The City of Regina recently announced they had fixed the city’s pension. We investigated and it was another plan that kicks the can onto Generation Screwed.
Colin Craig the Prairies Director has worked diligently to bring the pension crisis to the attention of governments.
We have followed the Regina pension for years. Pension coverage 2009
This is from the Canadian Taxpayers website
Today, pension guru Bill Tufts wrote an excellent email to Regina’s council about the boondoggle – you can see it below. Thumbs up to Bill for continuing to keep an eye on government employee pension problems across the country!
Hello Mayor and City Councilors
The city pensions has been causing you and taxpayers a lot of grief.
Unfortunately the new agreement on the plan is woefully inadequate and does nothing to solve the pension crisis. It takes the current promises made, converts them into debt and makes it the responsibility of future taxpayers and employees. The true shortfall or pension debt is about $ 1 Billion.
We urge the city to reconsider the deal and convert the plan into a defined contribution plan on a go forward basis.
Cities across North America have been succumbing to bankruptcy and a major part of their distress has been from gold-plated pensions. These are the pensions offered to public sector employees and offer a guaranteed income for life. These employees retire much earlier than the private sector with income substantially higher than an average retiree.
Recently this financial peril came to Canada. A town in Nova Scotia, Springhill was pushed into financial insolvency earlier this year, and was forced to dissolve as a town directly as an impact of its employee pension costs. The financial crisis with pensions is happening across the country, for example, the city of Montreal has seen its pension costs explode from $130 million a decade ago to over $600 million annually now. Thats almost a half billion dollars of taxpayers money not going to road repairs, helping the poor or investing in the city’s future.
Earlier this year St John’s Newfoundland (pop. 196,000) recently converted their employee plan into a defined contribution. In Nova Scotia, NSPower made this conversion as well.
There are several concerns with the plan changes proposed. We outline a major one here, the true cost of the shortfall.
If the pensions were to close (windup) next year the last actuarial valuation (2012) estimated that the debt to the city for closing the plan would be $535 Million. This was up from the previous valuation in 2010 when the shortfall was just $239.7 million. This increase was in spite of substantial returns in the plan over the past two years.
The true cost of the shortfall is substantially higher because of the calculation used for the pension valuation. The plan for this valuation used a rate of return estimate of 6.65%. This compares to the Ontario Teachers Plan, Canada’s largest plan. that uses a return of 4.95%. Using this rate of return the shortfall in the plan would be over $ 1 Billion. The increase in the true value of the shortfall is $275 million for each 1%.
Actuarial report, page 8
Read the Regina Pension Actuarial report here
Page 9 of the valuation report shows $275 million for each 1% in additional interest rate return.
Good luck on your deliberations, this is an important issue for the Future of the city.