N.B. MLAs primed their pension plan by $6 million, CBC review finds
New Brunswick MLAs will accumulate about $6 million in retroactive pension benefit increases over the next three years thanks to a pay change they voted themselves last spring, a CBC review of that decision reveals.
In addition, the province has had to increase its contribution to the MLAs' pension plan by about $14,000 per MLA per year to keep up with increased benefits MLAs adopted for themselves.
Marilyn Williams, a retirement planner and a University of New Brunswick finance instructor, reviewed the pay and pension changes for CBC News.
"It is the richest I have ever seen," she said.
In April, New Brunswick politicians voted to increase their base salary to $85,000 from $45,347. In exchange, the MLAs terminated two tax-free allowances that previously were used to supplement their incomes.
The effect of the changes was originally explained to be minor, almost revenue neutral for politicians. But instead it is generating huge increases in MLA pension benefits.
That's because MLAs pensions are based on their salary and the increase in the total wage package flowed directly through to their retirement accounts. Those accounts are now growing rapidly.
For example, the pay change is helping Premier Shawn Graham's retirement account grow by approximately 160 per cent over a three-year period ending on March 31, 2011.
Most of that growth comes from retroactive increases to benefits the premier earned years ago.
Opposition Leader David Alward has been criticizing the Liberal government for more than a week on the retroactive pay increase and bonus delivered to David Hay, the president and chief executive officer of NB Power.
The review projects Alward's pension will jump by 150 per cent over 36 months, mostly because of retroactive increases to his benefits.
The MLA pension plan allows politicians to use their three best earning years to calculate their retirement income. Once the pay increase has been in place for three years, every year of Graham's service as an MLA will have to be counted as though it occurred at the same rate of pay.
The changes affect 53 of the 55 MLAs, since Liberals Abel LeBlanc and Eugene McGinley are both over 70, making them too old to contribute to a pension.
The pension changes all started as a result of Justice Patrick Ryan's independent commission on MLA compensation review. The Ryan report also called for an immediate and "essential" pension review.
Ryan said he knew the MLA pay change would have a significant effect on MLA pensions but he felt it would be temporary pending the pension review.
Government House Leader Michael Murphy introduced the changes last April and was supported by both government and opposition members. But one aspect that the legislature did not approve was the pension review called for by the Ryan report.
Murphy did not agree to an interview on the review of the pension plan.
Murphy told the legislature that increasing the total wage package substantially and axing the tax-free allowances would increase MLAs take home pay by 3.9 per cent. No mention was made of any pension benefit tied to the change.
The wage package legislation was introduced and passed in the wake of the St. John River flood that wreaked havoc on Fredericton, forcing the legislature to shut down. There is no televised footage of MLAs approving themselves the pay hike because the flood waters knocked out the legislature's in-house camera system.