Finance Minister Doug Horner says he listened to concerns raised by government employees and scaled back the controversial reforms he had initially felt were necessary to make the province’s public sector pension plans sustainable.
Horner won’t eliminate early retirement programs as initially planned, will keep cost of living adjustments on benefits earned up to 2016 and won’t change the core benefits of retired employees.
“This is considerably less of a change than what we had originally intended back in 2012, and frankly more moderate than what we presented in September,” Horner told reporters at the legislature.
“I didn’t have the knowledge I do today about what we could do to save the defined benefit plans.”
But Horner stressed that some changes are required to address the $7.4 billion unfunded liability of the province’s four pension plans.
“As I have said many times, the crisis isn’t today; the crisis is into the future.”
Horner said the modest changes he will introduce won’t immediately wipe out the unfunded liability, but will stop it from increasing and eventually whittle it down to zero over the next three decades.
“This isn’t going to fix pensions today,” he said. “It’s designed to fix pensions over a long period of time.”
The changes include:
- Adjustments to add-on benefits earned from 2016 onward.
- Modifying the early retirement subsidy to a 60 and 90 factor meaning the employee must be at least 60 and have 30 years of service — a change from the previous 85 or 80, depending on the plan.
- Cost of Living adjustments on benefits earned after 2015 will remain at 60 per cent of the Alberta inflation rate, but that will be a target and not a guarantee.
- All the plans will eventually move from government sponsorship to joint sponsorship and a new risk management system will be implemented.
Among the initial recommendations was a plan to scrap all incentives for early retirement and begin allowing employees to pay into their pensions longer than the current 35-year maximum. The government also wanted to introduce a cap on how much employers and employees can contribute to a plan and get reduce guaranteed cost-of-living adjustments that are tacked on to annual pension earnings.
Changes are expected to be introduced in legislation tabled during the upcoming spring session and would come into effect Jan. 1, 2016.
Unions argued the pension plans are sustainable and that any changes would ultimately hit seniors on limited incomes the hardest.
In a report released earlier this month, Auditor General Merwan Saher said the government’s pension plans have lacked political leadership and a proper risk-management system.
Ten ministers have held the finance portfolio since 2000, the same period during which the funding status of the pension plans deteriorated to the point where the plans now have a combined unfunded liability of $7.4 billion.
While the boards of the four plans have implemented patchwork risk-management systems, Saher’s report said there “is no one organization within the public sector pension system with clear responsibility for coordinating and monitoring the performance of the public sector pension plans.”
The audit studied the Local Authorities Pension Plan, the Management Employees Pension Plan, the Public Service Pension Plan and the Special Forces Pension Plan, which have about 200,000 active members and 120,000 retirees.
Source: Calgary Herald