the UFCW Canada Pension Plan
Knowledge is power. Over the next six weeks, we're going to tell you everything we know about the Canadian Commercial Workers Industry Pension Plan. The massive multi-employer plan, commonly known as CCWIPP (as in "quip") covers some 180,000 members of the Canadian branch of the United Food and Commercial Workers International Union and provides pensions for some 35,000 retirees. For reasons that we still can't quite comprehend, CCWIPP is having solvency problems. It has a substantial unfunded liability and members who wish to take early retirement have learned that they might have to take reduced benefits to help CCWIPP trustees to fix the solvency problem. The Financial Services Commission of Ontario (FSCO) is conducting an examination (or something) of the plan to determine whether it is in compliance with pension legislation.
Since 2001 a small but tenacious team of MFD Contributors has been looking into CCWIPP. We've unearthed a lot of information and are digging up more as the days pass. What we've discovered is puzzling to say the least. It also raises a mass of issues related to pension plan governance and administration. It's time that working people who belong to pensions plan know what we know and that these issues are aired publicly. Why?
- Pensions are important. For most working people, a decent pension will mean the difference between retiring into a decent standard of living or retiring into poverty. Decent pensions for working people will become even more important in the years ahead as the boomer generation leaves the workforce. The size of this group is expected to strain government-administered retirement programs like the Canada Pension Plan and Old Age Security program) to their limits. Governments at the federal and provincial level are counting on employer or union-administered plans to cushion the impact.
- Pension plans that provide benefits for service industry workers are that much more important given the low wages and casual employment that is common in this industry. Workers who belong to CCWIPP are not likely to have substantial retirement income from other sources. They'll need the money they're supposed to get from this plan when they retire, in many cases, just to get by. Over the years the UFCW has pitched its pension plan as a big selling point among its members and prospective members. Members have been promised a good pension plan. All the more reason to ensure that their interests are protected.
- A small group of powerful people (high-ranking union officials, senior business executives and their circle of associates) within CCWIPP is entrusted with millions of dollars of workers' money. They are required to invest this money prudently for the benefit of hundreds of thousands of working people. The investment decisions made by this small powerful group will determine the quality of life of hundreds of thousands of workers after retirement.
- CCWIPP members are among the most vulnerable of unionized workers in Canada. Many work in low wage, part time service industry jobs with little hope of full time secure employment. These workers will rely almost exclusively on their pension income to maintain a decent standard of living after retirement. Demographically, this group consists of large numbers of women, people of colour and the working poor (the groups most often cited by mainstream labour movement representatives as the most in need of good union representation, decent wages, benefits and pensions).
- The small powerful group that governs this pension plan operates in an environment where there is little real accountability to members. The laws that govern pension plan administrator look quite stringent on the surface: Plan members are entitled to a lot of information about their pension plan and its investments. Trustees, administrators and other plan functionaries are held to strict codes of conduct. They are required to manage their pension funds prudently, for the sole benefit of plan members. Section 22(1) of the Pension Benefits Act of Ontario puts it this way:
"The administrator of a pension plan shall exercise the care, diligence and skill in the administration and investment of the pension fund that a person of ordinary prudence would exercise in dealing with the property of another person."
- Conflicts of interest are prohibited, and plan trustees are required to formulate and adhere to policies dealing with such issues.
- But whatever the law provides, what happens when pension trustees and administrators don't want to disclose a lot of information or engage in investments that may benefit others more than they benefit plan members? What can plan members do?
- Regulatory agencies in Canada have historically taken a "hands off" approach to pension plan governance. Plan members who have limited access to information about the operation of their plans and the status of their investments and there isn't a lot that they can do about it. That's a shame because greater accountability on the part of people who run pension plans can avoid pension disasters.
- Officials of a number of union-sponsored pension funds in Canada and the US have found themselves in hot water over the past couple of years for questionable investments that resulted in enormous losses. In some cases, hundreds of millions of dollars have been lost. This shouldn't surprise anyone but it seems to surprise a lot of people when it happens - including those who should know better.
- Union pension funds are particularly vulnerable to exploitation by unscrupulous business people. The powerful union officials who sit as trustees of these funds are not, whatever they might think of themselves, experts in business or finance. The millions of dollars at their disposal makes them desirable targets for the business community and especially for entrepreneurs seeking financing for ventures that are considered too high a risk for conventional lenders.
