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Another UFCW Pension Plan in the Hole

Written by Wanda Pasz Friday, 24 February 2006

In the wake a report about a possible police investigation of the UFCW's Canadian Commercial Workers Industry Pension Plan, yet another solvency-challenged UFCW pension plan has surfaced. A concerned member of the Ontario UFCW Pension Plan has asked the Financial Services Commission of Ontario to investigate.

The full text of the concerned member's letter to the FSCO:

Dear [FSCO]:

I am a member of the Ontario UFCW Pension Plan (0930396) which is registered in Ontario and is under the jurisdiction of the FSCO. In 2004 I was advised by my pension plan's trustees of a change to my pension formula that will result in a drastic reduction in my future pension income - a reduction that will work out to members receiving 70% less in pension income.

The Board of Trustees of my pension plan is controlled by the same union that controls the Canadian Commercial Workers Industry Pension Plan - the United Food and Commercial Workers (UFCW). Indeed, the Board of Trustees of my pension plan is controlled by the same man who until recently controlled the CCWIPP Investment Committee - Cliff Evans.

As you are aware, the CCWIPP has been the subject of a rather lengthy examination by the FSCO. A report of the findings of this examination issued in May 2005 and an addendum issued in December 2005 found widespread violations of the Pension Benefits Act and I understand from recent media reports that the RCMP is considering a criminal investigation. I further understand that CCWIPP has a substantial solvency deficiency and that members' benefits have been reduced as a result of efforts to remedy this deficiency.

The fact that my plan, controlled as it is by the same union and the same man, is in a deficit position with an enormous burden being placed on members has caused me much concern. As a result of that concern, I recently visited the FSCO offices and reviewed a number of files related to the Ontario plan.

I was shocked to learn that this plan, being fully funded in 1999 with a surplus of $961,000.00, had by 2002 developed a solvency deficiency of $2.5 million which has since ballooned to approximately $13 million.

This is particularly alarming since other documents on file at your office attest to the fact that during the period of 1999 - 2005, the pension plan's investments had high rates of return (13% in 2002) as well as a growing membership base. Actuarial reports for recent years offer no explanation for this at all. One actually states rather smugly that it's pointless to look at these details. Yet during this period a huge solvency deficiency developed and the plan's transfer ratio plummeted from 1.0 to 0.67.

I want answers.

How did this plan go from a surplus of almost $1 million dollars to a solvency deficit of $13 million dollars in less than five years? What investment decisions led to this catastrophic situation? Which investments caused this to occur and how much pension money was invested?

In addition, I would also like an explanation of the following items:

1. The financial statement for 2001 refers, at page 6, to "an unrealized decrease in fair value" of $1,436,578. I want to know what caused this. What particular investment was involved? What was the "fair value" and what caused the decrease of $1.4 million?

2. The financial statement for 2000 refers, at page 6, to a "realized loss on sale" of $1,756,850. I want to know what caused this. What was sold and why was it sold at a loss? Who was the vendor and who was the purchaser?

3. The changes that have been implemented to member's benefits will have the effect of reducing real pension income by 70%. This is outrageous! I want to know why such an enormous reduction is necessary and how the FSCO would see fit to approve this without conducting an examination of how this plan came to be in such bad shape.

I also noticed that your files, while containing numerous draft financial statements, did not have financial statements predating 1998. You indicated in an earlier message to me that financial statements for the period 1991 - 1996 were missing. I would like to have copies of these statements and believe that as a member I am entitled to these. I request that you obtain copies from the trustees and let me know when they are available. Please explain why a regulatory agency accepts draft documents, unsigned financial statements and why financial statements for a number of years are missing?

Lastly, given the very troubling circumstances of this pension plan and its close connection to the very troubled CCWIPP plan, I am requesting that the FSCO commence an examination of this plan to ascertain whether its trustees have been acting in compliance with the Pension Benefits Act and other relevant legislation.

I look forward to your reply.

[Name withheld]

What's the FSCO going to do? We'll keep you posted.

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