British Columbia Fire Fighters Achieve Breakthrough on Pensions

June 30, 2009 -- Professional fire fighters in British Columbia have taken a major step toward solving a longstanding pension problem -- a step that takes full advantage of a regulatory change the IAFF won at the federal level in Canada in 2003.

On June 16, Surrey, BC Local 1271 signed a landmark agreement with its employer to move into a newly-created group within the provincial pension plan that covers municipal employees. The group qualifies for an increased annual pension accrual rate of 2.33 per cent for each year of credited service, compared to the 2 per cent available to most working Canadians. The higher accrual rate will significantly improve a retired fire fighter’s monthly pension.

Local 1271 President Larry Thomas, who is also Secretary-Treasurer of the British Columbia Professional Fire Fighters Association, says a handful of other British Columbia affiliates are close to signing similar agreements, and it’s hoped that most of the province’s 49 IAFF locals will eventually be able to negotiate the 2.33 per cent accrual rate with their employers now that it’s available.

Thomas, as the fire and police representative on British Columbia’s Municipal Employees Pension Committee, was instrumental in the six-year battle to create the new 2.33 group. He explains that previously, most British Columbia fire fighters enjoyed a defined benefit pension plan as well as a supplemental defined contribution plan, to maximize retirement income.

But as fire fighter salaries rose over the years, the supplementary plan began to exceed the maximum allowed under federal pension regulations. Further rule changes in 2003 meant that 30 per cent of the supplementary pension income was cut, and contributions to the plan were being refunded.

Coincidentally, in December of that year, Canada’s Income Tax Act regulations were rewritten in direct response to IAFF lobbying to specify that fire fighters can benefit from a 2.33 per cent annual pension accrual rate, thus making it a viable option to improve fire fighters’ pensions within provincial pension plans. And Thomas says the increased accrual rate became the new goal for British Columbia fire fighters right away.

“It kind of fell on our lap at the same time, so we started a grassroots lobby within the pension plan to make the 2.33 an option available,” he says.

Wisely, the fire fighters and police, who also qualify for the increased pension rate, hired actuaries to look at the existing plan and assist with strategic advice. Though expensive, it turned out to be a good move, as the actuaries provided them with extremely valuable information such as the fact that fire fighters were in fact subsidizing other plan members’ pensions and that switching fire fighters to the new 2.33 per cent accrual rate would actually cost employers less.

The more fire fighters learned about their pension system, the easier it became to counter arguments made by the employer representatives on the pension committee. Fire fighters discovered that the employers’ initial arguments against the increased accrual rate were often based on mistaken information and a lack of detailed knowledge about how the pension plan actually worked.

Ultimately, creation of the new group within the plan required buy-in from the three partners on the province’s pension committee; the provincial government, other unions and the employers. The first two groups agreed with the new formula because it didn’t affect their members, but the employers, represented by the Union of British Columbia Municipalities, were a tougher sell.

“Once we could show them it was cost-neutral to other plan members and we would be funding the new pension rate ourselves, they were okay with it,” Thomas said. The rule change was made within the pension plan in November 2008, shifting the focus to negotiating the new system at the local level, which is now beginning in earnest across British Columbia.

With the new accrual rate, employer contributions actually drop by .61 per cent of each fire fighter’s pensionable earnings compared to the previous system. The Surrey local was successful in negotiating that fire fighters should be paid that amount as a “supplemental pension pay allowance” after pointing to existing labour arbitrations that have awarded such amounts to employees, not employers.

“I’m pleased that after six years of hard work, we got an improved pension benefit that’s stable and productive for our members for the long term,” Thomas says. “It allows our members to retire at full pension after only 30 years of service, and that gives them more time to enjoy their retirement.”

IAFF 6th District Vice President Lorne West, also a Surrey fire fighter, commends Thomas for his work on the issue and remarks how a challenge in this case was turned into an opportunity. And he notes that along the way, Thomas has become a sought-after source for information about pension issues.

“At the end of the day, it was the tenacity the fire fighters showed that made this happen,” West says.

At the national level, the IAFF has been lobbying to reform fire fighters’ pensions in Canada since the 1940s. It used to be that while regulations permitted fire fighters to retire early, there was no mechanism to make up for the resulting loss in fire fighters’ retirement income and in a typical scenario, a fire fighter retired with a pension that was 60 per cent of pre-retirement income, below the 70 per cent that is considered adequate for working Canadians.

In a typical scenario, the 2.33 per cent accrual rate would bring a retiring fire fighter up to 70 per cent of pre-retirement income. The increased accrual rate is available to fire fighters who have defined benefit plans that are integrated with the Canada Pension Plan, such as in B.C. and Ontario. For fire fighters who don’t have defined benefit plans, the IAFF is pursuing changes to the Canada Pension Plan that would give them earlier access to their benefits than other workers.

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