Representing 1,300 Manitoba Workers
Think Carefully Before Changing Pension Plans
On September 24, MTS announced that it was implementing a new 'Defined Contribution Plan'. The new Pension Plan would be mandatory for new Manitoba employees hired after the implementation date, which will be January 1, 2010. It will be optional for existing employees who are currently enrolled in the MTS 'Defined Benefit' Pension Plan. There are many distinct differences between the two plans and, in the union's view, the MTS Defined Contribution Plan, and Defined Contribution plans in general, are inferior in many ways, to the Defined Benefit Plan currently in place.
The main difference between defined contribution and defined benefit plans generally is that when you are enrolled in a DB Plan, your retirement allowance is fixed and protected. If there is a shortfall in the fund (due to economic conditions or for any other reason), your employer is required by law to make up the shortfall so that your pension payout is in accordance with the monthly retirement allowance set out in the plan fund text.
A defined contribution plan in reality, acts like a savings account. Enrollment in a defined contribution plan means that any contributions you or your employer makes to your pension account are subject to the volatility of the market. Instead of your retirement payout being 'defined' or established by the plan as in the case of a DB Pension, only your contribution into a DC plan is 'defined' or established. What you receive when you retire is subject to interest rates that have impacted the plan over the time your money has been invested, the timing of your retirement and the choices you have made as to how to invest your retirement contributions.
We would all agree that the recent volatility of the marketplace and low interest rates have been a major concern over the past few years. Therefore, we would urge any employee who is even contemplating moving their funds from the current DB plan into the newly implemented DC plan to seriously weigh the advantages and disadvantages of any such move, to contact the union and/or their financial advisor, to do further reading about these two distinct types of pension plans and to carefully review the terms and conditions of this particular MTS DC plan which is being implemented.
Retirement is a serious issue to all of us, whether those days are around the corner or a long way down the road. Please thoroughly consider the ramifications of making any decisions which would have a negative impact on your ability to enjoy retirement years with a decent income.
The company has indicated it intends to provide information so that employees can reach "an informed decision". We urge you to ensure the information you review is not one-sided and incomplete and the union will do its best or provide as much information as possible to address your concerns. In addition to individual pension considerations, the Local is consulting with its legal counsel in connection with the implementation of the new DC plan by the company.