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The Public Service Health Care Plan and Our Legal Action


PSHCP Legal Case Update

August 24, 2017

Earlier this month, the Federal Court of Canada released its decision in the matter of the National Association of Federal Retirees and its named applicants who were challenging the decision by the Treasury Board of Canada to increase the health care premiums of retirees from 25% to 50% under the Public Service Health Care Plan.  In her decision, Madame Justice McDonald sided with the Government. The Association has until the end of September to decide whether to appeal this decision. Further information will be provided on our website, in our monthly e-newsletter, and in Sage magazine as the situation unfolds.

What you need to know:

In the past, the federal government focused its efforts to rein in public sector compensation and benefit costs on current employees or new
hires — through such initiatives as pension reforms introduced in 2012 for new hires, and proposals to overhaul sick leave and stop the
accumulation of severance pay.

That changed in 2013. In its 2013 budget, the government signalled its intention to target retirees’ benefits to help ensure an “affordable, modern and high-performing” public service. Later that year, without consultation, then-Treasury Board PresidentTony Clement took direct aim at federal retirees with changes to the Public Service Health Care Plan (PSHCP).

The Public Service Health Care Plan Partners’ Committee had been waiting for more than a year for him to approve an agreement reached in principle on some minor changes to plan coverage. But media reports in July warned the National Association of Federal Retirees that the Treasury Board was set to change the principles of the PSHCP for retirees so that their share of coverage would double to 50 per cent of health care plan costs, up from the 25 per cent retirees had been paying — something that hadn’t been onthe negotiating table. And, as it turned out, the Treasury Board was not willing to negotiate. 

Federal Retirees took immediate action, launching our first Honour Your Promise campaign — an effort that involved every volunteer and member in speaking out against a move that we believe was, and is, illegal. 

Together, our members sent tens of thousands of letters to their Members of Parliament during the fall of 2013. In those letters, members expressed concern over the increase — and many described the serious consequences it could have on their budgets. We’ve estimated that we reached almost every sitting MP, because federal retirees live and are active in nearly every federal riding in Canada.

Hundreds came together with our Outaouais branch to talk about the issue with local MPs. Tens of thousands of our members and
supporters signed petitions, one of which was tabled in the House of Commons by the Official Opposition leader at the time, Tom Mulcair. The petition asked Tony Clement to honour the promises made to federal retirees and to immediately stop plans that would be
detrimental to the retirement and health care security of any Canadian.

“This issue is about more than balancing budgets and ensuring the public service is affordable for Canadians,” said then-president of Federal Retirees Gary Oberg. “This is about honour, and it is about whether or not the Government of Canada will meet the moral obligations it has — and honour the promises made — to its retired employees and veterans regarding their compensation.” 

In 2014, the PSHCP Partners Committee was still discussing the “proposal” — but in the 2014 federal budget, the most significant source of savings came from federal public sector retirees. The government committed to "phasing in equal cost sharing and increasing the minimum years of service required to be eligible for the Public Service Health Care Plan to six years."  They identified $1.4 billion of savings in 2014-15 and $7.4 billion over six years — estimates which were unsubstantiated and which most experts believe are unachievable.

Some protections were achieved by Federal Retirees, including a four-year phase-in period for the shift to 50/50 cost-sharing, protection for low-income retirees and some plan enhancements — and the federal government characterized all of this as a fairly negotiated deal. But as far as our Association is concerned, the government did not honour the spirit or principles of negotiation. Pensioner and employee representatives were faced with an ultimatum from the Treasury Board: Agree to the government’s demands or see legislated changes that would cause further hardship for some of the most vulnerable retired public sector employees and veterans.

So our work as an Association didn’t stop. By a unanimous decision in fall 2014, the Federal Retirees’ Board of Directors authorized the law firm Gowling WLG to commencelegal action. The decision was made in accordance with the National Association of Federal Retirees’ core mandate — to oppose measures detrimental to our members and potential members — and in support of the members who asked Federal Retirees to take action to defend their retirement benefits.

In February 2015, Gowling filed a Notice of Application in the Federal Court of Canada on behalf of the National Association of Federal Retirees and some of its members. The Notice of Application sought to have the Federal Court declare the Government of Canada’s actions regarding the PSHCP unlawful. The initial filing argued that the government cannot change vested rights of plan beneficiaries and that doing so is illegal, and that the government must recognize Federal Retirees’ right to negotiate and to represent retirees on plan operations and administration. After all, the federal government has recognized the Association as representing all federal retirees in the past.

The legal action also raises issues with the Canadian Charter of Rights and Freedoms — specifically, freedom of association and the right to life, liberty and security. 

For its part, the government filed documents later in 2015 arguing that the changes are necessary to align PSHCP benefits with
those provided by private sector plans, and that retirees are well-positioned to cover additional costs.

Our core argument in this case is that the government changed the plan illegally. Even if the PSHCP provides greater benefits than private sector plans, plan changes should be limited to making retirees’ benefits comparable to those of current public servants — and should do so by negotiating appropriately and in good faith.

Winning this legal action won’t oblige the government to reverse the changes it has made to the operation and administration of the plan — but if the National Association of Federal Retirees wins the case, that request may be made. More importantly, the government would not be able to implement a unilateral change in the future to the PSHCP, the Pensioners’ Dental Service Plan (PDSP) or to any of the superannuation plans.

Coverage under the PSHCP in retirement is part of the compensation promised to federal retirees for their years of service to Canada. To rescind part of that compensation now is to break a promise — to roll back deferred compensation after services have been rendered. That’s not right — and we’re continuing this legal action to defend federal retirees.

The full article appeared in Sage Fall 2016. Federal Retirees members receive Sage magazine, our national retirement lifestyle and political magazine, for free. To learn about this and other benefits of membership, visit our membership benefits page.