The Teachers’ Plan Deficit Needs to be Addressed

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  • Thanks for keeping the torch lit on this crisis with the teachers public pension issue. I agree the NSTU and governments have done a terrible disservice to teachers and to taxpayers.

    For anyone that has even a cursory understanding of demographics that also looked at school enrollment, pension finances & benefits would have seen this problem developing decades ago. Both parties in this case failed the people they serve and now instead of an ounce of prevention there will have to pound of pain (big $$) for taxpayers, pensioned teachers and worst for currently working teachers. That is if there is even the courage and smarts to do now what should have been done many years ago.

    The 3 hypothetical responses for a solution are excellent, and to me impossible to argue aren’t the best response to this serious problem.

    Hopefully there is the will to get it done and then keep making the right decisions no matter how politically tough it is.

    dh | May 22, 2018 | Reply

  • Hi Bill, I have a couple of issues/ questions: You state — “The interest on the $1.4 billion deficit in 2017 was $87 million, more than the amount of excess contributions.” What interest? Did the Pension fund borrow $1.4B? If not who is incurring the interest?
    Your points 1/ and 2/ describe changes that would reduce the liabilities of the Pension Fund. That would reduce the deficit (assuming the contributions remain at todays level). Decreased liabilities over a long , long time mean both the teachers and the gov would contribute less not more. But your point 3/ says “The province must make a contribution to the plan equal in value to the two measures described above. “. Why would the Province make a contribution?? Can you clarify??
    Many pension funds see rising interest rates as a substantial benefit that will improve their earnings and the value of their assets. Is there any hope there that this deficit will be significantly reduced.

    barry h | May 19, 2018 | Reply

    • Barry, the “interest” is the amount that would be earned if there was no deficit and investment returns matched the valuation assumption of 6.15%. Even after the changes described it might be a few years before the deficit was eliminated entirely. At that point the trustees would have to balance a choice between providing conditional indexing or reducing contributions. This is complex stuff and hard to fully explain in a short article.
      Bill B


      Bill | May 20, 2018 | Reply

  • My guess is that many teachers do not realize that with zero indexation ,once they retire their financial situation will change significantly after 10 years of being retired . Financial planners that advised people 10-15 years ago likely underestimated the increases in costs for cell phones , oil and gas , charges from health specialists , to name a few . The Union , nor the province, is not their friend in this situation .

    Peter S | May 18, 2018 | Reply