Scores of New Brunswick pension funds were rocked by the global 2008 financial crisis, which sent asset values plummeting. Across Canada, the value of corporate and government investment holdings crashed, leaving many without assets to pay existing and future pensions. Careless pension management and a frail economy made matters worse in New Brunswick.
Among the hardest hit New Brunswick pensions was a plan for ten thousand working and retired nurses and health care and community employees. Health care employees enjoy great benefits because of incentives needed to draw workers to an aging, sparsely settled province. New Brunswick nurses earned average salaries of $72,000, while making a modest pension contribution equal to 5.25 per cent of their paycheques – one of the lowest rates in the province. Further weakening the plan, the provincial government, which employs nurses and health care workers, had been allowed to spend the fund’s surplus to enhance pension benefits. The practice, unchallenged by union and plan members, left the fund with little cushion to absorb market shocks.
When the 2008 financial crisis struck, the pension fund was mortally wounded. By the end of 2008, the value of assets plunged to $830-million from $1.2-billion, leaving the plan with a deficit in excess of $340-million. It was a brutal blow for a fund facing a huge increase in retirements. In the nurses union, more than 40 per cent of workers are over fifty-five, leaving little time to recoup the losses.
On June 26, 2009, the plan’s governing committee met inside the squat, red brick Wu Conference Centre at the University of New Brunswick. Gathering in the Fredericton campus at a large horseshoe table were the unions’ senior executives and a handful of provincial officials.
Joining them were two advisers who would become indispensable pension paramedics.
In his mid-forties, Conrad Ferguson is tall and rangy, with a thick crop of grey-flecked black hair. His uncanny ability to forecast the implications of pension modifications would frequently be put to good use as New Brunswick struggled to fix its pension system.
Sue Rowland, an outspoken lawyer in her mid-sixties, had represented governments or workers in some of the country’s biggest corporate restructurings, including Algoma Steel and the Canadian arms of Chrysler and General Motors. By the late 2000s, job stress had taken a toll on her health. She selected less demanding cases and devoted time to her octogenarian husband. One 2004 assignment she did accept was advising New Brunswick medical workers. Rowland initially hoped to travel to the province a few times a year, but she and her husband were so attracted to the friendly, no-nonsense Maritimes that they bought a second home near Fredericton.
With no imminent funding help from the province, Ferguson said, the plan had some tough decisions. Employees would have to increase pension contributions by an additional 8.55 per cent of salary or the value of future benefits would be reduced by 66 per cent. Both options put an enormous burden on current workers. Without drastic measures, the actuary warned, the pension plan was no longer sustainable. “It was the holy shit moment,” said Rowland. “That’s when we knew it was going in the tank. Unsustainable is actuarial code for bankruptcy.”
Saving the plan
After Ferguson dispensed grim pension deficit news in 2009, a committee of union and government representatives endorsed a recommendation that benefit cuts be shared by all members, including retirees. The committee dispatched Ferguson and Rowland to find a fair, pragmatic solution. The committee’s willingness to swallow harsh medicine was crucial. Few unions cede core benefits such as pensions without a fight. But the nursing and hospital employee union leaders on the committee understood from the beginning that they needed to move quickly to save their damaged plan.
Marilyn Quinn was elected president of the New Brunswick Nurses Union in 2004 after twenty years as a palliative care nurse. “You can’t work in palliative care and not have hope,” says Quinn of the years she spent helping families reconcile themselves to death. When she heard the pension diagnosis in 2009, she says, “I put on my palliative care glasses. It was time to be honest and tell people what they didn’t want to hear.”
Her counterpart, Susie Proulx-Daigle at the New Brunswick Union, had a tougher challenge. Her group was a local of Canadian Union of Public Employees, whose national leaders strongly oppose pension cuts. “I told them that we had our own problems in New Brunswick and that we were going to solve them our way. We are more of a social union. We are part of communities that work together to fix our problems.”
To prepare members for harsh medicine, the unions made two crucial decisions. The first was trusting membership with bad news. Shortly after meeting with their actuary in June 2009, the unions alerted members in a newsletter that pension benefits could be reduced or changed and contributions increased to fortify the wounded fund. “Transparency was essential; we told them what was happening and they trusted us to do the right thing,” said Quinn.