THE BROKEN PENSION PROMISE
A REPORT TO CONVENTION 2011PREPARED BY David Peters
the passing into Law of the 2010 Financial Measures Act (FMA), the
NSGREA Executive has attended many Regional meetings around the
Province. The discussions have been centered around the pension issue.
What happened to our pension promise? Why and how did it happen? What has NSGREA done about it?
report is intended to inform members of all the information we have
available. There have been a large number of discussions about the
Public Service Superannuation Plan that we were not invited to attend.
We have had to read between the lines, interpret from what we do know,
and give our opinion about what has and can happen.
What happened to our Pension Promise?
In the simplest terms, the pension promised to us on our retirement was BROKEN.
all worked under terms and conditions that included a Defined Benefit
Pension Plan. Our plan is no longer one of those. No one can tell you
with any degree of certainty what your pension will be after 5 years.
YES! You could possibly receive less than today.
The Financial Measurers Act 2010
action by the NDP Dexter Government has ruined the PSSP. They have
broken the employers’ promise to us. Prior to this, the law had always
been that whatever promise “you went out the door with” could not be
altered. Established exceptions to this would be Bankruptcy where the
employee, including retirees might opt for reductions to “save” the
business, or a company simply ceasing to operate and not enough money
to pay. Neither of these scenarios applies to the Province of Nova
immediate change for retirees was to the indexing. For the first 5
years (2010 – 2014) indexing is fixed at 1.25% regardless of the
Consumer Price Index (CPI).
no changes were made, we would have received a 2% increase in January
2011, a difference of 0.75%. On average “only” a couple of hundred
dollars per retiree. But this is not forever. So, it adds up after
awhile. This is not what you worked for or what you were told prior to
retirement. THE PROMISE WAS BROKEN!
year, we will receive another 1.25% increase but it appears the CPI
will be around 2.75%. So, then we will have lost 2.25% to inflation
over the first two years. Now, we are starting to lose hundreds of
dollars on average. Once we have lost 6% to inflation, we will be
losing approx. $100.00 per month on average ($18,000.00 pension). Was
this scenario ever thought of when you made your retirement decision?
Did you factor this into your decision? THE PROMISE WAS BROKEN!
We could easily lose 10% of the value of our pensions over the first 5 years. After that, there is no guarantee of any indexing.
if the funded status of the plan is over 110%, then some indexing will
be paid. The amount is not specified, nor does it provide for any
“catch‐up” for already lost pension income. Those decisions will be
made by the TRUSTEE(S) at the time.
the 1970’s, inflation rose more than 60%. A couple of years back then,
it was double‐digit inflation, back to back. An employee who had
retired in 1970 at a Director’s level wrote in the 70’s, “I am now
living in poverty, please try to do something about protecting our
purchasing power”. There wasn’t any indexing back then. This could be
us as well. THE PROMISE WAS BROKEN!
See EXHIBIT “A” which shows the lost income because of the changes to indexing.
Other Effects on Pension
retirees, we have lost our opportunities to make up for this
unanticipated shortfall in present and future income. It is too late
for us to decide to work longer or save more to supplement our
it gets even worse. The FMA 2010 also states that if after the end of
each 5 years, the pension fund is less than 90% funded, then the
Trustee(s) are required to make further cuts, increase contribution, or
any combination of both, to put the fund back to 100% funded status.
There are no limitations. So, it is possible, under these new changes,
to cut our base pension. There are no other benefits that could produce
the necessary dollars to make up a large shortfall in the review year.
could happen by changing the value of each year of service to say 1.9%,
l.75%, l.5% or whatever. There are no limitations. But the Law does say
that the Trustee(s) must take necessary actions to correct the
cannot find another example of a plan that has had such an upheaval of
change with no guarantees of any kind. Thanks to the Dexter NDP
Government. And we have been told that the changes that have been made
are not up for discussion. PERIOD.
sadly, it gets even worse. There are also provisions in the FMA 2010
that prevent any legal actions being taken as a result of the changes
to the PSSP. If, they didn’t do anything wrong, then why would they
need such a clause? They knew what they were doing was wrong and how
they did it was otherwise illegal. That is the only interpretation that
can be made.
shame of it all. The sole Trustee, the Minister of Finance, Graham
Steele, broke most of the responsibilities that a Trustee is required
to follow. Graham Steele is a lawyer. Other members of the NDP Caucus
are legally trained as well.
PSSP is now the worst public sector plan in Canada. It is no longer a
Defined Benefit Plan. No one can define what the benefits will be after
each 5 year period. At best, it is a 5 year variable plan with no
guarantees. That’s all the respect we get from this Government.
