Saint John council may consider joining the provincial government’s recently overhauled pension plan as a way to deal with the city’s $193-million pension plan deficit.
"We might," said Coun. Bill Farren.
"If they have things there that will save the Saint John pension plan money on a go-forward basis, then we’d be fools not to sign onto it."
The provincial legislature is expected to pass a government bill as early as Friday to repeal the City of 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.
Farren said some members of council have talked about wanting to know more about the provincial government's new pension model, which Premier David Alward has said is open to all public and private pension plans.
'Maybe there’s something that we could cherry pick off of it, maybe we join it 100 per cent. I don’t know.' —Coun. Bill Farren
The revised New Brunswick pension model has already won the support of several provincial unions, as well as the opposition.
"Maybe there’s something that we could cherry pick off of it, maybe we join it 100 per cent. I don’t know because I haven’t seen the plan, it hasn’t been explained to me," said Farren.
He expects a motion to be brought forward as early as the next council meeting, requesting a meeting with provincial officials to discuss the redesigned plan.
More cuts likely
Farren said the newly-elected council will have to move quickly to find solutions — and that could involve further cuts.
The city's 2012 budget was based on a proposed package of pension reforms being approved by the provincial legislature.
But a controversial change that would have saved an estimated $75 million may not be allowed under the provincial Pension Benefits Act, which the city will still have to follow, he said.
The previous council had voted to eliminate cost-of-living adjustments for employees and suspend them for retirees, but Farren does not believe that change will be approved by the provincial superintendent of pensions.
Some of the other planned changes, such as basing pensions on an employee’s best three years instead of their best five years, and increasing the age of retirement to 60, could be implemented relatively quickly by amending a municipal bylaw, he said.
But those changes only amount to about $30 million in savings.
"It’s very frustrating," said Farren.
"I sat on the previous council under the belief we had those reforms done.
"We were told by then-mayor and then-city staff that ‘Oh, they feel very comfortable the reforms will be [approved by the province].’ And to start this task all over again is just putting the taxpayers and the workers behind the eight ball.
"I mean, you know it’s really putting this off and building the payment up. The payments every day are mounting and the taxpayers have to come up with that."
Mayor Mel Norton could not be reached for comment on Thursday.
Jamie Hachey, the president of the police union, declined to comment on any pension-related issues.
Paul Stackhouse, the president of the International Association of Firefighters, Local 771, was also reluctant to comment.
"All we’re trying to do is get some information right now and see what our position is in what’s going on with the repeal," he said.
"We’ve always been willing to sit down and resolve the pension issue and we’re still willing to do that," Stackhouse added.
Michael Meahan, president of the outside workers Canadian Union of Public Employees local, and Paul Johnson, president of the inside workers CUPE local, could not be reached for comment.
Susan Rowland, a member of the provincial Task Force on Protecting Pensions, which revised the provincial system in collaboration with a number of union leaders, said the new shared-risk model can apply to any pension plan in the province — whether public or private.
"A municipal plan like Saint John may wish to take advantage of the many advantages offered by the shared-risk model," Rowland said.
When Alward announced the new plan, he suggested it would be an "attractive" option to both public and private sector pension plans.
'We encourage those plans not currently involved … to see how they, too, might benefit from such changes.' —Premier David Alward
"I would encourage all New Brunswick employees and companies to examine this model and see the advantages it offers over their existing system," Alward said.
The revised plan is meant to address the significant funding deficit issues many plans are facing and make pensions more "secure, sustainable and affordable," he said.
"One of the strengths of this model is that it can be adapted to different public and private sector plans," Alward said.
"We encourage those plans not currently involved … to see how they, too, might benefit from such changes."
New provincial model
Under the new plan, benefits already in place for retirees will not decrease, but there will "likely" be "marginal" increases to employee contributions, Alward said.
Some of the other changes include:
- The retirement age will be moved to 65 from 60 over a 40-year period.
- Cost-of-living increases will be conditional on the pension plan’s performance, but when pensions are in a surplus position, cost-of-living increases could be reinstated retroactively for years where they were not provided.
- Plans will be based on an "enhanced career average" of earnings rather than the employee’s final salary.
- Investment mixes that are less volatile to market swings.
Several public unions will be adopting the model for some of their plans, including the New Brunswick Nurses Union, the New Brunswick Union, the CUPE Local 1252.
Private plan on board
The New Brunswick Pipe Trades Pension Plan, a private union, also signed onto the changes.
"I don’t look at it as being the first private plan, I look at it as being something that’s good for our membership, so I feel pretty good about that," said Gary Ritchie, president of the New Brunswick Building Trades and administrator of the pipe trades plan, which has about 3,000 members.
"I believe there will be a lot of plans that sign onto this, including private plans," said Ritchie.
'There’s all kinds of provisions in there that you can work with to help your situation — and that’s what we’ve done.' —Gary Ritchie, New Brunswick Building Trades
"There’s all kinds of provisions in there that you can work with to help your situation — and that’s what we’ve done."
Ritchie said unlike many private plans, the pipe trades plan is fully funded on a going-concern basis.
"But when you do the wind up, because of the interest rate today, then we end up, when we do the calculation, we end up with a deficit," he said.
Under the old rules, enough money had to be set aside to cover any unfunded liability by 2018. That was causing us big problems," said Ritchie.
"We would have to put almost one-third of the money that was in our pension plan aside to do a windup… and you wouldn’t be able to pay benefits out of that or anything," he said, declining to discuss specific figures.
The revised provincial model offers a different way to do the wind up calculation, said Ritchie.
"So therefore it means that we don’t have to put all that money aside at one time."
"Our benefits all stay the same, we have cost-of-living [increases]
, that all stays the same, so there’s no real effect other than on this solvency issue — we got some relief there.
"We don’t have to look at reducing somebody’s pension, so I think that is a good thing."
Ritchie said he’s not familiar with the specifics of Saint John’s pension plan, but he described the provincial model as a "pretty flexible of legislation" that could be adapted to meet individual needs.
Any public or private plans that want more information about the province’s new shared-risk model — and how it might affect their plan — can contact the task force, said Dave MacLean, communications director for the Department of Justice and Attorney General.
"It could be the union leadership on behalf of their membership, or it could be the plan sponsor, whether it be a municipality or a private company," he said.
It’s unclear how long such discussions might take.
The city’s pension plan is currently governed by provincial law, so any changes have to be approved by the legislative assembly.
But the newly-elected city council voted to ask the legislative committee to repeal its pension act to give it more authority.