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Retirees turn to lawyer on pension reforms Dispute - TJ

New pension model will require retired civil servants to share future financial risks

BY JOHN CHILIBECK

Legislature Bureau Telegraph Journal July 31 2013

Retired civil servants opposed to the Tory government's proposed changes to their guaranteed pensions have hired a top litigation lawyer.

Ari Kaplan of the Toronto law firm of Koskie Minsky LLP will provide advice to Pension Coalition NB, the group of retirees that banded together in the wake of the government's plans to replace defined-benefit plans with a shared-risk model.

The new model does not guarantee cost-of living increases when markets sour.

'They hired me because I'm a pension lawyer and I was involved in work out in New Brunswick before,' Kaplan said in an interview Tuesday. 'I'm familiar with these issues and advising them on what their rights are. Certainly, the retirees view the situation as analogous to spending your whole life paying the mortgage on your house and the day you finish it off, the government comes and expropriates the house.' Retirees who attended feedback sessions held by the coalition and the provincial government made it clear they were unwilling to part with benefits they felt they had earned over a lifetime of work in the public service. There are 33,000 former civil servants and teachers who could be affected by the changes.

Finance Minister Blaine Higgs was not immediately available for comment, but he has acknowledged his Progressive Conservative government should have done a better job communicating its ideas with retirees.

The government is hoping the new model will shore up underfunded pension plans that were designed in an era of high interest rates, better market returns and much lower life expectancy. Besides shaving government costs, the shared-risk model could also help current employees avoid paying higher contributions. Given the way guaranteed investment plans have faltered across North America, some jurisdictions are considering cutting future benefits, increasing contribution levels - in many cases drastically - or doing an unpalatable combination of both.

'The province firmly believes that the status quo of taxpayers paying $2.50 for every dollar paid by members of the public service plan is not sustainable going forward,' said Brendan Langille, a spokesman for Higgs, in an email. 'The province is working with Pension Coalition leadership and has supported their request for an independent actuary of their choosing to look at the work done to date. We remain committed to working collaboratively with the coalition on a path forward to address the large deficit faced by the plan and make it more secure for our current and future employees.' But the idea of retirees helping out employees and taxpayers isn't gaining much traction with the coalition, which has resisted the changes. The only common ground the two sides have reached was holding public consultations and hiring an independent actuary chosen by the coalition to review the government's numbers - at a $20,000 cost to taxpayers.

'Hiring this lawyer does not mean we have to sue the government,' said Clifford Kennedy, the coalition's spokesman. 'It all depends on the alternative solutions the actuary finds and the legal position we find ourselves in. That will determine what our future actions will be.' Kaplan backed this up, saying it would be premature to sue the government when it hadn't put forward any legislation to make changes.

The Toronto lawyer was previously appointed to represent retired nurses in a 2011 case that was before New Brunswick's Court of Queen's Bench. A pension committee that administered the nurses pension plan had applied to see if it could legally reduce benefits to employees and retirees and raise contribution levels by more than 50 per cent as a means of dealing with the plan's massive deficit. In the end, the court ruled that the committee could reduce benefits of active employees, but not the benefits of retirees who had, in effect, completed their contracts.

Kaplan, who has written a textbook on pension law, says the same principle applies for other public servants.

'There's a fundamental difference between a pensioner and someone who is actively working. Someone who is 70 is not in the same socio-economic category as someone who is 25 and working. The relative impact this has on retirees is much greater than it would on other demographic groups in the plan.' He said retirees typically have little protection because their unions don't represent them anymore, all the more reason for the coalition to hire a lawyer.