Target Versus Defined Benefit Plans

Target Benefit Plans and Defined Benefit Plans: What is the Difference?

Dale Lauber answers a BCRTA member’s question about the real import of Bill C-27, which proposes to create a means where employers can convert Defined Benefit Pension Plans to Target Benefit Pension Plans. Get more information at https://bcrta.ca/target

Q.

I still do not know what a targeted benefit plan is. I think it has something to do with retirement funds that are not working well? We are always being assured the BCTF pension fund is doing well, so do not know if this would affect retired teachers in BC, nor can I find anything on the BCTF website. I would appreciate a very simple, understandable statement about what a TBP is and how it could affect BCTF retirees.

Thank you,

Retired BC teacher

A.

Defined Benefit pension plans, like our Teachers’ Pension Plan, define (calculate) your pension according to salary, years of service, and an accrual rate. This pension promise can be calculated at anytime during your years of contributing to the pension plan. That pension promise is guaranteed. When you retire the calculation is finalized and that pension is guaranteed. The lifetime pension can not be reduced at any time in the future. This is a very important part of our pension plan.

Target Benefit plans are a lot less secure. The plan has a target that it attempts to pay to you on retirement. However, if the pension plan has some years of poor investment returns the pensions promised to workers can be reduced and even pension being paid to retirees can be reduced then or at any time in the future. Quite shocking to retirees when that happens.

Bill C-27 applies to all Federally regulated pension plans – federal government workers, RCMP, soldiers, airlines, railways, ports and banks. This bill would allow Defined Benefit pension plans (which have guaranteed pension) to be converted to Target Benefit pension plans (which have benefits that may be reduced).

The province of Manitoba has already followed the outline of Bill C-27 and proposed a similar process of eliminating Defined Benefit plans and replacing them with Target Benefit plans for workers in that province. We do not want this ‘disease’ to spread to BC and our Teachers’ Pension Plan. Because Bill C-27 has not yet been passed in the House of Commons we want Members of Parliament to know that we are opposed to this surrendering of Defined Benefit plan rights to Target Benefit plans (the word ‘surrender’ is used 14 times in C-27).

Bill C-27 does not directly affect us but it could, if passed, start a trend of Target Benefit plans replacing Defined Benefit plans across Canada and in our province.

Dale Lauber is a member of the BCRTA Pensions and Benefits Committee. He as been a member of the BC Teachers’ Pension Plan Board of Trustees since 2001.