It’s a chunky little title: “Why Newfoundland and Labrador’s public sector pension deficit is growing and why pension reform is imperative.”
The report, prepared for the provincial government last August by pension experts Mercer, one of the Marsh & McLennan Companies, doesn’t pull any punches: “With only $6.3 billion of assets to cover $11.4 billion of liabilities at year-end 2012, it is unreasonable to expect that the funded position will improve in the future without changes to benefit and/or contribution levels. In fact, should experience emerge as expected (i.e. the fund returns 7.25 per cent per annum and future contributions only cover future benefit accruals), it should be expected that the unfunded liability will grow by approximately $367 million each year.”
No much news in that, you might say: after all, the province for years simply took pension contributions and used them as government revenue, building roads and hospitals and hoping against hope that the future was so bright that it would somehow take care of the burgeoning pension rolls.
That isn’t going to happen, the review says: “It is simply not plausible to expect that the current fund will ever grow at a rate sufficient to meet accrued obligations. There just isn’t enough money at work.”
That doesn’t mean that governments haven’t tried to address the problem: the Williams government put $2 billion into the teachers’ pension plan in 2005-2006, and a further $1 billion into the public sector pension plan (PSPP) during the same time period. The money promptly disappeared. The teachers’ plan lost 21 per cent of its value in the 2008 market crash. Things were just as ugly in the public sector plan: “Unfortunately, the additional $1.042 billion contributed to the PSPP between 2006 and 2008 only slightly exceeded the $0.997 billion of investment losses reported by the actuary in the PSPP’s December 31, 2009 valuation report.”
All of that is bad enough news, but as this province chugs along in the relatively small club of the country’s “have” provinces, there’s a table buried in the report that shows just how “have-not” the province’s public pension plans are.
They are the fiscal elephant in the room, and it’s worth looking at comparative table Appendix C, below.
Pension Plan Funded Ratio Asset Value ($M) Unfunded Liability ($M)
British Columbia 100.0% $19,441 -
Alberta 78.4% $6,481 $1,790
Manitoba 85.6% $3,104 $555
Ontario Pension Board 88.5% $17,270 $2,255
Ontario Public Sector Employees
Union Employees Pension Trust 100.0% $14,705 -
Ontario Municipal Employees
Retirement System 87.9% $60,767 $9,924
Healthcare of Ontario
Pension Plan 100.0% $47,414 -
New Brunswick 96.5% $4,135 $154
Nova Scotia 97.6% $4,392 $109
Prince Edward Island 87.4% $968 $140
Labrador 54.8% $3,927 $3,241
Source: Mercer report (www.atipp.gov.nl.ca/info/completed/2014/pdf/fin_14_2014.pdf)
It’s a message about just how terribly far behind we actually are.