Monday, October 04, 2010

Government will face pressure to change rules
(Published in the Daily Gleaner, Monday October 4th, 2010)

Markets Cities say more time is needed for pension funds to rebuild
The ink will barely be dry on premier-elect David Alward's list of cabinet choices before Fredericton and Saint John municipal leaders start clamouring for meetings on pension issues.
Fredericton's finance and administration committee chairman Coun. Mike O'Brien said the idea of Fredericton officials and city workers creating a common front arose during discussions with city employees, who have been meeting with councillors individually to talk about the proposed de-indexing of their pension fund.
"They're obviously trying to clarify their position a bit better and vice versa," O'Brien said.
The city's superannuation board had recommended increases to employer-employee contributions to start offsetting the deficit, but council decided on its own to consider de-indexing the fund.
Dozens upon dozens of emails opposing de-indexation started flowing immediately to elected officials. City workers swamped council chambers and some were turned aside for lack of room Sept. 12, when first and second reading was slated for the de-indexation amendment.
At that meeting, Coun. Marilyn Kerton put forward a notice of motion that she'll introduce a new motion in two weeks not to de-index the pension fund. Kerton has signalled that she doesn't want to see pensions de-indexed starting Jan. 1. She wants council and city workers to thrash out possible ways to start eliminating a $39.4-million pension deficit without removing annual cost of living adjustments. City workers get two-thirds of the annual rise in inflation.
Union and non-union workers have said they would sooner pay higher pension premiums than forfeit the pension provision, but the city is worried about paying its share of the annual cost hikes.
O'Brien has said it would cost the city $335,000 in 2011 to match the employee contributions. To balance the pension fund over 15 years instead of a longer period would mean escalating contributions year over year up to $905,000 each from city coffers and from workers between years three and 15.
O'Brien said he has agreed that workers and city representatives should approach the provincial government jointly to make a pitch to alter pension funding rules. "We're setting that in gear," he said. "I'm contacting some of the MLAs and the staff are as well."
O'Brien said Fredericton isn't the only municipality to face a pension deficit due to the Pension Act's timelines for balancing the fund. Saint John's pension fund is $129-million in debt and O'Brien said councillors in the port city are facing the prospect of a nearly 15 cent tax rate hike just to deal with it.
He said Saint John is going to ask that it be allowed to rebalance its fund over 25 years, instead of the legislated 15, and get an extra year's grace to do its actuarial filing.
"That's all we've asked," O'Brien said. "If they gave us 25 years instead of 15, and if they gave us one more year to do a filing - which lets us have an up-to-date valuation because markets have recovered slightly - that changes the water on the beans completely.
"So what I would like to do is to meet with some council reps and the employee reps, with our MLAs and meet with the brand new Justice minister whomever is sworn in," O'Brien said. "It's affecting all municipalities."
Unlike a private enterprise, municipal governments aren't going to fold up or close their doors, so there's no risk to the province. The city has tried to convince past governments to amend pension rules, but with a new Conservative government taking power, O'Brien said it's time to make a fresh appeal.
In Saint John, city manager Patrick Woods has said that the shortfall in the pension account is largely the result of the financial market collapse in 2007-08, longer life spans among retirees, and the need for more conservative investment earning assumptions.
Saint John, like Fredericton, has to start making payments retroactive to the beginning of 2010, but it wants to defer payments until 2011. Saint John wants the province to allow it to repair its pension fund with payments over 25 years rather than 15. As with O'Brien, Woods has said a municipality can take more time to pay its deficit because there is no threat the city won't be around in the future to make payments.
With files from Canadaeast News Service

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