/employer balance, with one independent member of the Pension Committee. It also provides that the pension committee shall elect its own chair. The standing committee believes that this amendment to the bill will implement a fair and balanced governance model for the NEBS plan.

Mr. Speaker, I now ask to turn the report over to my colleague Mr. Yakeleya.