A bid by a Saint John councillor to dismiss the city's pension board failed during Monday night's council meeting, with the city solicitor advising it would be illegal.
Ward 1 Coun. Bill Farren put forward the motion, which was voted down. He said he wants a new board to be in place when pension reforms are introduced, likely this fall.
"I encourage the utmost urgency," said Farren, referring to the city's troubled employee pension plan, which has an estimated $193-million deficit.
But city solicitor John Nugent said the city does not currently have the authority to dismiss the pension board.
Although the provincial government has repealed the Saint John Pension Act — a move that would give council control over the pension plan and the power to make changes to deal with its crippling deficit — council doesn't have the authority to make any changes until a provincial task force working on a proposed new plan delivers its report, Nugent said.
It's unclear when the provincial Task Force on Protecting Pensions, which revised the provincial system in collaboration with a number of union leaders, will submit its report.
'What we were asked as a council, and what we agreed to as a council, was until the task force reports back, to not make any changes to the pension board.'—Mayor Mel Norton
"We've very much put our faith, trust and confidence in that task force," said Mayor Mel Norton.
"What we were asked as a council, and what we agreed to as a council, was until the task force reports back, to not make any changes to the pension board, that entity that governs our pension," he said.
Farren worries the plan the task force recommends will cost more than he, as a councillor, will accept.
Proposal to end defined benefits
Ward 2 Coun. Susan Fullerton, who made a motion this summer to replace the pension board with professional financial advisors, has the same fear.
"I really would like us to look at other forms of providing pensions for our staff, including RRSPs and defined contributions," instead of defined benefits, or a shared risk model, she said.
Either of those controversial options would end guarantees that future retired city employees can count on pension cheques for a fixed amount regardless of what happens to the markets.
"Based on the financial realities of what the taxpayers are experiencing, I feel that it needs to be for all staff," said Fullerton.
"I don’t feel that that is a popular stance, but I didn’t come to council to be popular, I came to make what, to me, are my best recommendations and I’ve been studying very heavily on this and I really feel that we need to look at these other options."
A formal valuation of the plan, as of the end of 2011, is expected from the actuary this week. It's not yet known whether the deficit will be more or less than the previously estimated $193 million.
The previous council had voted to eliminate cost-of-living adjustments for employees and suspend them for retirees.
The provincial pension framework, which is a shared-risk model, is following the Dutch system. The changes will not cut the benefits that are in place for retirees, but it will likely lead to marginal increases to employee contributions.
Other provincial changes include, basing pensions on an enhanced career average of earnings rather than the employee’s final salary, and moving the retirement age to 65 from 60 over a 40-year period.