Teachers’ Pension Plan Not Getting Better
Posted May 10, 2013
In 2012, the Teachers’ Pension Plan earned 11.31% on its assets, an excellent performance. But the deficit still got worse.
The just-released 2012 report represents a substantial improvement on previous years. It is more attractive, easier to read, and provides improved disclosure. But none of that makes the enormous problem go away.
There are two immediate consequences of the unfunded liability. First, teachers who have retired since August 1, 2006 again received no indexing. Second, the province had to make additional cash contribution of $13.8 million, up from $7.4 million in 2012. Unless the problem is satisfactorily addressed, it is likely that neither the recent retirees nor today’s active teachers will ever receive inflation indexing. And those extra contributions from the province will grow at an alarming rate.
Former Finance Minister Steele clearly recognized the problem as long as two years ago. The 2010 report told us that, “Actions to improve the long term health of the Plan are being evaluated by the Plan Sponsors with input from the Trustee.” It appears that nothing came of that evaluation.
The right time to address this question was in the recent renewal of the Teachers contract, but the only substantial topic appears to have been wages, which will increase by 7.5% over three years.
Once again, in the 2012 report, we have acknowledgement that there is a serious issue:
“Throughout 2012, we researched and considered various options that will improve the long-term sustainability of the Plan. In 2013, we will provide the Plan Sponsors with comprehensive recommendations that will include what we believe are necessary Plan amendments. We will continue to work with the Plan Sponsors with the goal of retirement security for all generations of Plan members.”
To put the deficit of $1,678.7 in perspective, it is more than the total support provided to universities over the last five years. This is as disappointing for today’s teachers as it is for other taxpayers. The teachers are paying for an indexing benefit that they will never receive. To be taken seriously, any commitment to balancing the books and eventually reducing taxes must address this issue.
Any resolution will require some combination of increased contributions from both teachers and the province, a very gradual increase in retirement age, and participation of all retirees in conditional indexing. Teachers will still have among the very best pension plans in the province. Most taxpayers do not have any plan at all.
The government’s recent efforts on the Public Sector Superannuation Plan have shown what needs to be done, but they failed to act as part of the collective bargaining round with Teachers just completed.
The current collective agreement runs until July 31, 2015, hopefully long before the subsequent election. Door-knocking for this year’s vote has already begun.
Readers are urged to use the opportunity to talk about this to candidates. Do they understand the size of the issue and urgency of a response? Is their party committed to achieving a satisfactory resolution as part of the next collective agreement?
Today’s teachers may also want to ask their union leadership why they are supporting a two-tier system for indexing, and whether the union is committed to treating all retirees the same.
Related ArticlesPensions in Crisis
- CPP Changes: Don’t Pop The Champagne July 8, 2016
- A Weak Response to the Teachers’ Pensions Plan Deficit June 20, 2014
- Fix the Teacher’s Pension Plan Now May 16, 2014
Voters trying to understand the various positions being advocated for the Canada Pension Plan have every reason to be confused.