O'Brien seeks pension solution
(Published by the Daily Gleaner, September 30/10; Heather McLaughlin)
(Fund down/Workers want to pay extra money instead of losing indexing option in their pension funds"
Finance and administration committee chairman Coun. Mike O'Brien says he's putting on his thinking cap to figure out how to follow up with city workers as they seek to retain indexing of their pension plan.
City hall was jammed with workers - who spilled out into Phoenix Square because there wasn't room in the public gallery of the council chamber at Tuesday's meeting - in a show of opposition to a council resolution to remove the benefit. They received a minimum two-week reprieve on a proposal to de-index all contributions to their pension fund after Jan. 1.
"They did a good job," O'Brien said of the presentation made by city employees, who also brought in their actuarial professional to offer ideas.
The city wants to de-index their pensions - which are adjusted annually to two-thirds of the increase in the cost of living - because of revenue shortfalls in the $175-million pension fund.
In mid-2007, financial markets suffered their worst downturn since the stock market crash of 1929. That's left the pension fund in a $39.4-million deficit position.
O'Brien said in order to restore the pension account to balance over the next 15 years, the city and its employees would have to substantially increase the level of their payments into the fund.
Each party would have to contribute $335,000 in year one, then $680,000 each in year two and $905,000 each in years three through to 15. O'Brien said the total is approximately $13 million each for the employees and the taxpayers. That's a lot of cash for both parties and O'Brien said it would leave city workers paying the highest pension contribution rates in Eastern Canada.
But employees say they want to contribute the money to keep the indexing. Kathy Edwards said the workers feel strongly that without indexing, their pensions will erode over 20 years and the majority of the 753 contributors to the fund aren't in the top earning percentile.
The bulk of city workers are earning $47,500 annually. After 25 years of service, that results in a pension of $22,875, according to figures generated by the employees.
O'Brien said the motion that council approved Tuesday night is a notice of motion. In two weeks time, Coun. Marilyn Kerton will have to introduce a new motion that won't go to first and second reading for another two weeks.
That allows about a month for the city and its workers to talk. Kerton has already stated that she concurs with the recommendation of the city's superannuation board, which suggested that the city and workers each contribute an additional 1.5 per cent of salary in the 2011 budget year.
The performance of the pension fund could be reassessed at that time.
O'Brien said he's talking to city hall staff to clarify the process and timelines, but it's his feeling, since he's also the chairman of the city's superannuation board, that the board should weigh more options.
The finance chairman said he has asked staff to prepare a report for him on the information provided by the employees and render some opinions on the information submitted.
"There was nothing agreed to last night on a process, but obviously the super board is the group that represents the employees and the employer, so obviously we should go back through the super board and look for some more direction on how to proceed," O'Brien said.
"We were pleased that our voices were heard and we hope that we can come up with some acceptable solution that will satisfy both parties in the coming weeks," O'Brien said.
"A long-term solution within a month is likely impossible, but if we can address the current budget situation to the mutual satisfaction of both sides, then we can focus on long-term solutions in 2011.''
O'Brien wasn't surprised at the employee response given how most people view their pensions. "I wasn't surprised by the turn out," he said. "I was very impressed with the calmness and professionalism with which they presented ... I'd like to compliment them on that."
O'Brien had suggested that employees could set aside extra funds toward retirement through RRSP contributions, but Edwards said not all employees have room to do that because they have maxed out their retirement contributions through their group plan.
Some employees are paying between $400 and $500 a month toward their pensions. "We pay a lot for that pension; it's not a gift," Edwards said. "We're not asking for any additional taxpayer money to be drawn out in blood."