... this will be in Mondays TJ 27/2014 Government claims it’s contributing too much into teachers’ pension plan ADAM HURAS Legislature Bureau January 26, 2014 The provincial government has contributed too much in the teachers pension fund according to Finance Minister Blaine Higgs Photo: RON WARD/TIMES & TRANSCRIPT FREDERICTON – The provincial government has made more than $870 million in special payments to the New Brunswick teachers’ pension plan that it wasn’t required to make, according to Finance Minister Blaine Higgs. In the midst of talks with the teachers’ federation to see them move to a shared-risk pension model, Higgs says government has not been bound by legislation to continue covering the shortfalls of a current plan, but it has been anyway for more than a decade. Higgs said the province now contributes more than three dollars for every dollar contributed by a teacher to the existing plan. That amount is equal to about 25 per cent of a teacher’s annual salary contributed to the pension by taxpayers, while teachers themselves contribute about 7.8 per cent of their salary. “It is true that the teachers’ pension plan is reasonably well-funded today,” Higgs said, noting the plan is at 89 per cent funding. “However, this is directly related to the special payments currently being made by taxpayers.” The special payments are over and above normal employer’s matching contributions. In the case of the teachers’ plan, this has resulted in a total unmatched contribution by taxpayers of approximately $1.3 billion since 1991-92, Higgs said. The provincial government has also not been obligated to make a significant chunk of those payments. The province’s teachers have had a pension plan since the 1920s, but government didn’t start contributing to it until the 1970s when both the province and employees started making an equal contribution into the plan. The plan then fell on hard times roughly two decades later. In reaction, an agreement was struck under the Frank McKenna government in the early 1990s with the New Brunswick Teachers’ Federation to increase employer contributions through special payments until the plan was fully funded. A section of the Teachers’ Pension Act directly states today that “in each fiscal year, until such time as the benefits under this Act are fully funded” the government will pay into the teachers’ pension fund. Higgs said that goal was reached in 2000. “The agreement was clear – we will make special payment until such time it is fully funded,” Higgs said. But the plan only remained fully funded for three years when world markets crashed. At that time, the government resumed special payments, “with no obligation to do so, and they have continued until now,” Higgs said. If those special payments had not restarted in 2003-04, the plan would currently be funded at approximately 70 per cent and would continue to be under pressure. The special payments amount to an additional $873 million in government money, Higgs said. “What has been recognized by this government is that this is a situation that should not continue without a proper fix,” Higgs said. “The thought that the plan is all good, that we don’t have a problem, fair enough, it’s at 89 per cent funding, but it’s there because the government has been contributing roughly three times what the employers have been contributing. “There’s the issue. We have a funding model that is not fair to taxpayers and the demands on it are too high for the current model to survive.” The New Brunswick Teachers’ Federation did not return requests for comment. Talks on moving the teachers to a new pension model didn’t seem to begin well. Peter Fullerton, co-president of the New Brunswick Teachers’ Federation, said last month that an initial letter from the government seeking a meeting on pension changes seemingly dictated that a shared-risk plan was necessary. “What we’re upset about is the process,” Fullerton said. “The letter we got doesn’t start with open, honest discussions. “It looks like the PSSA shared-risk model.” The federation represents about 8,000 current members and about 6,000 retirees. Higgs said that this past week, actuaries have presented a shared-risk model to the teachers. “It’s going well,” Higgs said of the talks. “In dealing with it now, it’s first realizing what’s a fair and equitable funding formula and what’s a fair and equitable benefit so it is there for future pensioners and employees.”
Posted on: Mon, 27 Jan 2014 01:10:08 +0000
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