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Originally published by Maclean’s magazine.

After a long, tense summer in which lockouts and strike action were threatened, Canada Post finally came to an agreement with the Canadian Union of Postal Workers (CUPW). The reasons for the standoff were many, including staffing levels for long routes (which often required overtime to cover), and pay equity for rural carriers—mostly women—who made 28% less than their urban counterparts.

But one issue remains unresolved: Canada Post wants to switch new employees from a defined benefit (DB) plan to a defined contribution (DC) plan. The fact that Canada Post and the CUPW punted on this issue is no surprise. It seems no organization, whether public sector employer, private employer, or government agency, can figure out exactly what to do about pensions. With middle-class incomes remaining stagnant, the cost of living increasing, and retirees living longer than ever, this stalemate is leaving workers in the lurch.

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To the extent that Canadian employees even have a pension plan (and fewer than 40% do), defined benefit plans are the gold standard. DB plans guarantee an annual income to retiring employees based on several factors, including age at retirement and whether a spouse will receive payments if the retiree passes away. Under DB plans, employers are taking a huge risk: if the investment returns generated by the pension managers aren’t enough to cover the payout to retirees, it’s up to the employer to make up the difference. Unfunded liabilities made up roughly $10 billion in employer contributions in 2014, and in the 2012-13 period, they jumped by 25%.

For the rest of the story, visit Maclean’s magazine.

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Originally published on Advisor.ca
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