Here is my comment on the pension issue, as I know that questions remain and I have had people ask me why I have taken the approach that I have so far. My take on it is based on my experience of sitting on one Pension Board and learning more and more about the issue in recent years. I believe that good pensions are hugely important for peace of mind of employees, and in fact it is beneficial to employers to provide good pension benefits in order to be competitive in attracting people. I realize the value of Defined Benefit plans as having much better retirement outcomes for people on the whole as well, and believe that these are worth preserving. The challenge today is that Pension plans need to be in a position to be sustainable over decades, in order to provide certainty that they can provide the benefits to their members that are promised. One question that came up was why not revisit the whole agreement that was developed through negotiation with the other 8 unions in light of the legal opinion that ATU brought forward implying that the City plan wasnt in a deficit. The first comment is that I think we have to weigh the legal opinion of a law firm against the ongoing work and analysis of a hired Actuary and the Pension regulator in deciding how to make these important decisions. along with the Board of Trustees of the plan that is responsible for ensure the plan is properly managed. The valuation that identified the $68m deficit was done by an Actuary and then the solution needs to be assessed and passed through the pension regulator. The City does not manufacture the deficit or surplus but has to respond to what is valuated by the Actuary. The pension solution that the 8 unions and the City negotiated prior to Mondays meeting keeps the Defined Benefit plan in place. Yes, It does reduce some of the benefits in order to deal with the 68m$ deficit that the plan faces as a result of the 2012 valuation. The pressures facing this plan are similar to the pressures facing plans across North America. I guess where I differ with those who say that as a result of a recent upward trend in the stock market we should revisit the whole thing, is that we have to be realistic about the threats that these plans face into the future. Many of them were designed in an era when we were seeing consistent 9-15% returns on the market, and plans were seeing surpluses. While others may be optimistic about the stock market into the future - I am not so confident that it is going to be able to sustain this growth trend and that we arent going to face further downturns in the future - and that we have to build plans that can deal with these. Plans dont see much of a lift from one good year on the market - because the highs and lows are smoothed out as part of the valuation of the plan to deal with the volatility. The uncertainty in the market is also meaning that Pension Regulators like the Pension Superintendent are increasing their scrutiny of plans, and will not approve valuations and plans unless they demonstrate clearly a viable combination of contributions, benefits, and cushion to deal with the ups and downs. Finally - the fact that people are living longer is adding to the costs of these plans in the long term over and above what they were in the past. The longer the members live, the more money that the plans need to have in them to pay them out. The fact that a solution was successfully negotiated through collective bargaining with the 8 out of the 9 beneficiaries of the plan without abandoning it or moving to DC or something else is an accomplishment. The responsibility to have a good mix of benefits that is sustainable over the long term is shared between the employers and employees as the parties that contribute to them. Thats my take, I know it is long. Im not going to try to engage on every detail, but wanted to clarify how see this pension issue.
Posted on: Thu, 25 Sep 2014 05:19:37 +0000
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