Pension reform must come to Canada too!

May 28, 2011
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One challenge I see is that Canada has not yet come up with a comprehensive report or plan on how to deal with the PS pension issue. It is straight forward and easy from where I sit.

How can it be presented in a way that is easy to understand, focuses on the big issues and will get buy in?

It is unfortunate that after all the time and effort governments in Canada spent on the “Retirement Crisis” no investigation was done into PS pensions. Several provinces had expert commissions, the federal government has its report and several provinces did extensive work leading up to the Kananaskis summit.

Elsewhere around the world pension reform for the PS is rolling along.  With each new report the issue is distilled into a clearer picture.

In the UK the Hutton Report provides comprehensive solutions that are fair for employees and taxpayers that will work. California has an excellent strategy in the Little Hoover. That was followed up with an even simpler plan from the LAO. Just this week the Treasurer in Rhode Island released a good but easy to understand report. Each ones becomes simpler, yet more refined and easier to understand.

A simple plan like this is needed to educate the elected officials who are very unknowledgeable of the issues and more importantly the options they have to deal with the issues.

The California LAO 10 page report boils down to 4 key points

    • No “Full Retirement Age” Prior to 62.
    • No Pension Greater Than 60 Percent of Highest Three Years’ Compensation.
    • No Pensions for Part-Time Employees and Others.
    • Future Employee Pension Contributions Must at Least Equal Employer’s.

The report also touches on health care costs and OPEB’s  -

The Treasurer of Rhode Island released an excellent report this week to look at the issue. Here report suggests some simple and easy to understand changes.

  • Fair and balanced rule, benefits and contributions for all members must be required of any retirement system reform. This report underscores the truth that any reform impacting only new employees will not affect the existing $7 billion to $9 billion unfunded liability for past service. This problem is decades in the making and all stakeholders must now share in the solution.
    • Align retirement age with Social Security (why not CPP)
    • Change the accrual rates
    • Adjust COLA rates
    • Hybrid plans and portability

I see this as one of the first requirements to have in place and have been working towards what I call the Roadmap to Pension Reform.

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