E-mail from the FARQ to the delegates of its member associations

March 31^st, 2009

As we already informed you in our previous e-mails, last January 15^th the provincial assembly of the Government of Quebec unanimously adopted Law 1 in an extraordinary parliamentary session. For the FARQ, this law is above all an aid to employers by allowing them, in this crisis context through which we are passing, to spread out over 10 years rather than 5 years the payment of the additional contributions to offset the solvability deficits of our pension funds which will have the effect of substantially reducing them (up to 73 % according to Morneau Sobeco). This law additionally weakens our pension funds during this time of crisis for which 94 % of them had a solvability deficit on the 31^st of December, 2008 (according to Aon).

Let’s recall that this law followed on from the recommendations put forth by the overseeing committee set up by Minister Hamad in November 2008 and which was composed of representatives of two union federations, of employers, of the Chambers of Commerce and the Quebec Pension Board (RRQ). The objectives sought by this committee were:

Law 1 established also that the great majority of the measures related to these two objectives will be elaborated upon by regulations for which the draft should be published in the spring of 2009. (See the attached Lettre Express by the RRQ of the 18^th of March). On last February 27^th, we were invited by the RRQ to a session, called pre-consultative, on the different measures foreseen by this draft. Present at this meeting were the representatives of the principle retirement and seniors associations of Quebec as well as five representatives of the RRQ. Mr. Luc Arsenault, the representative of Minister Hamad, , was present by telephone conference. Essentially the actuaries of the RRQ, using a slide show, verbally presented us the measures contained in the Lettre Express of last March 18^th which is annexed to this present document. It would be extremely difficult at this time to analyse in depth the elements of this meeting. No document having been provided to the participants, it was necessary to wait three weeks to read the Lettre Express on the RRQ web site. So you’ll understand the delay in informing you.

However, the FADOQ Network and the FARQ tabled on this occasion a document copied to the representatives of the RRQ as well as the other persons present expressing the point of view of our two organisations and affirming that "the retirees should not be penalised because of the enactment of government measures to help employers and most particularly of the lightening of the obligations undertaken by the employers as regards pension plans". You’ll find this document attached to this e-mail.

Whereas the interventions of FARQ/FADOQ have resulted in a certain improvement of the law in favour of retirees as regards the initial objectives of the overseeing committee, this law none the less makes retirees support a good part of the effect of the economic crisis particularly in the case of bankruptcy. An example, take the case of an employer in financial difficulty for which the pension plan on the 31^st of December 2008 had a solvability deficit of 15 %. By using the dispositions of Law 1, this employer could greatly reduce the additional contributions required to offset the deficit. In case of bankruptcy of this employer 2 years later for example, the pension payments will be cut, but the Minister promises that the law will cover the difference of the shortfall caused by the reduced offsetting contributions, that is to say because of the application of Law 1. By how much will the payments be cut? That’s an important question. If during this same 2 year period, the financial markets continue to degrade by another 15 %, the deficit will increase to 30 % instead of 15 % and the pension payments will be cut by 30 % and not 15 %, without counting the additional cut for the pension payments uncut 2 years previously, similar to what our colleagues of Maritime Shipyard at Levis have known. That’s the situation that could happen in cases of bankruptcy. We raised this problem with the RRQ during the meeting of last February 27^th. The RRQ hasn’t replied.

The FARQ and the FADOQ are always against reductions in pension payments in the case of employer bankruptcy. Several times, they have requested corrective legislation so that retirees will not be the victims of such situations, for they are in no way responsible. The regulations of Law 1 will result in reductions in pension payments in the case of bankruptcies, that’s why our two associations do not support this law. We have also sent to Minister Hamad, a draft letter, which you’ll find a copy, proposing our solutions so that retirees will not be unjustly treated.

The debates on this Law 1 will be on the agenda of the next annual assembly of the FARQ which will be held this year in Montreal this May 1^st. The documentation will be sent to you soon. I’d like you to reread the memorandum that the FARQ/FADOQ submitted to the RRQ in September 2005. This document remains completely up to date and will allow you to have a better understanding of the present situation.

Good reading and looking forward to the pleasure of our next meeting at the FARQ annual assembly.

Jacques Beaudoin, President

FARQ