(Adds interview with federal government minister, reaction from opposition)
By Randall Palmer
OTTAWA, March 26 (Reuters) - Retired federal workers will pay more of their supplemental health costs under an agreement with the Canadian government intended to align the public sector with the private sector, Treasury Board President Tony Clement said on Wednesday.
Retirees' contributions will rise to 50 percent of the cost of their health plan from 25 percent now. The supplement plan pays for drugs, eye-glasses and other items not covered by the general medical care plan that is free for all Canadians. Low-income pensioners will not be affected.
The government will also require six years of employment, instead of two, to be eligible.
The new deal is projected to save C$6.7 billion ($6.0 billion) over six years, less than the C$7.4 billion flagged in the Conservative government's Feb. 11 budget, but it avoids the threat of a court challenge if Ottawa had tried to impose the changes through legislation.
"Now we have zero legal risk," Clement told Reuters.
"I'm quite convinced that this in total puts our books in a better fiscal light... Those savings are now certain. There was a low-to-medium legal risk before."
The broad lines of the changes had been announced in the federal budget, but agreement had not been reached with the unions and retirees. The package was sweetened with some modest improvements to current benefits, including eliminating a C$60 annual deductible for single individuals and C$100 for families.
The February budget charted a return to a balanced federal budget in 2015, partly through savings exacted from public sector unions.
Green Party leader Elizabeth May criticized the deal for retroactively changing retirement benefits that employees had signed up for when they joined the federal public service.
"Make no mistake. This is not fair," she told reporters. "They caved to a government which said, 'It's my way or the highway'."
Clement disagreed. "We bargained in good faith. These were intensive negotiations, to be sure. Both sides had to give a little bit. There's no question about that," he said.
Clement, whose department oversees the civil service, will now turn his attention to trying to reform the sick leave provisions in 27 federal government collective agreements, all of which must be renewed over the next year, leaving open the possibility of labor strife.
"I remain hopeful that we can come to a deal. I think when the public considers sick leave issues, our position will be seen as a very reasonable position," he said.
Asked if any further changes would be made to public sector pensions, he pointed out that in the last bargaining round the unions had already agreed to 50-50 sharing of the cost of pensions. "That's enough for now, and my focus is the sick leave system, which is badly broken," he said.
($1=$1.12 Canadian) (Editing by Peter Galloway and Jeffrey Hodgson)
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