Ottawa's rush to approve CPP reforms raises red flags

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Experts are questioning why Ottawa and the provinces are rushing to meet a July 15 deadline to approve this week's landmark enhancement of the Canada Pension Plan given that so many questions remain on how the reform will work.

Late Wednesday, Finance Canada released new figures outlining the higher premiums and benefits that would apply under the deal signed on Monday in Vancouver by Finance Minister Bill Morneau and eight of his 10 provincial counterparts.

The document suggests Canadians earning $82,700 or more in 2025 dollars will be paying $1,100 in new premiums in addition to the $3,415 that would have been paid that year without an enhancement. That works out to a 32-per-cent increase. Employers would match those contributions. Finance Canada presents the ensuing benefits in 2016 dollars, estimating the combined new and existing benefits would reach a maximum of $19,900, which is a 52-per-cent increase over the current maximum of $13,110.

(The CPP is indexed to inflation. It is not clear why the benefit in the document is given in 2016 dollars. The premium increases will be fully phased-in by 2025.)

Many questions remain, including how the expansion will affect federal and provincial programs for low-income Canadians, and how the Canada Pension Plan Investment Board will manage the billions in new contributions that will come from higher premiums.

At the request of Ontario, Ottawa and all participating provincial cabinets must approve the deal no later than July 15.

University of British Columbia economist Kevin Milligan is among those questioning the timeline.

"This is a big, multibillion-dollar change in a program," he said. "I think it is worth the time to make sure that we get this right. I'm wary of a July, 2016, deadline."

The deal released on Monday was a high-level agreement-in-principle that came together only in the final hours. The document the finance ministers signed did not mention crucial details such as the new premium rates and how they would apply. Rough outlines of the premium increase were provided later on Monday and Tuesday to the media from Finance Canada.

As for the details released on Wednesday related to premiums and benefits, Dr. Milligan said the expansion could be considered "modest" in relation to the plan Ontario would have introduced in the absence of a national deal.

"I would characterize it as something Canadians will notice on their pay checks when they're working and also when they're retired," he said.

Mr. Morneau was not available for an interview on Wednesday, but he is scheduled to address Toronto's Economic Club of Canada on Thursday morning.

Ontario Finance Minister Charles Sousa told The Globe and Mail he insisted on the tight deadline because Ontario needed to make decisions soon if it was going to go ahead with its own provincial plan in the event that national talks failed.

"I wouldn't leave the meeting without a date," he said. "I don't want this to be: 'We'll consider this. We'll all sign it and we'll all be happy.' I said, 'Yeah, but give me a drop-dead date.'"

Bill Robson, president of the C.D. Howe Institute, an independent think tank, is also questioning the "hasty" deadline in light of the fact that so many important issues need to be addressed.

Mr. Robson said the lack of detail regarding Monday's announcement raises questions as to whether every finance minister was fully aware of what had been agreed to during the fast-paced negotiations.

"My impression here is that there might not be complete unanimity among the finance ministers about what they actually agreed to," he said. "It's likely there are a lot of loose ends to be tied up, and if that's true, then I would say the arbitrary deadline could be an an obstacle to getting those things right."

Mr. Robson said the public should receive a full breakdown from the Chief Actuary of Canada of how the expanded CPP would work. That analysis should also include an explanation of how the new benefits would interact with federal and provincial programs that are geared to low-income seniors. Mr. Robson said it is not clear whether the enhancement will give low-income retirees any extra money or whether raising their premiums while they are working will simply allow provincial and federal governments to save money on income supplements.

Quebec's main reason for refusing to sign the deal was specifically because it would increase premiums on low-income Canadians.

"It's an unpleasant surprise to see that in the deal," Mr. Robson said. "Quebec's objections on this front are entirely sensible."

Conservative finance critic Lisa Raitt said even though the House is on summer recess, a committee debate or some form of consultation should happen before cabinet approves the deal.

"There's no transparency on it," she said. "This is all very shifty."

With a report from Jane Taber in Toronto