heading for broke
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Heading For Broke . Newfoundland and Labrador Pension System . Policy work. - PowerPoint PPT PresentationTRANSCRIPT
Newfoundland and Labrador Pension System
Heading For Broke
Consulting on employee compensation and pensionsHouse of Commons Finance Committee Senate National Finance CommitteeProvincial consultations on pensions Municipal consultations on compensation MEPCO Policy think tanks Chamber of CommerceCanadian Federation Independent Business
Policy work
Demographic Tsunami
Statscan:Focus on Geography Series
N.L. Population Projections Ages
0 to 19 20 to 64 Over 65 2012 108,377 329,477 84,2542026 110,205 281,547 130,055Change 2 % - 15 % + 54 %
Source: Department of Finance Population Projections,
N.L.
Population Projections
Top Healthcare Systems 2011 2008 % INC N.L. $ 5,061 $3,930 28.7 %Alberta $ 4,486 $3,252 37.9 %P.E.I $ 4,291 $3,845 11.6 %
N.L. Estimated Per Person cost 2013$5,399
Cost per person, public healthcare costs
Source: National Health Expenditure Database, CIHI
The Problem of Aging
Where is healthcare going?
Health Care $ 2,843,585,000Pensions / Retiree Benefits $ 875,613,000Debt Expense $ 847,569,000Pension Shortfall * $ 840,000,000Education $ 795,350,000Post-Secondary $ 789,746,525
* FPFA Recommendation
N.L. Budget $ 7.6 Billion
"They are not sustainable as they are…They are not going to last."
Tom Marshal – CBC Dec 2, 2013
The shortfall to the pensions amounts to $7,500 per NL resident.
Source : Board of Trade
It’s Bad
How bad?
NL Pensions have promises of $13.5 B and assets of $
8.0 B
Pensions are 59% funded.
March 31, 2013
Future Retiree Benefits
Promises of $ 2.87 B Add: Pensions $ 5.50 B Total - 2013$ 8.37 B2008 $ 2.97 B
Standard and Poors
The $ 2-billion advance payment under the Atlantic Accord in 2005 was directed to the Teachers’ Pension Plan. Further special payments totaling approximately $1.6 billion were made between 2006 and 2013
Bailouts $ 3.6 B $4.5 B???
Front Door Bailouts
These are annual increases in the premiums paid into the pensions plans. The province has not taken advantage of this feature yet.
Ie. Canada public sector contributions in 2002 were $ 12.4 B by 2012 they were $ 33.6 B
Statscan Cansim 280-0004
Backdoor Bailouts
If the bailouts don’t work the governments can just change the rules
Solvency relief funding 2008, from 3 years to 10 years.
OOPS! Solvency relief rules extended in 2010
Recent conversations with Finance are talking about 30 years!
Changes the R ules
Public employees might appear to have little incentive to push for reforms, yet they will pay a price for inaction: salary freezes, layoffs, increased payroll deductions and the threat of a city or county bankruptcy. Doing nothing to current pension obligations will cost public employees everything. A pension cannot grow without a job attached to it.
Little Hoover Commission for Pension Reform
Why changes are urgent
“Unfunded liabilities, simply put, are the amount of money needed to be put into the plans today to fully support promises made to retirees and current employees for services already provided. Unfunded liabilities do not include amounts required to pay for benefits related to future service”
Alberta Auditor General's Fall Report 2013
Every Day The Hole Grows
Why are pensions underfunded?
CFA Institute – Feb 2014
TeachersPolice, Firefighters MilitaryPublic WorksLibrarians, etc.
Can we afford to pay them what they have negotiated??
We Love Public Sector Employees
Value of OMERS Pension
$75,000 Survivor Pension
$450,000 Lifetime Pension aged 65-84
$155,000 Lifetime Bridge Benefit
Total Value $960,000$280,000 Inflation Protection @ 2.5%
Source: OMERS Report to Members Based on $ 45,000 Annual Income
Total Contribution $50,000
Total Value $960,000
Cost of Pension
Excessive Compensation??
Assets VS. Liabilities
2006 2007 2008 2009 2010 2011 2012 -
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
Assets Liabilities
Source: Pension Investment Committee, Activity Reports
We are all in this Together
Unions
Government
Taxpayers
Enroll all new hires in the public sector in Defined Contribution (DC) plans
Convert existing employees to DC plans Phase out early retirement for all employees Eliminate the bridge benefit Convert all pensions for Members of the
House of Assembly (MHA) to DC plans
Solutions
Questions ?