70 years the PSSP was a 50‐50 cost shared plan. Taxpayers never had to
contribute any extra money to the plan. In fact, the various employers
got a 2 year contribution holiday in 1997‐1998.
it came to getting rid of the unfunded liability, they decided that it
would be a 33%‐67%. The government put in $536 million and reduced
pension benefits by more than $1 billion dollars ‐ Not a 50‐50 split.
as taxpayers, we are sharing paying interest on the $536 Million. Prior
to this, there wasn’t any interest being paid on the unfunded
liability. It was a paper figure only. The unfunded figure was based on
a very conservative set of assumptions and very aggressive mortality
must be noted that the fund has been in a more serious under funded
position and fully recovered. The Government must have had ulterior
motives this time.
Why did it happen?
our view, all this happened because of a very disrespectful, dishonest,
deceitful, unjust Government whose knowledge of pension plans and their
issues are sadly lacking. What else can we feel and think? There wasn’t
did not have to happen. In November, 2009, this same government gave
167 other defined benefit plans in the Province 10 years to make up
their under funding. But within 6 months of being elected, Graham
Steele decided to take away our indexing immediately and make other
potentially devastating changes. We believe they reacted solely on an
Actuarial Report without the ability to understand its full meaning.
a number of years, the Dept. of Finance has been intent on getting rid
of the indexing. It appears they lacked skilled leadership in the area
of pensions. It appears they were managing the plan solely on the
Actuarial Annual Reports, when this is not the Actuarial Annual
Reports’ sole purpose.
had been a member of the Minister’s Advisory Committee for the last 20
years and never was it discussed to apply any changes to retirees. So,
imagine the surprise when I received the Minister’s letter purporting
to save the Pension Plan with the cuts to benefits and the only
explanation was, “it had to be done”. I immediately resigned by phone
call to the Minister’s Office. Two weeks later the Minister abolished
the committee. It was obvious that my input into any discussion was not
management will not have to deal with any under‐funding and this makes
their jobs much easier and less stressful. Maybe the Minister of
Finance was not fully informed.
report the Government reacted on could not possibly have been at a
worse time. It was a reflection of the Financial Global crisis which
produced a large loss in the value of assets, second only to the Great
Depression, and governments reacted by setting interest rates at
historical lows. Every pension plan was devastated.
How did it happen?
happened behind our backs. There was absolutely no discussion with any
retirees. It was shrouded in secrecy, so secret, that union
representatives had to sign letters of confidentiality and could not
even discuss it with their members. It is very curious to note that
three of the five labour representatives on the Minister’s Advisory
Committee were in on the discussions with Government while two were
excluded. Those excluded being two retirees; myself and Jim Bacich. No
one was there to voice the interests and concerns of retirees. Our
pension promises were being discussed and our fate decided upon without
the voice of the 12,000 retirees. The President of NSGEU stated
publicly that the union did not represent retirees.
appears the Minister of Finance made every effort to exclude retirees
from any input. This is unprecedented by any employer in the history of
All of organized labour rolled over on this one.
we have no knowledge of how the discussions transpired. We don’t know
if deals were made or what was said about employees in receipt of a
pension. We do know that Superannuation, by law, is not negotiable. The
only one with the authority and the power to make change is the
What has NSGREA done?
immediately got legal advice which basically said that governments have
the power to pass laws that take away employees vested right to legal
action as a result of any of the changes. So, for the time being, there
doesn’t appear to be any legal resolution.
order to make any changes, it will take legislative change. That means
political action. NSGREA has had meetings with the Liberal and
Conservative Caucuses. Both expressed sympathy with our concerns and
said the changes should not have applied retroactively. But, they did
not commit to make changes. More meetings will be held with both.
regions have invited MLA’s to meetings to inform them of our concerns,
not only what happened but, equally important, how it happened.
What Can Members Do?
members should become as active as possible in attending Regional
Meetings, talking to MLA’s and supporting actions the Executive will
have to do something to protect our future income. If not, we could be
devastated by future actions. As of now, we don’t know what our pension
will be in 2015.
The solution is political action. Get more involved now.
is hope in the future. When working employees realize the uncertain
retirement benefits they are working for, they will join our fight. It
would be interesting to attend a pre‐retirement course now to hear the
spin and explanation.
very respected members of NSGREA reported to me that Premier Darrell
Dexter told them that retirees were consulted about the changes. In
fact his words were “numerous meetings were held with retirees”. This
is a lie and couldn’t be further from the truth. Either he is lying or
he was lied to. You decide.
have already paid for our pensions. The pension was over funded when
many of us retired; by as much as 123% funded. Now we are being forced
to pay again for future pensions.
OUR PENSION PROMISE IS BROKEN!!!!
A – Should Receive
B – Will Receive
C – The Amount the Pension will be Less
|Amount||Year 1||Year 2||Year 5||Year 10|
Assumptions: (1) No indexing will be paid from 2015 to 2019.
(2)The Consumer Price Index will increase by
an average of 2.75% per year from 2011 to 2019.
|Pension (Received in 2010)||Total $’s loss over 10 years|