To hear Jim Leech describe it, writing an award-winning book is the natural outcome of reading too much hogwash about pensions on the eve of his own retirement. Leech stepped down as President and CEO of the Ontario Teachers’ Pension Plan (“OTPP”), a $140 billion pension fund, in January 2014.

“I was ranting and raving about the ill-informed articles.” Someone said, “You should write a book about it.” “But who would publish a book on pensions?” Leech asked. “Well, here’s a contract from Random House …” Leech credits Deborah Allen, director of communications at OTPP, as “an indispensable midwife” for The Third Rail.

“We wanted to write a book for educated Canadians who know there’s a debate on pensions but who feel intimidated and need a point of access,” he said, describing the target audience he and co-author Jacquie McNish were aiming for. (A previous book by McNish, Wrong Way: The Fall of Conrad Black, landed her the 2005 National Business Book Award.) The pension book had to be “mainstream, not addressed to experts, and so short that it could be read on the airplane between Calgary and Toronto.”

The opening vignette, a classic shoot-the-messenger story, grips the reader’s attention through its sheer injustice. “It’s Theatre of the Absurd,” chuckles Leech over tea at the National Club, where we met to discuss the book and Canadian pension reform in general. He explains the selection of cases surveyed and how they relate to the issues at hand.

For starters, the approach to pension reform in New Brunswick was chosen because the people in it “are peering over the edge of the abyss.” All the issues affecting pensions: poor demographics, political reluctance to confront the issue, and a big case of “pension envy” were present, and these were exacerbated in New Brunswick, which is scaling down its pulp and paper industry and is losing its young people. “That case shows [pension reform] is about people,” says Leech. “It’s about leadership quality—where you sit down and do the right thing without too much screaming and yelling.” Leech emphasizes the importance of communication in the case of New Brunswick. The province’s then-premier, David Alward, thought he had a solution, “but his solution changed through the process of engaging” with the stakeholders—“and it was a better solution overall,” Leech explains.

The second case highlighted in the book is that of Gina Raimondo, Treasurer of Rhode Island, who tried to restructure pensions in that state. He and McNish chose to look at this approach in the book because “they were not just peering into the abyss, they went right down in it,” says Leech. Raimondo, a Rhodes Scholar, was personally vilified for proposing radical pension reform. Then one municipality went bankrupt and had to cut benefits by as much as 55 percent. Suddenly Rhode Islanders realized they could no longer ignore pension deficits. Raimondo’s proposed pension reforms received overwhelming support. On September 9, 2014, she swept the Democratic primary race for Governor.

The third and final case in the book describes the Dutch system that “did it right,” although not without a struggle, as is made clear. Of the Netherlands, the authors write: “There is no rancorous divide between those who have pensions and those who don’t, because more than 90 percent of workers are enrolled in plans. Employees and employers are experienced consensus builders.” Furthermore, the Dutch case demonstrates that “pension reform today must be a continuous exercise.”

Each of the cases in the book features a politician or public official who had to touch the so-called third rail, i.e., an issue so controversial that it is “charged” and “untouchable” and likely to result in political suicide. “There are a gazillion experts on pension reform,” says Leech, “but what it really takes is political will.”

Leech comes from a military family, and he saw that his widowed mother was well sustained in later years by a military pension. What disturbs him are “sad cases … where people were talked into taking a lump-sum settlement and invested it themselves,” made unwise investments, and ended up destitute.

Leech has three recommendations for Canadian pension reform. The first is “a modest enhancement to the Canada Pension Plan,” which appears to be moving forward under pressure from the provinces. “Perhaps in three to five years,” says Leech, but he doubts that this enhancement would include restructuring. He says the details are to be worked out, but “we want enough savings going on to provide decent pensions for those in the $30,000 to $100,000 range. That’s where the biggest problem lies.”

The second recommendation is to stick with defined benefit (“DB”) plans. Leech concedes this is an uphill battle because “there’s been a wholesale trend toward defined contribution—not a smart way to go.” The defined contribution (“DC”) plans came into fashion, he explains, “because CFOs wanted predictable and stable numbers” for the company’s contribution each year.

DB plans are by far the most cost-efficient way to operate a pension plan, according to Leech, although they “may need to be reformed to be sustainable,” such as by moving to target benefit plans. Such plans target but do not guarantee benefits; rather, they link features such as indexing or the extent of coverage to available funds. “Instead of spending the energy to switch [DB plans to DC],” he says, “they should try and get liabilities right so they can take full advantage of pooling.”

“People complain that police or teachers have such a good pension plan. I say, ‘They’ve been forced to save. Are you saving as much as they are?’ And it turns out, no, they’re not.”

“Defined benefit plans are superior [to defined contribution] because they cost much less to operate. Savings are pooled in large funds, and these can scale and keep costs low.” (He cites management fees of 50 basis points for large DB plans, compared to approximately four percent for individual DC plans.)

“The world seems to think that it’s DC or DB, black or white,” with the employee taking all the risk or none of it. “Surely we are smart enough to find something in the middle,” urges Leech, “where there’s an appropriate sharing of the risk.”

His third recommendation is based on the likelihood that DC plans continue to proliferate. The goal thus becomes “to create a smart DC plan.” The most controversial feature is to make DC plans obligatory. “People complain that police or teachers have such a good pension plan. I say, ‘They’ve been forced to save. Are you saving as much as they are?’ And it turns out, no, they’re not.” Where possible, pooling should be done, for example, through offering fewer investment options. He says a smart DC plan should start to annuitize at around age 40 in order to get rid of the longevity risk.

The federal government is quiet on pension issues, but in the meantime, some provinces see the writing on the wall and are forging ahead with their own pension reforms. There’s New Brunswick, lauded in The Third Rail as “building the foundations for the country’s most secure pension fortresses.” Most recently, there is Ontario’s newly announced Ontario Retirement Pension Plan, which features mandatory matching of employer/employee contributions from workplaces without pensions.

“The political moons may be lining up,” to bring about the first recommendation, but Leech says the other two recommendations will be harder wins. Despite the struggle, and despite his new duties as Chancellor at Queen’s University, he continues to speak out on pension reform. In March 2014, he completed a project calling for pension reform at Ontario Power Generation, Hydro One, the Electrical Safety Authority, and the Independent Electricity System Operator. Announcement of the report was suppressed until a long weekend in August, and little has come of it. No surprise there, as The Third Rail makes clear, “Delay and denial is all too often the preferred political response to looming pension meltdowns.”