Thousands of unionized employees who work for the city of Halifax must decide whether to accept reduced benefits or increase contributions by about $1,000 to address a pension fund deficit expected to grow by $139 million this year.

So far the unions are leaning towards making up the deficit by increasing contributions which would go into effect in 2014.

"The direction is clear towards contributions," said Pension Fund manger Terry Troy who has held several town hall meetings.

CBC News has learned 790 members of the Amalgamated Transit Union recently voted to cough up an extra two per cent or about $38 more per pay to fix the pension deficit.

That union said it will not comment until four other unions also vote.

Faulting financial markets

Troy said the worsening deficit is the result of poor financial markets and a decision to reduce expected long term returns from 6.75 per cent to 6.25 per cent.

"This should not be portrayed as a crisis. We are planning for the future," said Troy.

Last month pensions managers notified stakeholders which include HRM council and public sector unions.

There are 9,400 people on the pension plan, including 5,800 active members. The going concern deficit is expected to reach $267 million by Dec. 31.

At town hall meetings employees they have been presented with various scenarios to address the deficit.

'This should not be portrayed as a crisis. We are planning for the future'—Terry Troy

"There was a show of hands and they were overwhelmingly in favour of paying the contributions also," said Nancy Elliott, a lawyer with NSUPE, which represents 3,000 pension fund members.

She said the unions are anxious to keep their defined benefits plan intact.

HRM employees have the so-called 80 formula allowing members to retire without penalty when age and service reach 80 years. Police and firefighters have the 75 formula.

"Once you lose a benefit from a pension plan its very difficult to get it back, whereas as if the market turns around with returns on investment at some point we may be able to bring contributions down," Elliott told CBC News.

Elliott said plan managers are being prudent.

Union and management jointly sponsor the HRM pension fund. Both sides must agree to changes. If the unions do not agree to reduce benefits - which are part-planning scenarios to deal with the deficit - Halifax will be obliged to match the increased pension contributions.

That would cost HRM about $6 million.

Finding the money

The audit and finance committee will be briefed on Dec 18. Coun. Russell Walker said staff will find the extra money.

View of Halifax (CBC)

"Staff will know where that is coming from. Whether programs are cut or added. It's too early to say," Walker told CBC News.

The situation would be even worse if the province of Nova Scotia doesn't give Halifax an exemption from meeting a solvency test. It requires pension plans to have enough money if HRM were to cease operations.

A situation HRM argues is not going to happen.

Without the exemption member pension contributions would have to increase from 10% of salary today to 22 per cent of salary.

"We're reviewing their request and expect to have an answer before the calendar year," said Labour Minister Marilyn More.