- Underlying the activities of the small, powerful groups who sit atop enormous piles of workers' money, are broader issues of union democracy. Secrecy around pension plans is part of a culture of secrecy that pervades undemocratic unions. There is great reluctance on the part of the mainstream labour movement and its leaders to acknowledge and address issues of internal union democracy, but these issues are not going away. Reform movements are springing up in many of these unions. Union democrats are engaging in innovative strategies to further their objectives. How organized labour responds to these developments, has far-reaching implications for the labour movement and for the business community as well.
The Financial Services Commission of Ontario, the regulatory agency responsible for ensuring that CCWIPP is operating in line with pension legislation, is in the process of conducting some kind of inquiry into CCWIPP (FSCO officials have used a number of different terms to describe exactly it is that they're doing: Audit, review, examination). Their handling of this inquiry will say a lot to union members and to the public in general about how this regulatory agency enforces its mandate and what working people can expect if they ask for assistance in pursuing issues related to their pension plans. How seriously are members' complaints and concerns taken? How do regulators respond when the trustees begin to turn up the heat? That's what really counts.
Our belief that workers' issues are for the most part non-issues in the eyes of the mainstream media, law enforcement agencies and government regulators, is what prompted us to do our own digging into what's happening with CCWIPP. What we've discovered is... perplexing.
- Substantial investments, some in the order of hundreds of millions of dollars, in high-risk real estate investments, on terms highly favourable to the recipients.
- A significant concentration of investments in businesses controlled by a man named Ronald H. Kelly, a self-admitted pedophile who is believed to be hanging out in Panama.
- Continuing patterns of investment in enterprises that generate no returns or that consistently generate losses.
- Investments in companies in which CCWIPP Trustees, including the Chairman of the CCWIPP Investment Committee, are Officers and/or Directors.
- The use of consulting and administrative services provided by firms controlled by CCWIPP Trustees.
- The use of single purpose intermediary firms, controlled by officials from CCWIPP's Investment Committee, to flow funds from CCWIPP to the recipient enterprises.
- Valuation and reporting of that begs a lot of questions.
- The buying back, through these intermediary companies controlled by CCWIPP's Investment Committee, of financially troubled businesses from investors who have been the recipients of CCWIPP financing.
We're going public so that neither the regulators nor others with responsibility for safeguarding workers' resources (which is what pension funds are) can say, "Oh we didn't know about that. Gosh, why didn't somebody tell us?" We also want to share what we know with CCWIPP members and with the community of workers in general so that they can better understand what goes on with their pension plans, what to look for and where to look if they're not getting a warm feeling.
We know that pension stuff isn't high on most people's list of interesting reading. It involves a lot of terms and concepts with which most people are unfamiliar. Relationships between the players can be complicated and it can be difficult to keep focused on the issues and not get overwhelmed. For this reason, we've tried to organize this feature in a way that will make it an interesting read, easy to follow and to understand. Our feature will be presented in six segments at (roughly) one-week intervals. Included in each segment will be links to resources and information that will demystify the concepts and terminology used by the experts so that the community of workers can be knowledgeable too. As always, we welcome your comments, ideas and any information that you might want to share.
The six parts of Full Disclosure:
Pension plans, unions and collective bargaining - a source of empowerment for workers or play money for big shots? A brief history of the Canadian UFCW and the evolution of CCWIPP. CCWIPP facts and figures. What's going on and why it got our attention. Resources and information about pensions.
The Boys and their Plan
The men and women of CCWIPP and its ancillary businesses. The investment committee, the investment corporations, tangled webs of business unionists and businessmen, big shots and magicians.
Following the Money
Innovative investments and underwhelming returns. Where millions of pension plan dollars have gone and what the members have to show for it.
Union Member at the Gates
A pension plan member decides he's had enough. A story that may well shake the foundations of the pension plan investing community and the house of labour.
Watching the Watchers
The regulators: A helpful bunch of guys or asleep at the wheel? What pension regulators in Alberta and Ontario know about CCWIPP and what they're doing about it.
Hot on the Trail
We tell all about the mission to solve the CCWIPP puzzle. Where we looked, what we found, where it led us and where we're going to from here. We'll also tell you why it's virtually impossible for working people to find out what's happening with their pension plans and why it's time our governments step in.