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Politics Longer phase-in of CPP reform convinces skeptics to support deal

Saskatchewan Premier Brad Wall.

The Canadian Press

Ontario's strong threat to go it alone on pension reform was the key factor in getting skeptics like Saskatchewan Premier Brad Wall to support the first major expansion of the Canada Pension Plan in its 50-year history.

Saskatchewan's signature was one of the biggest surprises of Monday's landmark deal, given that a week earlier the province described itself as the leader of the "naysayer" parade.

Federal Finance Minister Bill Morneau reached the CPP deal with most of his provincial counterparts Monday night after years of debate over Canadians' preparedness for retirement, but Manitoba and Quebec did not sign on. The breakthrough came after British Columbia proposed a longer phase-in to help provinces fearful of the deal's impact on their economies.

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That was the worry of some business groups as they came out swinging against the plan Tuesday and raised concerns that few details were revealed. The deal was announced with very little background information to show how the enriched benefits and higher premiums would apply at various income levels.

Mr. Wall, who has been a particularly vocal critic of CPP expansion in recent years because of higher premiums, said he agreed to sign on with a more gradual time frame.

"Saskatchewan had a choice to make the CPP changes better by going slower with an extended implementation period, or sitting it out and risking that a more aggressive plan like the Province of Ontario's would be implemented nationally," he wrote on Facebook on Tuesday.

Indeed, Ontario Premier Kathleen Wynne credited her government's tenacity as the key factor that helped achieve a breakthrough in negotiations.

Describing herself as a "thorn in the side" of her colleagues on the issue of retirement security, Ms. Wynne told reporters Tuesday morning that had she and her government "not continued to put this issue out on the table squarely … I firmly believe we would not be here today."

"Ontario's determination has paid off with a national framework," she said.

The day after the agreement in principle was signed in Vancouver, key questions remained as to how the enhancement would work.

Canadian Manufacturers & Exporters criticized the deal, saying businesses had not been properly consulted and the economy would suffer.

"The reality is that each business only has so much money to invest," Jayson Myers, CME's president and CEO said in a statement. "The more money that goes to governments, the less that is available to improve their operations to make them more competitive and grow."

The small business lobby group the Canadian Federation of Independent Business described the deal as "a devastating move for Canadian workers and the economy in general."

Frank Swedlove, president of the Canadian Life and Health Insurance Association, expressed concern that those earning close to the proposed new threshold for insurable earnings of $82,700 will face significantly higher premiums.

"While we said in our press release that this would be modest, as we crunch some numbers, I think we're of the view that for many Canadians, this won't actually be modest," he said in an interview.

Quebec, one of the two holdouts, has said it will adopt some but not all of the changes via its own Quebec Pension Plan, which already operates independently of the CPP.

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Manitoba Premier Brian Pallister told reporters in Winnipeg Tuesday that his cabinet would be reviewing the agreement this week to decide whether to support the expansion.

"This is the first major change in the CPP in its history and so it's very important to get it right," he said. "I also want to use this opportunity to make sure that all Canadians get it right, too. The CPP was never designed to be the only way that people secure their retirement future … This is our opportunity to elevate the financial literacy of Canadians."

Several provinces said Tuesday that the decision to delay the start date to 2019 and have the expansion phased in gradually until 2025 was instrumental in getting a deal.

Alberta Finance Minister Joe Ceci said he was looking forward to supporting a deal, but he went into Monday's meeting concerned about any agreement that could further weaken his province's ailing economy.

Alberta's energy-dependent economy is in a second year of recession and wages are falling. Mr. Ceci says the deal is balanced, increasing retirement support for Albertans while allowing the province's economy to recover first.

"I and others pushed to see that the expansion won't begin until our economy rebounds. The overriding issue for me was jobs and economic growth," he said. "Our economies are fragile and we need to see them rebound."

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Ministers had been trading letters and phone calls over the past few weeks, but the face-to-face negotiations began Sunday night over dinner at CinCin Ristorante, an upscale Italian bistro on Vancouver's Robson Street.

The official meetings took place at the Pan Pacific hotel on Monday morning.

According to B.C. officials, there was a standoff over Ontario's insistence that the new plan should start in 2018. The conference host, B.C. Finance Minister Mike de Jong, argued that the alternative timeline would ease the burden on business and workers during a period of economic fragility. He also stressed that it was important to keep Ontario in the CPP system, and to get Canadians to save more – but just not as quickly.

Ontario Finance Minister Charles Sousa said Saskatchewan, which has criticized the enhancement scheme as a payroll tax, had always been a "no." But after lunch on Monday, the dynamic changed – and Mr. Sousa says he was "dumbfounded."

"After our lunch … Saskatchewan said 'Charles we are prepared to go in,'" he recalled.

Saskatchewan wanted the timeline pushed back by a year so that it would start in 2019.

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"They said, 'Move the goal posts and we'll play,'" said Mr. Sousa, who referred to that as a "defining moment."

New Brunswick Finance Minister Cathy Rogers praised Ontario for "leading the way" and for being flexible during the talks.

"I am thrilled that we are able to come to a national solution where people didn't have to go their own way," she said, adding that she didn't think they would reach a deal. "I wasn't as positive when we walked in. I wasn't sure we were going to get there."

With reports from Justine Hunter, Justin Giovannetti and Bertrand Marotte

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