Sunday, March 29, 2009

Newspaper debate over the Pension Fund

The majority of members in Local 37 are covered under the Public Service Superannuation pension plan (PSSA). Recently, the PSSA and other public service pensions have attracted some media attention when the government announced that due to market losses they had to account for a $300 million deficit that is related to potential pension shortfalls.

It's important to realise that this is a "paper" deficit only at this time. Pensions are required to be fully funded, so that if a plan were to shut down, enough money has been put aside to pay out the current and future pension benefits of all current and potential retirees. Pension contributions are invested by the New Brunswick Investment Management Corporation so that investment earning help offset the cost of benefits. In a situation like we have seen in the past twelve months, where investments have lost a significant portion of their value, the pension fund becomes underfunded, resulting in the reported deficit. The key thing to remember is that retirement benefits aren't paid out all at once and the investments are bound to bounce back before a lot of those pension benefits need to be paid.

Some special interest groups have suggested the government should convert the current pension plan from a defined benefit plan (a guaranteed retirement pension, based on your years of service and the average earnings) to a defined contribution plan (the employer would contribute a specific amount each year that you would be responsible for investing). The difference is that in a defined benefit plan, you are guaranteed a pension, but in a defined contribution plan, you retirement income is based on how your investments have made out. If the market crashes, or you made bad decisions, you may have a significant retirement income shortfall, or your retirement savings may eventually run out.

There is no question that defined benefit plans such as the PSSA are the best option to ensure that workers will have a proper retirement income and not become a burden on society. However, Finance Minister Victor Boudreau has said he will study the alternatives, and the Telegraph Journal published an editorial this past week encouraging the Government to change the PSSA to a defined contribution plan. Click on to read the Telegraph Journal editorial.

I want all members to know that we are working hard to protect your pension plan. Pensions and the way they are funded are complex issues, and one of the challenges is to simplify the issue so that the average person (including some people who may not have pensions) can understand that the best and most economical long-term choice for both government and their workers continues to be a defined benefit plan.

I have already started the research process of gathering data and information that we will provide to Finance Minister Boudreau in order to prove that our existing plan is the best one for New Brunswick. We will keep members up to date on this important topic as we go forward.

It will also be important that members contact their MLAs to get their commitment to support the PSSA. The Union can write the most persuasive and logical letters to send to government, but there is simply no substitute for 2000 members calling their MLAs! Going forward, we'll provide the information to members that they will need to do this.

No comments: