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Canada Post workers demonstrate outside the riding office of Prime Minister Justin Trudeau in Montreal, Saturday, Aug. 6, 2016.Graham Hughes/The Canadian Press

The Canadian Union of Postal Workers is standing by its position to preserve its defined benefit pension plan, despite a new decision that will see another workers group switch to a defined contribution plan for new employees.

Arbitrator Michel Picher accepted Canada Post's proposal to reach a new collective agreement with the Canadian Postmasters and Assistants Association (CPAA), a union representing 5,000 rural workers across the country. A key change that resulted from the final offer arbitration includes shifting toward a defined contribution pension plan – a savings plan that does not pay a guaranteed level of pension in retirement – for all new employees.

The decision also means that the 50,000-member CUPW, the largest Canada Post union, is the last postal group that has a defined benefit plan for new employees, in which workers earn a specific amount of pension regardless of how the fund's investments fare.

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CUPW president Mike Palecek said the arbitrator's decision does not change the union's approach as it goes forward in negotiations.

"It actually confirms the approach we're taking in these negotiations," Mr. Palecek said. "The fact that management has been able to bully the smaller unions into accepting this is not going to absolve them of the responsibility of negotiating. We want a negotiated collective agreement."

Canada Post spokesman Jon Hamilton said the corporation needs to address long-term sustainability issues with the pension fund through the implementation of a defined contribution plan for all future employees. The corporation is grappling with a pension solvency shortfall that totalled $6.2-billion at the end of 2015, leaving the plan about 78-per-cent funded on a wind-up or solvency basis. "It's a fair, reasonable and responsible approach to address the very real issue the pension plan is facing. The solvency deficit is growing and the size of the pension plan is growing faster than the revenues of the corporation," Mr. Hamilton said.

CPAA president Brenda McAuley said she was disappointed and saddened by the arbitrator's decision. The union had proposed a modified defined benefit plan, with indexing that would be conditional on how the pension was performing. "We've been the CPAA for more than 100 years and we feel getting a defined contribution pension plan is selling out our new members," Ms. McAuley said, adding that 96 per cent of the workers in the union are women. "There are very few good paying jobs in rural areas so it's very disappointing for the next generation of postal workers. It's a sad day for women workers in rural Canada."

Canada's public sector had been largely impervious to the idea of moving toward defined contribution pension plans. But pension plan consultant Keith Ambachtsheer said such shifts in the public sector are "inevitable."

"In the corporate world, defined benefit plans are dinosaurs," Mr. Ambachtsheer said. "Increasingly if unions want the corporations that employ their people to be sustainable in the competitive world, you can't lay on cost that make the organization uncompetitive. It just doesn't make sense."

However, some are skeptical of the benefits of a public-sector shift toward defined contribution plans. Alex Mazer, a pension consultant who works with Ontario's largest public-sector pension plans, said it would set an unfortunate precedent and that there are often financial liabilities associated with closing such public-sector pension plans. "I think it would be a real shame if this set a precedent for the public sector," Mr. Mazer said. "It would be bad for workers and especially bad for government finances as well."